Introduction

The Topic of research here is “Sachet marketing for FMCG products

in rural area, history, evolution and future”. So the project is to study
sachet products in rural areas. The approach involves serving up
products and services in affordable portions, sachets or sizes, so that
consumers get to know and like a brand. The practice was named after
Hindustan Lever's successful introduction of single-use
shampoo sachets in India.

India was always the promised land for FMCG with a sizeable
population and pent up demand for products that were ‘value for
money’. Poor distribution and high landing costs would however keep
consumers away from committing to family packs, month packs etc.
Another challenge was the large semi urban, rural population were the
disposable incomes where significantly lesser and average put down
value for a purchase therefore were nominal. Marketing of FMCG
Products in India was revolutionized by one major change in
trajectory – Sachet Packs. The concept of sachet packs goes back a
long time into British India and their distribution of tea – However
only in the last 30 years has the concept been really successful. The
however remains – Is it time to move out of sachet packs or stay
invested in this business model.
Several studies suggest that sachet packs have help drive product
penetration but have also resulted in lower consumption levels.
Customers in India across a vast social spectrum have started looking
that sachet packs more favourably compared to multi-serve large
packs not because they can’t spend more – but because sachet packs
are ‘available’.

History : (How sachet products were introduced)

Let’s get into how big the sachet pack business has become – The trend
started in 1983, when Cavin Kare introduced the most innovative packaging concept
in India's fast-moving consumer goods (FMCG) history by launching its Chik shampoo
in sachets for Rs 1. Since then, sachets have played quite a role in mobilizing FMCG
products in India.

It has since then moved into all spheres of our lives – Cornflakes @
Rs 10, Carbonated Colas at Rs 5, ‘Chota recharge packs’, Small
Biscuit Packets, Tiny Milk Whitener Packets, Small Cosmetic Packs,
Detergent at Rs 2, Hair Oil at 50p, DTH Add On packages, 200 ml
milk pouches, ketchup and what not. Every Brand has tried it.
Cadbury sold products at 1 rupee to compete with sugar
confectionery. Cosmetic Brands came out with Re 1, 2, 5 packs with
3ml, 4gm, 7.2ml packs to entice the bottom to the pyramid to try out
its products.
The primary objective of having sachet is to induce trials and then
upgrade the consumer to a bigger/larger pack.

This scenario has led to the advent of portion packs by the consumer
product companies as they are targeting people living in villages, who
due to financial constraints will prefer portion packs rather than large
packs due its affordability.
The reason: The value offered by a sachet is higher and
companies have for long not had the courage to reduce the sachet
attractiveness once they achieve penetration.
The pricing of small packs doesn’t leave much by way of margins for
the industry. According to industry estimates, smaller packs in most
categories are expected to contribute over 75% of total sales in now
compared to 30-40% at the turn of the century.

However, this growth is at the cost of margins. The profit margins on

larger packs are higher by around 25-30% on an average, compared to
a low unit pack. The higher the large-sachet substitution the more it
hurts margins.

Several companies have tried to break this pattern with the following
strategies

1. Focus Sachets in Rural and semi-rural while larger packs are

distributed in Cities [This did not work due to the diverse social
groups in Indian cities – from slums to multi-storied]

2. Launching Bigger Combo Packs – Limited success as these are

mainly limited to ‘modern trade’ a outlet which is little more than a
drop in the FMCG world.

3. Launching Rs 5- Rs 10 Packs instead of Ultra Low price packs –

This has worked to some extent, however the problem is just
postponed. Rs 5-10 is not exactly what marketers had in mind but
beyond this would be a stretch and could jeopardise market shares in
case of dramatic changes in pricing.

A SMALL AMOUNT
Inexpensive is the primary reason, portion packs are getting
popularity. It has become a successful strategy in penetrating across
the rural market. Consumer goods companies bring products in small
and affordable packs. Products like detergent powders, shampoo, hair
oil, soaps, spices, tobacco, mouth fresheners and other goods in small
packages are very popular among the rural consumers.

SK Sarkar, a joint director with Indian Institute of Packaging, says,

“If you buy a good quality of shampoo bottle, you may have to pay
hundred rupees. If you go to the poor population, which is the main
population of the country, may be his daily income is hundred rupees
or even less. So, first essential thing is not shampoo, first he has to get
his food and other eatables, he cannot afford a shampoo bottle which
may cost hundred rupees. But if you are providing him a two or three
rupees pouch, he can easily afford.”

According to market experts, approximately 70 per cent of the

products are sold in small pouches in the country. Consumer goods
companies are very much keen to target the rural population. Low
income has been the main reason behind popularising small pouches.

“People are demanding portion packs because it is countable and

affordable to the rural masses especially for the low income people,
these are the advantages of portion packaging. The consumer and the
manufacturer, both are happy.

Many people in rural India are daily wage earners; they consume
things as per their daily need. They cannot afford large packs of
detergent powders, hair and edible oil, shampoo, spices or other
products. And therefore, portion packaging is becoming popular. If
manufactures do not bring consumer goods in small packs, they may
not capture the main market and it would be left.

HEALTH CONSCIOUS
Experts say that nowadays, people are more conscious about their
health, so they prefer well-packed food items which can be preserved
for longer time.

As per the need of consumption, small packs are well-preserved. “If

you open a large pack of biscuit, it is very sensitive and may get
deteriorated very fast and as well as bacterial contamination from the
atmosphere. If the consumer gets small packs of biscuits, edible oil,
pastry and all.

Even edible oil is packed in small packs; the customers are assured
that the product is not adulterated. Due to the long duration of use,
large packs always have a chance of leakage, adulteration or bacterial
contamination. “It is an argument, why a person needs a small
quantity of anything? And then it is almost guaranteed that it is
hygienically packed. Exact quantity is small you get that and it is well
preserved.

NUCLEAR FAMILY
The family structure has also been one of the reasons for the
popularity of portion packs. Earlier, most of the families were living
jointly, so in those days, there were large packs. Now the scenario has
faded out and the trend of nucleus families has arrived in the country
and is somewhat applicable in rural areas too. People are living in
small number in a family.

THE RECOGNITION
Small packs were introduced almost three decades ago. With its start,
the sale of shampoo raised rapidly, almost exponentially. It became
more popular in the country. Earlier it was limited only to urban high
income group.

Portion packs bridged the gap between the rural consumers and the
consumer goods. The rural consumers got an access to these
consumer goods easily, now they do not have to pay for a large pack
which cannot be afforded by a daily wage earner who just earn in
hundreds or even less earning in a day.

Consumerism in a sachet

Companies are studying behaviour patterns and preferences of rural

consumers and devising strategies to hook them on to consumerism.
The price tag actually dissuades a rural consumer or a poor urbanite
from purchasing a product. While the vast rural population is open to
experiment with new products symbolic of a changing lifestyle,
affordability continues to keep the market reined.

With urban markets maturing, the need to expand the rural base is
becoming critical for companies to improve top- and bottom-lines.

The rural market and consumers have both matured over the years,
enabling the seller to identify prosperous pockets in such areas. The
companies are studying behaviour patterns and preferences of rural
consumers and devising strategies to hook them on to consumerism,
so characteristic of the urban areas.

A marked reflection of this trend is the sachet revolution. Companies

are resorting to the low unit price strategy to expand sales in the
growing rural market. They have been enthused by the findings of the
ORG Rural Consumer Panel study which showed that the share of
branded goods is high for a number of daily use products. Branded
goods comprise 65 per cent of sales in villages today and the share of
non-branded products is shrinking dramatically.

Affordability remains a major constraint in turning the rural potential

into effective demand. Juxtapose this against people being lured by
advertisements for branded products. Hence, low unit price (LUP)
packs offer an attractive proposition for low-income consumers to
sample these products.

Low unit price

Over the years, the sachet strategy has proved so successful that,
according to an ORG Marg data, 95 per cent of total shampoo sales in
rural India is by sachets. A decade ago, Hindustan Lever Ltd (HLL)
experimented with a marketing strategy of sachets. The aim was to
initiate rural consumers to use shampoo in the place of traditional
alternatives and in the process increase sales volumes and make
shampoo affordable for the masses. These one-time-use packs proved
popular with the consumers. Urban consumers, too, have responded
enthusiastically to sachet shampoos, as also the hotel industry.

More recently, HLL thought of introducing its premium shampoo,

Organic, in sachets. Sales of the shampoo has mostly been in bottles
(the ratio of bottles to sachet is 95:5.) and now the company is aiming
to move to sachets and make the bottle-sachet ratio 75:25.

HLL is now into creating `bubble pack' shampoos _ a combination of

mini packs, which is neither a sachet nor a bottle and works on the
principle of capillary action. It is test-marketing a Clinic Plus
shampoo bubble in South India, priced at Rs. 8 and Rs. 14 against the
normal sachet of Rs. 2 and it is expected to go national in mid-2000.
The logic of a shampoo bubble is to upgrade the sachet user to the
next in line higher volume in shampoo.

The price-to-value equation is not favourable for the rural consumer.

It hopes to break the price barrier in the rural market and increase
penetration from 12 per cent to 20 per cent.

Sachet packs seem to be the in-thing for other manufacturers too.

Prompted by the success of HLL, many companies are experimenting
with various other products in sachets. Marico has introduced coconut
oil _ a regular-use product in the rural areas _ in mini packs. The idea
of beverages such as tea in small packs is also fast catching on with
HLL, Tata Tea, Duncan’s and Goodricke.

Interestingly, no perceptive change in tea consumption in relative

terms in urban or rural markets has been observed, but LUPs are
driving the rural market, says the ORG Marg study. The change is in
the skewed composition where `paise packs', as LUPs are called, have
grown by nearly 10 per cent between 1995 and 1999. The exemption
from excise duties has also helped the growth in sales. The sale of the
main pack has, however, declined substantially. So, big companies are
now targeting the economy segment with their brands such as Tiger,
A1, Agni and Shakti. LUPs have also helped break the resistance of
some sections to high prices by offering them affordable options.

Mini-deodorant:

The latest to join the mini product bandwagon is HLL's Pepsodent

toothpaste, which will now be available in sachets for Rs. 4, with the
target consumers being travellers and the rural population. The sachet
strategy is also being employed in the nascent deodorant market. HLL
has priced the 5g Rexona deo-stick at just Rs 5.50 _ the lowest for
such a product in the world.

This strategy is also aimed at hooking the consumer with small packs
and then getting them to buy the brand. The deodorant companies feel
a huge consumer market can be opened up by this strategy. The
problem with the deodorant market was that people hesitated to
accept body odour as a problem. And even if it was, they preferred
talcum powder to deo. More important, pricing of deodorants was a
major deterrent.

A sampling exercise was done to change these perceptions and

outreach the consumer. But unlike the shampoo segment, where a
sachet user remains that, the marketing of mini does is not seen as a
long-term strategy.

However, the Chennai-based CavinKare has introduced single-use

sachets for its Spinz Singiez perfumes in two fragrances priced at 1.50
each. The perfume market is estimated to be about Rs. 70 crores, but
the market penetration is only 1 per cent. Given the universal appeal
of perfumes, the market can expand significantly if perfumes can
break the price barrier and brought within the reach of the middle-
class, which itself is very large, as NCAER studies show. Now even
household cleaners, which have remained beyond the reach of the
common man, are likely to be targeted with this new mantra. While
satellite TV has raised the consumer's appetite for such products, their
market has not expanded as a large number of consumers remain
outside the buying capacity net. So a surface cleaning brand like Lizol
(from the house of Reckitt and Coleman) has entered the market with
10-ml sachet.

Critical-

The Indian market still sees price as a critical factor in the expansion
of demand for a variety of products. The price tag actually dissuades a
rural consumer or a poor urbanite from purchasing a product. While
the vast rural population is open to experiment with new products
symbolic of a changing lifestyle, affordability continues to keep the
market reined. The sachet revolution, in such circumstances, is ideal
to overcome this constraint. It has the potential of unleashing
consumerism in India.

Looking for rural data-

ORG-MARG, the consumer research agency, recently launched the

first-ever Rural Consumer Panel or R-Panel to provide `a
systematically researched information base'. The panel monitors
purchasing and consumption patterns of the rural consumer in 20,000
households across 1,000 villages randomly selected from 215 districts
across India. It provides monthly information on brand preferences,
average household spend, buying habits like frequency of purchase
and brand loyalty, gain-loss analysis, overlap analysis and other
important indicators for over 32 FMCG categories.

Objective of study

 Present a rural marketing perspective.

 Present a profile of Indian Rural market.
 Study and analyse the consumer behaviour in rural markets.
 Examine the product and brand penetration in rural markets.
 Analyse marketing of consumer product rural markets.
 Present marketing strategy frame for marketing consumer
products in rural areas.
 Literature Review

Although initially sachets became popular as a tool to encourage

product trials (sampling), today they have become one of the
key drivers of product sales in volume terms, especially for
customers at the middle and bottom of the economic pyramid.
Sachet marketing is also described as the practice of “thinking
small, but in large volumes” (Trendwatchers 2004). Moreover,
companies are beginning to tap into the hitherto untapped
markets with different pack sizes in the wake of increased
competition in the consumer goods’ category (Elliott 1993).
Since little empirical research has been carried out involving
sachet marketing, we draw insights from extant studies on
packaging. Folkes, Martin, and Gupta (1993) suggest that
consumers may prefer large pack sizes over small ones to reduce
their concerns of running out of the product. Another reason
cited is that of lowering their transaction (replacement) costs for
using the product (Lynn 1992; Worchel, Lee, and Adewole
1975). Wansink’s (1996) study on the effect of package size on
consumption concludes that consumption tends to increase when
product issuance is in larger sizes, largely due to the consumers’
belief that unit cost is reduced when the product is purchased in
larger packages. However the actual unit cost may be different
from the perceived unit cost of the product. An interesting
conclusion from this study is that large pack size itself does not
increase usage volume, but rather it induces lower perceived
unit costs as a result of which usage goes up. Thus pack size and
usage volume are independent. This finding is consistent with an
earlier study by Granger and Billson (1972), which found that
consumer migration to larger sizes, was greatly accelerated
when the lower per-unit cost was clearly indicated. On the
whole the studies have two important implications for sachet
marketers: (1) Since sachet is a small pack size, consumers
would perceive it to have higher unit cost (compared to large
pack sizes), thus reducing their usage volumes or consumption,
and (2) Customers who cannot afford large pack sizes (due to
increased risk or lack of affordability), will find the sachet’s
lower price point attractive enough to induce trial and initiate
consumption activity. Moreover from consumption perspective,
since large-size packs are more difficult to control and more
prone to product wastages (Stewart 1994), the sachet offers
additional benefits of control of use and lower wastages.
Reduced wastages further reduce the unit cost of the sachet.
From a household storage perspective, sachets are better than
large packs as they take up less space in a household inventory
(Hendon 1986).

As packaging innovations make product sachets more

economical not just in total cost but in per-unit cost as well, all
consumers, not just those at the bottom of the economic
pyramid, should migrate to sachet sizes. Rundh (2005)
enumerates the different functions of packaging, and discusses
how packaging can in fact be used strategically as a source of
competitive advantage. Four of the ten functions that he cites are
directly served through sachet sizing: (1) to provide consumer
convenience, (2) to contain prices, (3) to promote hygiene and
safety, and (4) to be the source of innovation. Garber’s earlier
study (1995) already points out the important role that
packaging plays in product choice. More recent studies have
specifically looked at the question of product size as a strategic
tool (Jardine 2006; Lee 2006), and downsizing as a competitive
response to supersizing (Dickenson 2005; Packaging Digest
2006; Rigby 2006). Creusen and Schoormans’ study (2004)
points out the role that product appearance, and thus perception,
plays on consumer choice, and highlights the importance of
considering the affective, and not just the rational aspects of
consumer behaviour. However, much of the literature related to
sachet marketing has been anecdotal rather than empirical, and
typically discusses sachet marketing as a way for branded
products to penetrate the market at the bottom of the pyramid, or
BOP (Prahalad 2004). Mahajan and Banga (2006) present their
strategies for selling to the poor, and identify many of the
strategies that define sachet marketing: filling the just-in-time
pantry, allowing smaller payments, combining products to
conserve space, streamlining offerings to make them more
affordable. They discuss how economies of volume, rather than
economies of scale, are more important in sachet marketing,
using population density and the geographic concentration of
BOP markets to demonstrate how the resulting distribution
efficiencies provide economies of volume, if not economies of
scale.

Although sachet marketing has been presented in the literature

primarily as a means for reaching the economic underclass and
converting them from non-branded to branded product users
(Prahalad 2004; Mahajan and Banga 2006), there is really no
reason to limit its potential. Drawing from earlier studies that
rational consumers were drawn to larger sizes because of the
lower per unit costs (Wansink 1996), it seems that if packaging
innovations and distribution efficiencies can bring down the cost
of sachet sizing such that per unit costs can now be lower than
regular or super sizes, then consumers at all (not just the lowest)
economic levels can be drawn to use sachets and increase both
market share and total consumption of the product: well-off
consumers would purchase sachet sizes because of the lower
per-unit cost, and could even increase total consumption level
because it is now more affordable than before. Poorer
consumers will patronise a branded sachet item because they
can now afford the product, and get dual benefits of lower total
cash outlay required for purchase, as well as unit cost.
Data Analysis
 Appendix

1. Name:

2. Gender:

Male Female Others

3. Age:

18-25

26-30

40 Above

4. Which sachet products do you use very often?

Oil Shampoo Detergent Pickle Soap
5. Does these products are useful?
Yes No

6. How often do you use such products?

Daily Weekly Once a month Every2-3 month
Do not Use
7. Overall, how much are you satisfied from the products?
Completely satisfied Very satisfied Fairly satisfied
Neither satisfied nor dissatisfied
8. Whether you prefer the product in sachet or bigger pouch?
Sachet Bigger pouch
9. Which product of sachet is mostly available in your area?
(Select 1-5 according to your preferences, 5 being the highest
value)
1 2 3 4 5
Oil
Shampoo
Detergent
Pickle
Soap
10. Other than these 5 sachet product, what more products do you
like to see in sachet?

11. Which shop do you visit very often to buy such product?
Kirana shop any shop a particular shop
Does not matter
12. Do you really feel that these products are very handy?
Yes NO None of the above
13. Do the prices of sachet seem reasonable to you?
Yes No