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Industry divided over impact of new packaging norms on prices of foods
Friday, 19 October, 2012, 08 : 00 AM [IST]
Abhitash Singh, Mumbai
The new packaging norms - the Legal Metrology (Packaged Commodities) Rules, 2012, under the Legal Metrology Act, 2011 - which will come into effect on November 1, may or may not spell additional financial burden for the food processing industry, but the packaging industry seems to be awaiting them as a means to foist competition.
Meanwhile, according to the ministry of consumer affairs, food and public distribution, the new norms have been formulated keeping the consumers’ interest in mind.
Some representatives of the packaging industry feel that the new packaging norms will encourage competition and also shoot the prices of many products and the burden of it will be passed on to consumers.
They added that the companies would no longer have the window available to tweak grammage, in case the raw material prices increase. This will mean they will have to increase product prices to avoid eroding margins.
While most companies are bracing up for the situation, Godrej Consumer Pvt Ltd (GCPL) and Dabur officials are saying that there will be no immediate impact on pricing.
P G Potnis, general manager, GCPL, informed F&B News, “There will be no impact on pricing.
Earlier the product which was available in 70 gm pack will now be available in 100 gm pack and the reason consumer will have to pay for it is since we are giving more, we will be charging more. The increase in price is absolutely logical and not reasonable.” He added, “There was a possibility of violating the norms in earlier packaging, which will not be a case now after the implementation of new norms.
Byas Anand, corporate communications, Dabur India Ltd, said, “The standard packaging norms will not be affecting our company because we do not deal in those categories, which are mentioned in them.”
J N Mehta, general manager, Gujarat Co-operative Milk Marketing Federation (GCMMF), which markets the Amul brand of milk and dairy products, said, “Standard packaging would bring in price rationalisation.”
M A Tejani,MD, Gits Food Products Pvt. Ltd, said, “Since the cases of unfair trade practices were growing, the government under the 2nd Schedule of said rule have asked all the manufacturers of 19 commodities to mandatory pack items in standard size only and any unfair reduction of quantity will not be permitted.”
He further questioned, “Why under the second schedule of the said Rule 19 manufacturers have been asked to follow the rules. The same rule should be applicable to manufacturers of all the products. Consumers are cheated when this type of new norms come into force.”
“We don't see any impact on the pricing as we already use standard packs. Packs of 200 ml, 300 ml, 500 ml, 600 ml, 1 litre, 1.5 and 2 litre as prescribed by the consumer affiars ministry are already in use in our company. So we do not see any impact on pricing,” said an official from Coca-Cola on the condition of anonymity.
In order to avoid adding to inflationary woes, companies have admitted that their pricing strategy has been cautious so far. However, according to analysts they may no longer be able to resist price hikes. Pravin Kulkarni, general manager (marketing), Parle Products, stated, “I foresee a situation where product prices will shoot up,”
Meanwhile, K V Thomas, minister of consumer affairs, food and public distribution, said, “We were about to bring new packaging norms long back. The norms were going to come into effect from July this year, but were eventually postponed because of intense lobbying by FMCG companies. The new norms will make it mandatory for players to pack items in standard sizes only. We are bringing this new packaging norms keeping the interest of consumers in mind.”
Biscuits are one among 19 product categories that will be affected thanks to the new packaging norms. Others include ghee, butter, milk powder, packaged milk, baby foods, edible oil, and salt.
In the case of biscuits, soaps, coffee, tea and allied beverages, pack sizes start from as low as 25 gram going right upto one kilogram. In some other categories such as branded rice and flour, for instance, pack sizes start from 100 gram going beyond five kilogram, while in the case of detergents and laundry soaps, the minimum pack size is 50 gram respectively.
Analysts say, the move not to standardise small packs will help companies since they act as recruiter packs. That is entry level products and help consumers to get familiar with the brand.
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