EXECUTIVE SUMMARY

The fast moving consumer goods (FMCG) segment is the fourth largest sector in the Indian
economy. The market size of FMCG in India is estimated to grow from US$ 30 billion in
2011 to US$ 74 billion in 2018.

Food products is the leading segment, accounting for 43 per cent of the overall market.
Personal care (22 per cent) and fabric care (12 per cent) come next in terms of market share.

Growing awareness, easier access, and changing lifestyles have been the key growth drivers
for the sector.

With rise in disposable incomes, mid- and high-income consumers in urban areas have
shifted their purchasing trend from essential to premium products. In response, firms have
started enhancing their premium products portfolio. Indian and multinational FMCG players
are leveraging India as a strategic sourcing hub for cost-competitive product development and
manufacturing to cater to international markets.

Top Companies

According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned by
MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27
of these are owned by Hindustan Unilever.

The top ten India FMCG brands are:

1. Hindustan Unilever Ltd.

2. ITC (Indian Tobacco Company)
3. Nestl India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)

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7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and Health Care
10. Marico Industries

Index

TABLE OF CONTENT

Sr. No. Particulars Page. No

1. Introduction to Packaging 7.
2. Introduction to FMCG 20.
3. Survey On 46.
4. Recommendation & Conclusion 55.
5. Annexure 58.
6. Bibliography 60.

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 CHAPTER- 1

INTRODUCTION TO PACKAGING

PACKAGING INDUSTRY
PACKAGING TYPES
WASTE MANAGEMENT OF MATERIAL USED IN PACKAGING

3
 1.1 Introduction

JO DIKHTA HAI WOH HI BIKTA HAI

The earlier approach to marketing was simple enough: make sure the product is
visible - on store shelves and through mass media advertising - and it will more or
less sell itself. With the evolution of modern retail, though, the emphasis is shifting
to in-store displays and promotions - probably also because for the first time, the
space for such initiatives is available. But manufacturers no longer have the last
word on what will happen at the store. "Modern trade has a significant say in
promotions, perhaps because it offers far superior results with a much faster lead
time," says Future Group's Mall. Cadbury India's Sethi points out that retailer are
more open to brand promotions and displays - including posters, gondolas and
danglers - when manufacturers back up their ideas with shopper insights. "There will
be a shift from traditional media to increased communication at the point of
purchase," he says. Initiatives that help grow the category as a whole are particularly
welcome, say analysts, since that boosts the retailers' revenue. And many FMCG
companies are predicting that spends on promotion, in-store and point of purchase
displays will increase significantly from the present 20-30 per cent share of the
marketing budget. Consumer goods companies need to make several changes - in
strategy and in attitude - if they are to achieve the same level of success with
organized retail as they have with traditional formats. Printing barcodes on their
products would probably be a good place to start.

4
SHOW YOUR PRODUCTS TO CUSTOMERS:
Buyers spend lots of energy in buying and developing the merchandise before it
finally hits the stores. Sometimes, however, it is forgotten that one very critical
aspect is the way the product is presented to customers in the store and overlook
issues such as packaging and in-store display.
The importance of the saying JO DIKTA HAI WOH BIKTA HAI cannot be
overestimated. Proper display and presentation can make all the difference between
achieving or not achieving sales targets. Remember the following:
1. Visual Merchandising: Be involved in the planning of the in-store presentation of
your merchandise. Adequately plan the MDQs (Minimum Display Quantities).

2. Communicating Ideal presentation standards: Effectively communicate to the

store staff on how the merchandise should be displayed and the ideal presentation
standards. This could be by way of talking to sales staff directly, sending mail before
the merchandise arrives at the stores or making a detailed manual at the beginning of
each season. Remember to look for ways in which the job of the sales staff can be
made easier by improving packing and display methods of the product.

5
Meaning:

Packaging is the science, art and technology of enclosing or protecting products

for distribution, storage, sale, and use. Packaging also refers to the process of design,
evaluation, and production of packages. Packaging can be described as a coordinated
system of preparing goods for transport, warehousing, logistics, sale, and end use.
Packaging contains, protects, preserves, transports, informs, and sells. In many
countries it is fully integrated into government, business, and institutional, industrial,
and personal use. The wrapping material around a consumer item that serves to
contain, identify, describe, protect, display, promote and otherwise make the product
marketable and keep it clean. Packaging is more than just your product's pretty face.
Your package design may affect everything from breakage rates in shipment to
whether stores will be willing to stock it. For example, "display ability" is an
important concern. The original slanted-roof metal container used for Log Cabin
Syrup was changed to a design that was easier to stack after grocers became
reluctant to devote the necessary amounts of shelf space to the awkward packages.
Other distribution-related packaging considerations include:

Labelling: You may be required to include certain information on the label of

your product when it is distributed in specific ways. For example, labels of food
products sold in retail outlets must contain information about their ingredients and
nutritional value.
Opening: If your product is one that will be distributed in such a way that
customers will want to--and should be able to--sample or examine it before buying,
your packaging will have to be easy to open and to reclose. If, on the other hand,
your product should not be opened by anyone other than the purchaser--an over-the-
counter medication, for instance--then the packaging will have to be designed to
resist and reveal tampering.
Size: If your product must be shipped a long distance to its distribution point, then
bulky or heavy packaging may add too much to transportation costs.

Durability: Many products endure rough handling between their production point
and their ultimate consumer. If your distribution system can't be relied upon to
protect your product, your packaging will have to do the job.

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 1.2. Packaging Industry

Overview:
The global packaging industry is approximately a $433 billion market. The domestic
packaging market, which is the major focus of this report, represents approximately
29%, or $124 billion of the global market. The industry consists of four general
segments classified by material type: paper and board, plastics, glass and metal. The
largest segments of the industry are paper and board and plastics, which account for
36% and 35%, respectively, of the global packaging market. The packaging industry
is a large, fragmented market with thousands of competitors. While packaging
companies serve a variety of markets, the largest end markets for packaging
products are food and beverage. Food packaging accounts for approximately 40%
($175 billion) of all packaging applications.
Beverages represent approximately 18% or $80 billion. These end markets are
stable, non-cyclical, steadily growing markets that are consequently attractive,
regardless of the economic climate. The growth rate of the packaging industry is
primarily driven by growth rates and market trends within various end markets.
Growth rates vary from a low of 3.2% for beverages to a high of approximately 5%
for health care products. The largest end market, food, has historically grown at
slightly less than 4% annually. It should be noted that sub segments of an end market
may grow at higher rates than the end market itself. For example, while the beverage
market has generally been a low growth market, the bottled water sub segment of the
beverage market has recently achieved very strong growth. With liberalized trade
and economic policy, The Nation has achieved a higher rate of growth and
accelerated the reform revolution. Advance estimate for GDP growth for 2005-06
expects the economy to grow by 8.1 %. Manufacturing Sector is said to grow at
9.4% in 2005-06 compared to 8.1 % in 2004-05. Agricultural Sector is projected to
expand at 2.5 % in 2005-06 compared to 0.3% growth in 2004-05. Due to FDI in
retail sectors, the Retail Sector in India is expected to grow by 20 % in the next 10
years. These developments will give a boost to all the sectors, Packaging Industry in
particulars and open up tremendous opportunities in the packaging Industry.

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 Indian Packaging Scenario:
Indian Packaging Industry is worth Rs. 2,00,000 corers with growth rate varying
from 5% in some sectors to as much as 20% in Sectors like Flexible Packaging,
compared to 3% in developed countries.

Most of the basic raw materials needed for Packaging Industry such as Paper, Board,
Plastic, Glass, Metal and others are available in abundance.

Packaging Machinery Sector involved in making Packaging Converting Machines,

Product Packaging Machines and allied equipments have adopted modern
technology are exporting the machines even to developed economies of the world.

Over 40% of Export is done by small and medium Sector Industries where
Packaging Industry has its major presence.

A number of State of Art Package Converting and Manufacturing plants have been
set up in the country; some of them are exporting to developed countries.

Major Players:
In Flexible Packaging:
Overview:
Consists of typically multi-layered laminated sheets or a combination of various
subtracts such as polymers, aluminium fibbers and paper
Market around Rs. 2000 corers (US $ 465 mn.)
Laminated sheets are generally a combination of polyester films, BOPP,
Polyethylene, etc. Others - metallic packaging, co-extruded fibbers, lamination
BOPP and polyester film are major raw materials - account for 60% of the raw
materials cost

Industry:
There are over 150 manufacturers in the sector
There are nearly 100-150 manufacturers in the small scale industry with capacities <
250 tonnes per annum and 10-15 players with capacities over 1000 tonnes per
annum

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 Major players - Paper Products, Akar Group (Akar Laminates, Sharp Industries,
Vishnu Vijay Packers, Orient Press, India Foils, Flex Industries, RT Packaging,
Mukund Flex Pack, etc.
Players categorised as class A, B & C. Class A caters to premium brands of MNCs
and large companies. Class B caters to lesser known brands - cost conscious
segments.
Import duty : Basic - 35%; Surcharge - 10%; CVD - 16% and SAD - 4%

Usage:
Flexible packaging is primarily used in the packaging of food and beverages
Food sector alone consumes two third of laminates produced in the country
Personal products such as hair care products, pan masala, tea, coffee and industrial
products account for the balance.

In Films:
BOPP films first used in 1960 in the packaging industry
Polypropylene is the basic raw material for BOPP films
Many manufacturers depend on imports to meet raw material requirement
Market around Rs. 400 crores (US $ 90 mn.)
Indias share of the world market of 2 mntpa (million tons per annum) is very low <
5%
Share of BOPP improving over competitive materials such as PET and Cellophane
BOPP may substitute polyester films as it is cheaper to PF, however converters need
to upgrade their technology

Players:
Segment dominated by Cosmo Film (14500 T) and Gujarat Propak (11500 T).
Others - Sharp Industries, Max India, Supreme Oriented Films, MM Rubber Co.,
Hindustan Adhesives, etc.

9
 Polyester Films:
Industry:
Market around Rs. 850 crores (US $ 195 mn.)
First segment to enter packaging
Initially polyester films were imported
Now packaging polyester films are made from polyester films which are in turn
made from Dimethyl Terephthalate (DMT), Purified Terephthalic Acid (PTA) or
Mono Ethylene Glycol (MEG)

Players:
Garware Polyester was the first to set-up a unit in 1981
Major players in this sector are Garware Polyester, Polyplex Corporation, Ester
Industries, Venlon Polyester, Siltap Chemicals, Jindal Polyester, Jalpac India, Amco
Vinyl, etc

In Laminate Tubes:
Industry
Market around Rs. 750 crs. (US $ 175 mn.)
Tubes are of two types - laminate tube and seamless tube
Laminate tube comprises of 5 layer printed laminate where as a seamless tube body
comprises mono or multi layered extruded
Seamless tubes (no seam in the tube) was first introduced in 1996
Properties of these tubes can be varied by using a variety of polymers - HDPE,
LDPE, HMHDPE, etc.
Popularly used in cosmetic, dentrifice, pharmaceuticals, etc.

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 1.3. Packaging Types

Protecting goods is very important. Food, electronics, clothes, furniture and other
consumer goods all come in packaging meant to protect them during transportation
and storage. There are different types of packaging solutions and materials.
Packaging can be standard or custom made, for instance.

Paper and Carton Packaging: Paper and carton packaging is used for
different types of goods (food, electronics, toys, shoes, kitchenware and even other
packaging materials). Paper and carton packaging companies produce wrapping
paper, inflated paper, sheets, boxes, tubes, pallets, interlayers, corners, edges and
custom protective systems (depending on the dimension and shape of the packed
good, the carton is cut and modeled to fix and protect the product). Paper can be
used to laminate other materials in order to make them stronger. There is also
anticorrosive paper that can be used to wrap goods or to laminate other materials.

Film Packaging: There are multiple types of films used in the packaging
industry, most commonly polyethylene (PE), polypropylene (PP), polyolefin and
polyvinyl chloride (PVC) films. The films usually come on a roll and are used to
wrap goods, cover goods, protect boxes and make other packaging products (such as
bags, tubes, bubble wrap and sheets). Films can be used for lamination, printed or
perforated.

Foam Packaging: Foam used for packaging can be produced on a roll or in

sheets of different thicknesses. The foam is used to wrap goods or make bags
(usually laminated with high-density PE), corners, edges and custom systems. The
corners and edges are used to protect flat glass, furniture and sharp edges. Foam can
be cut and modeled on the product's shape to fix and protect it. It can be antistatic
and has good insulation properties.

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Textile Packaging: There are some goods that are best protected by textiles. For
example, there are custom-made textile insertions used in the automotive industry to
protect car parts during transportation. The textile insert is put on a metal frame that
fits into a metal container. There is also textile material used for box covers.

Plastic Boxes and Containers: Multiple types of plastic boxes and containers
are used in all industries. For example, in the food industry there are plastic
containers for goods like ketchup, yogurt, milk and juices. Plastic boxes are mainly
used for transporting goods and are reusable.

Packaging Systems: Packaging companies offer different types of systems that

can be divided into two categories: special solutions and packaging machines

Other Types: Adhesive tapes are also considered packaging materials, as they
help seal boxes. They are usually made out of PE or PP film that has acrylic or
solvent glue applied to it and that can be printed on. Strapping tapes are usually
applied on boxes or pallets.

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 1.4. Waste Management of Material used in packaging

Package development involves considerations for sustainability, environmental

responsibility, and applicable environmental and recycling regulations. It may
involve a lifecycle assessment which considers the material and energy inputs and
outputs to the package, the packaged product (contents), the packaging process, the
logistics system, waste management, etc. It is necessary to know the relevant
regulatory requirements for point of manufacture, sale, and use.
The traditional three Rs of reduce; reuse, and recycle are part of a waste
hierarchy which may be considered in product and package development.

Prevention:
Waste prevention is a primary goal. Packaging should be used only where needed.
Proper packaging can also help prevent waste. Packaging plays an important part in
preventing loss or damage to the packaged-product (contents). Usually, the energy
content and material usage of the product being packaged are much greater than that
of the package. A vital function of the package is to protect the product for its
intended use: if the product is damaged or degraded, its entire energy and material
content may be lost.

Minimization:
(Also "source reduction") the mass and volume of packaging (per unit of contents)
can be measured and used as one of the criteria to minimize during the package
design process. Usually reduced packaging also helps minimize costs. Packaging
engineers continue to work toward reduced packaging.

Reuse:
The reuse of a package or component for other purposes is encouraged. Returnable
packaging has long been useful (and economically viable) for closed loop logistics
systems. Inspection, cleaning, repair are often needed. Some manufacturers re-use
the packaging of the incoming parts for a product, either as packaging for the
outgoing product or as part of the product itself.

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Recycling:
Recycling is the reprocessing of materials (pre- and post-consumer) into new
products. Emphasis is focused on recycling the largest primary components of a
package: steel, aluminium, papers, plastics, etc. Small components can be chosen
which are not difficult to separate and do not contaminate recycling operations.

Energy recovery:
Waste-to-energy and Refuse-derived fuel in approved facilities are able to make use
of the heat available from the packaging components.

Disposal:
Incineration and placement in a sanitary landfill are needed for some materials.
Certain states within the US regulate packages for toxic contents, which have the
potential to contaminate emissions and ash from incineration and leach ate from
landfill. Packages should not be littered.
Development of sustainable packaging is an area of considerable
interest by standards organizations, government, consumers,
packagers, and retailers

Sustainable packaging is the development and use of packaging which results in

improved sustainability. At the end stage of design it involves increased use of life
cycle inventory (LCI) and life cycle assessment (LCA) to help guide the use of
packaging which reduces the environmental and ecological footprint, but in the very
first steps requires a look at the whole of the supply chain: from basic function, to
marketing, and then through to end of life (LCA) and rebirth. The goals are to
improve the long term viability and quality of life for humans and the longevity of
natural ecosystems. Sustainable packaging must meet the functional and economic
needs of the present without compromising the ability of future generations to meet
their own needs. Sustainable packaging is a relatively new addition to the
environmental considerations for packaging (see Packaging and labelling). It
requires more analysis and documentation to look at the package design, choice of
materials, processing, and life cycle.

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This is not just the vague "green movement" that many businesses and companies
have been trying to include over the past years. Companies implementing these eco-
friendly actions are reducing their carbon footprint, using more recycled materials,
reusing more package components, etc. They often encourage suppliers, contract
packagers, and distributors to do likewise.

For example, researchers at the Agricultural Research Service are looking into using
dairy-based films as an alternative to petroleum-based packaging. \ Instead of being
made of synthetic polymers, these dairy-based films would be composed of proteins
such as casein and whey, which are found in milk. The films would be
biodegradable and offer better oxygen barriers than synthetic, chemical-based films.
More research must be done to improve the water barrier quality of the dairy-based
film, but advances in sustainable packaging are actively being pursued.
Environmental marketing claims on packages need to be made (and read) with
caution. Ambiguous titles such as green packaging and environmentally friendly can
be confusing without specific definition. Some regulators, such as the US Federal

Trade Commission, are providing guidance to packagers.

Companies have long been reusing and recycling packaging when economically
viable. Using minimal packaging has also been a common goal to help reduce costs.
Recent years have accelerated these efforts based on social movements, consumer
pressure, and regulation.

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 CHAPTER- 2
INTRODUCTION TO FMCG

OVERVIEW OF FMCG INDUSTRY

MARKETING STRATEGIES ADOPTED BY FMCG
ROLE OF PACKAGING IN FMCG
FACTORS INFLUENCING PACKAGING DECISIONS
PACKAGING AS A MEDIUM TO INCREASE SALES

16
 2.1. Overview of FMCG Industry

The FMCG industry manages consumer packaged goods - production,

distribution to marketing. The Indian FMCG industry is the fourth largest
industrial sector that has stayed recession-resilient and shows signs of bright
future.

The Fast Moving Consumer Goods (FMCG) industry primarily deals with the
production, distribution and marketing of consumer packaged goods, i.e. those
categories of products that are consumed at regular intervals. Examples include food
& beverage, personal care, pharmaceuticals, plastic goods, paper & stationery and
household products etc. The industry is vast and offers a wide range of job
opportunities in functions such as sales, supply chain, finance, marketing,
operations, purchasing, human resources, product development and general
management. Global leaders in the FMCG segment are Sara Lee, Nestl, Reckitt
Benckiser, Unilever, Procter & Gamble, Coca-Cola, Carlsberg, Kleenex, and
General

Performance:
In India, the FMCG industry is the fourth largest sector with a total (organized)
market size of over US$15 billion in 2007, as per ASSOCHAM, and can be
classified under the premium and popular segments. The premium segment (~25%)
caters mostly to the higher/upper middle income consumers while the price sensitive
popular or mass segment (~75%) consists of consumers belonging mainly to the
semi-urban or rural areas that are not, and cannot afford to be, brand conscious. The
market growth over the past 5 years has been phenomenal, primarily due to
consumers growing disposable income which is directly linked to an increased
demand for FMCG goods and services. Indeed, it is widely acknowledged that the
large young population in the rural and semi-urban regions is driving demand
growth, with the continuous rise in their disposable income, life style, food habits
etc.

17
On the supply side, the wide availability of raw materials, vast agricultural produce,
low cost of labour and increased organized retail have helped the competitiveness of
players.

At a time when the economy and other large industrial sectors such as automobiles,
aviation and financial services are reeling from the global slowdown, the consumer
goods sector in India has managed to defy the trend. According to the recent reports
by Zeus Consulting, India's FMCG industry has so far been resilient to the
slowdown in the economy and a dip in consumer sentiment, with most companies
posting double-digit growth in net profits in the first half of fiscal 2009, backed by
healthy sales. As very categorically said by the Amway India Enterprises managing
director and chief executive, Mr. William Pinckney, I am not saying that our
company [sector] is recession-proof but it is recession-resilient. This statement on
the whole stands strong for most the leading players in the FMCG sector. While a
price hike and cost-cutting were the first lines of defence in a bid to protect margins,
Indian manufacturers were able to let logic rather than bottom lines dictate
measures, with increased marketing efforts, a well-thought product mix and new
launches helping them emerge unscathed from the turmoil. The prospects going
forward also remain promising. Adi Godrej, Chairman and MD of Godrej Consumer
Products Limited (GCPL) and Chairman of Godrej Industries feels that the best
policy would be to provide tremendous fiscal and monetary stimuli to the economy,
- [stimuli is needed] especially in industries connected with consumer finance. Once
that is done, the economic growth will come through and that will generally create
multiplier factors. FMCG already seems to be doing quite well and FMCG sector
will have its best year ever in 2009-10. he said.

Future Prospects:
The only threats to this strong growth trajectory remain the high portion of
unorganized trade, the limited distribution network of new entrants and the pressure
on profit margins due to increasing competition. But these are likely to be of
diminished importance as proportion of organized trade increases and players invest
in improving distribution. Going forward, the industry prospects remain attractive,
and new graduates can hope to leverage the training and on-the-job learning at the

18
leading players in various functional roles, across the Metros as well as the interior
heartlands on India.

FMCG eyes 15% growth this year:

The Rs 86,000-crore FMCG industry is expected to witness a lot of action in 2010.
With the economy showing signs of revival, the industry is expected to register a
15% growth in 2010 as compared to the previous year. The industry will witness a
spate of acquisitions & mergers in the 2010. There will be a renewed focus on rural
consumers too, said an analyst based in Mumbai. The countrys FMCG industry
registered a 12% growth in 2009 despite the economic downturn. The captains of the
FMCG sector are optimistic about the industrys performance in the New Year.
Godrej Group chairman Adi Godrej said With 8% GDP growth and GST
implementation, we feel it will be a great year for the FMCG sector in India. The
focus area for the Godrej Group will be on FMCG business in 2010.Sharing similar
sentiments, Amit Barman, vice-chairman of Dabber India said the industry is
expected to register a 14% growth this year as India is getting out of the recessionary
blues. Our focus would be on OTC healthcare and skincare brands to sustain our
growth in this sector, he added. According to Wipro Consumer Care & Lighting
CEO Vinit Agrawal, the industry is expected to perform better in the New Year as
compared to the previous year. Even during the economic slowdown, the FMCG
industry registered a 12% growth.

When you see buoyancy in economy, the industry will further grow in 2010. Our
core focus will continue to be on rural consumers, he said Harsh Agrawal, director
of Emami Ltd said Emami is looking at both organic and inorganic growth strategy
in 2010. The industry is poised for a double digit growth as the overall growth rate
of the country is growing, he said Echoing similar views, Saugata Gupta, CEO,
Consumer Products, Marico Ltd said the industry will register a 15 % growth in
2010 as compared to the previous year. I expect the top line growth of the industry
to register 15-20 % this year, he added. Nikhil Vora, managing director, IIDFC
SSKI Securities Ltd said the topline of the FMCG is likely to grow by 14.2% y-o-y
in Q3FY2010, substantially driven by volume growth. Despite the rise in input costs,
FMCG industry is likely to sustain its robust growth momentum aided by increased

19
rural incomes, taxation benefits and gradual shift from the unorganized
sector/regional players.
Scope of the Sector:
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest
sector in the economy. A well-established distribution network, intense competition
between the organized and unorganized segments characterizes the sector. FMCG
Sector is expected to grow by over 60% by 2010. That will translate into an annual
growth of 10% over a 5-year period. It has been estimated that FMCG sector will
rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. Hair care,
household care, male grooming, female hygiene, and the chocolates and
confectionery categories are estimated to be the fastest growing segments, says an
HSBC report. Though the sector witnessed a slower growth in 2002-2004, it has
been able to make a fine recovery since then. For example, Hindustan Levers
Limited (HLL) has shown a healthy growth in the last quarter. An estimated double-
digit growth over the next few years shows that the good times are likely to
continue.

Growth Prospects:
With the presence of 12.2% of the world population in the villages of India, the
Indian rural FMCG market is something no one can overlook. Increased focus on
farm sector will boost rural incomes, hence providing better growth prospects to the
FMCG companies. Better infrastructure facilities will improve their supply chain.
FMCG sector is also likely to benefit from growing demand in the market. Because
of the low per capita consumption for almost all the products in the country, FMCG
companies have immense possibilities for growth. And if the companies are able to
change the mindset of the consumers, i.e. if they are able to take the consumers to
branded products and offer new generation products, they would be able to generate
higher growth in the near future. It is expected that the rural income will rise in
2007, boosting purchasing power in the countryside. However, the demand in urban
areas would be the key growth driver over the long term.

Also, increase in the urban population, along with increase in income levels and the
availability of new categories, would help the urban areas maintain their position in

20
terms of consumption. At present, urban India accounts for 66% of total FMCG
consumption, with rural India accounting for the remaining 34%. However, rural
India accounts for more than 40% consumption in major FMCG categories such as
personal care, fabric care, and hot beverages. In urban areas, home and personal care
category, including skin care, household care and feminine hygiene, will keep
growing at relatively attractive rates. Within the foods segment, it is estimated that
processed foods, bakery, and dairy are long-term growth categories in both rural and
urban areas. Indian Competitiveness and Comparison with the World Markets:
The following factors make India a competitive player in FMCG sector:

Availability of raw materials:

Because of the diverse agro-climatic conditions in India, there is a large raw
material base suitable for food processing industries. India is the largest producer of
livestock, milk, sugarcane, coconut, spices and cashew and is the second largest
producer of rice, wheat and fruits &vegetables. India also produces caustic soda and
soda ash, which are required for the production of soaps and detergents. The
availability of these raw materials gives India the location advantage.

Labour cost comparison:

Low cost labour gives India a competitive advantage. India's labour cost is amongst
the lowest in the world, after China & Indonesia. Low labour costs give the
advantage of low cost of production. Many MNC's have established their plants in
India to outsource for domestic and export markets.

Presence across value chain: Indian companies have their presence across the
value chain of FMCG sector, right from the supply of raw materials to packaged
goods in the food-processing sector. This brings India a more cost competitive
advantage. For example, Amul supplies milk as well as dairy products like cheese,
butter, etc.

21
 2.2. Marketing Strategies adopted by FMCG

Marketing strategy is a process that can allow an organization to concentrate its

limited resources on the greatest opportunities to increase sales and achieve a
sustainable competitive. A marketing strategy should be cantered on the key concept
that customer is the main goal.

SWOT Analysis Strategy:

Strengths:
1. Low operational costs
2. Presence of established distribution networks in both urban and rural areas
3. Presence of well-known brands in FMCG sector

Weaknesses:
1. Lower scope of investing in technology and achieving economies of scale,
especially in small sectors
2. Low exports levels

22
Opportunities:
1. Untapped rural market
2. Rising income levels i.e. increase in purchasing power of consumers
3. Large domestic market- a population of over one billion.
4. Export potential
5. High consumer goods spending

Threats:
1. Removal of import restrictions resulting in replacing of domestic brands
2. Slowdown in rural demand Tax and regulatory structure

FMCG marketing Strategy in Rural India:

Barring a few, notable exceptions, rural marketing in India [Images] is still about a
van campaign, a badly-made commercial, a few painted walls and the occasional
participation in village haats and melas.
But then, "rural" means different things to different people: from 500,000 people for
consumer durables, to less than 50,000 for fast-moving consumer goods. Still, it is
heartening to note the increasing awareness of the importance of rural markets - or,
at least, of companies wanting to move beyond urban boundaries. According to
estimates by the Rural Marketing Agencies Association of India, the total budget for
rural marketing is only about Rs 500 crores (Rs 5 billion), compared to the over Rs
13,000 crores (Rs 130 billion) allotted to mass media. This is grossly inadequate to
cover the huge potential for different products in rural markets. Of course, clients'
reluctance to spend big money for bigger results in rural markets is because there are
no standard performance yardsticks for judging the efficacy of the rural marketing
efforts. The TRPs and NRS/IRS data help you determine the efficacy of TV and
press marketing. But there is no study to tell you what is the ideal cost per contact or

What is the ideal number of eyeballs or footfalls for different rural activities.
But only consider the huge successes of some regional brands, especially in the
FMCG sector, which are giving the multinationals a run for their money.
Companies like Cavin Kare (Chik Shampoo, Meera Herbal Powder, Fairever Cream
and so on), Anchor (100 per cent vegetarian toothpaste), Ghadi detergent powder

23
and Power soap are proof that regional brands can become brands to reckon with.
And don't forget Nirma, the most enduring example of a brand that began as a
regional player and is now a giant.

What did these products do that was so different? Most of them identified a segment
that was vacant in terms of product and area of operation. They all started in small,
concentrated markets, appealing to the local ethos and aspirations of the targeted
area. Their communication, be it a simple radio spot or a wall painting or a theatre
film, touched a chord in the target audience. And, most importantly, their policies
were flexible and they could adopt to fast changing marketing situations. What
should companies do to step up their payback from rural marketing efforts? Here are
some steps that should help.

People power:
Total commitment from top leadership, keeping in mind that rural marketing is a
long-term relationship, is imperative - the successes of Hindustan Lever [Get Quote]
and ITC are proof of this statement. But even more important is the need for a
dedicated task force. Rural marketing efforts need special mindsets, which many of
the urban-oriented management graduates who are at the helm of affairs at most
organizations do not possess. A separate marketing and sales vertical headed by
people with passion and commitment to rural marketing and supported by a field
team that can face the rough and tough of the vast country-side with courage and
conviction is a must. The best bet is to recruit students from specialized institutes
such as the Indian Institute of Rural Management, or at least, management graduates
who have studied the subject as an elective.

Many of these are students from small towns, people with fire in their bellies who
want to prove themselves in big companies and have no issues about working in
smaller markets. Pay them well - remember, you pay peanuts, you get only monkeys
- and discuss the path their careers are likely to take in the organization. And send
them out in the field only after thorough training.
Ensure the consistency of the team involved in any project, until the completion of a
specific task. Recently, we were involved with two big clients. In both cases, the

24
teams that briefed us in the initial stages and participated enthusiastically in the
campaign, were shifted out midway, in keeping with their companies' policy of
shifting and promoting people. The teams that succeeded felt no ownership of the
campaigns they had not initiated. What started as a great rural marketing initiative
has been relegated to the dustbin... the fate of many rural marketing initiatives in the
country.

Goals are good

Early on in the campaign, define your objective: is it a tactical effort to achieve
increased sales in specific areas during a specific time, or do you want to build a
strong equity for your brand in rural India? Our experience with FMCG companies
is that they are more interested in the first choice. Most of them have previously
appointed vendors who implement the company's ideas blindly, be they van
campaigns or below-the-line activities. There is very little effort to tailor whatever
communication is made in such efforts, to suit the local audience or fit it with the
overall campaign efforts in the mass media. This invariably leads to less than
satisfactory results in terms of awareness of the brands and long-term impact of the
efforts in the targeted markets. If you are interested in the second alternative, a
comprehensive brand building strategy in rural India, with both short term and long
term goals, is a must.

Know your customers

A good place to begin is studying the mindset of your customers, so you can create a
customized plan of action. All too often, clients insist their knowledge of their
customers (based on studies of urban India) is enough on which to base an action
plan. Our experience shows that the attitudes, aspirations and fears of rural
customers, with regard to products and brands, are very different from their urban
counterparts. Research can give you invaluable ideas for new product development
as well as new methods of reaching your target audience. The refrigerator with
standby power for 12 hours, pressure cookers with two handles and a radio with key-
winding mechanism are all the result of research.
More and more companies turn to the local haats to sell their products. While haats
offer opportunities to target consumers from several villages at one place, and to that

25
extent make your effort cost-effective, ensure that the people who patronize these
haats are the kind who will buy your brand. For instance, we recently conducted a
survey among some haats in Tamil Nadu, with some interesting results. The haats
were popular with the poorest agricultural labourers who consciously buy the
duplicate, spurious products that are sold in these bazaars, since they can't afford the
real thing. It is estimated that FMCG companies lost more than Rs 10,000 crores (Rs
100 billion) to spurious products, mostly sold through such local hats and bazaars.

Ensure availability
Most anecdotes about rural marketing centre on the distribution aspect - the
humongous task of physically reaching your product to over 600,000 villages, most
of them without motorable roads. But it's not really as nightmarish as it is made out
to be, at least keeping in mind the present goals of marketing companies in rural
India. We've all heard about the shampoo sachets that are available in even the
smallest villages. How does that happen? It's a direct result of rising aspirations,
fuelled by television commercials. The consumer demands the product from the
local shopkeeper, who then buys the products from the nearest feeder markets.
Which means if you can ensure distribution to the feeder markets in towns or
villages with populations of 10-15,000, youve already taken the first step towards
reaching your target customer? Studies also indicate that rural consumers prefer to
shop for durables such as televisions, automobiles and appliances in the nearest big
town or city. So, if your products are in towns with populations of 50,000, you're
closer to the rural consumer than you would have thought.

The Mystery Game:

It was a complete Mystery; I was flummoxed at the news article after reading it,
HUL foxes P&G through successful Ambush Marketing.
It was a great outdoor marketing campaign by P&G in Mumbai, and I think it did get
foxed and frustrated by HUL, but the outcome of the whole melodrama that
followed is still uncertain. There were huge outdoor hoardings, model bus-stops, and
full page print ads by P&G to create excitement over Pantene and its new packaging.
Carefully ironed out, or so P&G envisaged. It was too open to attack, and Dove took
the bold step and stepped into the fray. Kudos to HUL for getting it done within a

26
day I think it was more of a, done within a month than a day. Competition
intelligence as they call it has definitely come into play here. HUL was waiting for
the bait to get hooked on. But still, a campaign rolled out within a few weeks is
commendable. (Brand executives would concur) But did it achieve anything for
HUL? Brand connotation with the Mystery Shampoo is and will always be
Pantene; Dove did nothing to change that. All that HUL visualized was a retort back
at P&G through the necessary buzz within everybodys mind. They achieved the
buzz, but inside the marketers head. The consumer was left lurking during the
delivery of the Dove message. (There is no Mystery, Dove is the No.1
Shampoo)

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 2.3. Role of Packaging in FMCG

The importance of packaging design as a vehicle for communication and branding is

growing in competitive markets for packaged FMCG products. This research
utilized a focus group methodology to understand consumer behaviour toward such
products. The challenge for researchers is to integrate packaging into an effective
purchasing decision model, by understanding Consumers behaviour towards the
packaging of FMCG products. When consumers search for and process information
in-store, the product's package can contain relevant and useful information for the
consumer. Product packaging forms the end of the 'promotion-chain' and is close in
time to the actual purchase and may therefore play an important role in predicting
consumer outcomes.

Packages also deliver brand identification and label information like usage
instructions, contents, list of ingredients or raw materials, warnings for use and
directives for care of product. Packaging is the container for a product
encompassing the physical appearance of the container and including the
design, color, shape, labelling and materials used
Packaging has a huge role to play in the positioning of products. Package design
shapes consumer perceptions and can be the determining factor in point-of-purchase
decisions which characterize the majority of shopping occasions.

In recent years the marketing environment has become increasingly complex and
competitive. A products packaging is something which all buyers experience and
which has strong potential to engage the majority of the target market. This makes it
an extremely powerful and unique tool in the modern marketing environment. In
addition to its benefits in terms of reach, some marketers believe that packaging is
actually more influential than advertising in influencing consumers, as it has a more
direct impact on how they perceive and experience the product.
In most cases, the experience has been that pack designs are more likely to
influence the consumer perception of the brand.

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For products with low advertising support, packaging takes on an even more
significant role as the key vehicle for communicating the brand positioning.
Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged
Goods (CPG), are products that are sold quickly at relatively low cost. Though the
absolute profit made on FMCG products is relatively small, they generally sell in
large quantities, so the cumulative profit on such products can be large.
Examples of FMCG generally include a wide range of frequently purchased
consumer products such as toiletries, soap, cosmetics, teeth cleaning products,
shaving products and detergents, as well as other non-durables such as glassware,
light bulbs, batteries, paper products and plastic goods. FMCG may also include
pharmaceuticals, consumer packaged food products and drinks. Some of the best
known examples of Fast Moving Consumer Goods companies include:
General Mills,
H. J. Heinz, Reckitt Benckiser,
Sara Lee,
Nestl,
Unilever, Procter & Gamble,
Coca-Cola, Carlsberg,
Kleenex, Kraft, Pepsi,
Wilkinson and Mars.
Unlike other economy sectors, FMCG share float in a steady manner irrespective of
global market dip, because they generally satisfy rather fundamental - as opposed to
luxurious - needs.

The Relevance of Packaging as a Marketing Tool:

Never underestimate the importance of packaging. Marketers often measure
consumer brand perceptions and ignore the pack. Yet we know from the way that
consumers react to unbranded products that packaging plays a huge role in
reinforcing consumer perceptions. Packaging helps to drive the way consumers
experience a product. Yet, we spend little time researching the connections between
packaging and the direct experience of the product (Rice and Hofmeyr, 2000,
Commitment-led Marketing, pg 216). Before one can assess or question the current
thinking regarding packaging research (and whether the research into packaging

29
suitably reflects its value within the marketing mix), one must first assess whether
packaging as a marketing tool really justifies more attention. What relevance does
packaging have in the marketing world of today?

Reaching the target market:

In recent years the marketing environment has become increasingly complex and
competitive. Although advertising can be a highly effective means of
communication for those consumers who are exposed to it, reaching the entire target
market for most products is generally not a feasible prospect. Media fragmentation
has meant that it is becoming increasingly difficult (and expensive) to reach and
communicate with customers and potential customers, forcing marketers to adopt
more innovative means of reaching their target market (Hill and Tilley, 2002). In
contrast to advertising, which has limited reach, a products packaging is something
which all buyers experience and which has strong potential to engage the majority of
the target market. This makes it an extremely powerful and unique tool in the
modern marketing environment. In addition to its benefits in terms of reach, some
marketers believe that packaging is actually more influential than advertising in
influencing consumers, as it has a more direct impact on how they perceive and
experience the product.

In most cases, our experience has been that pack designs are more likely to
influence the consumer perception of the brand than advertising ( Hofmeyr and
Rice, 2000, Commitment-led Marketing, pg 282 ).
For products with low advertising support, packaging takes on an even more
significant role as the key vehicle for communicating the brand positioning

Winning at the First and Second Moment of Truth:

Packagings dual role is what makes it a truly unique marketing tool. Unlike other
forms of communication which tend to be fleeting, packaging plays a crucial role not
only at the point of sale, but also after the actual purchase of the product. The
packaging has to provide consumers with the right cues and clues both at the point
of purchase and during usage. The first moment of truth is about obtaining
customers attention and communicating the benefits of the offer. The second

30
moment of truth is about providing the tools the customer needs to experience the
benefits when using the product

The Point Of Sale (The 1st Moment Of Truth)

The importance of making an impact at the point of sale cannot be underestimated.
A recent Point of Purchase Advertising Institute (POPAI) survey in the UK found
that over 70% of all purchasing decisions are made in-store at the point of purchase.
Brand purchases are being made or broken in the final five seconds. (Jugger,
1999) At the point of purchase, packaging serves a number of key functions,
namely:
1. Cutting through the clutter actually getting the consumer to notice/see the
product
2. Communicating marketing information
3. Stimulating or creating brand impressions
4. Providing various brand cues:
Value
Quality
Safety
Of course, if packaging does not cut through the clutter and catch the consumers
.Attention, none of packaging do other functions even come into play. The most
brilliant and creative packaging is useless unless it is seen. Creating a powerful shelf
presence so that the brand stands out from the crowd and is actually noticed is the
first and most vital step for any product on a shelf.

The average British supermarket contains 25,000 items and the average shopping
basket just 39 items (Jugger, 1999). What this fact illustrates is that todays
consumers have to sift through a vast amount of products to choose what they want
and not surprisingly they end up ignoring most of what they pass. In a standard
supermarket the typical shopper passes about 300 brands per minute (Rudh, 2005).
This translates into less than one-tenth of a second for a single product to get the
attention of the customer and spark purchase (Gelperowic and Beharrell, 1994, pg
7). Even when consumers are actively shopping a product category, most actively
view only about a third of the brands displayed (Young, 2005, p1) So how does one

31
actually cut through the clutter and get the attention of the consumer? Most would
agree that. To generate initial consideration, two things are key:

1. Shelf placement ensuring that your product is placed on the shelf in the area
most likely to be seen by customers
2. Packaging that creates a visual contrast (in comparison to its surrounding
Products) .This can be achieved through the innovative use of color, a unique
Shape/structure, a strong logo/brand mark, or a unique visual icon
Packaging plays a particularly vital role in categories which have low involvement
(e.g. impulse purchase categories like chocolates). In these categories, consumers
tend to be driven by in-store factors and extrinsic cues as they have neither the desire
nor the need to comprehensively investigate and assess all the offerings available to
them. Even in higher involvement situations, most consumers dont have the time,
ability or information to assess all the pros and cons before purchase. Instead they
rely on various cues (e.g. brand name, packaging, etc.) to help them make their
decision (moment of truth article: Zeithaml, 1988). Even categories which are
traditionally considered high involvement decisions, such as motor vehicles, have
people for whom the decision is made without much consideration and categories
which are often considered to have few involved consumers, such as soap, is an
important, deliberated decision and assessed in depth by some.

Usage (The 2nd Moment of Truth)

Unlike advertising exposure which can be relatively brief, packaging continues to
build brand values during the extended usage of the product and can drive brand
equity and loyalty. After purchase, packaging plays both a functional and a
marketing role.

Functional Role:
From a functional perspective, packaging is often part of the usage/consumption
experience not only is it a means of providing any necessary information, but it can
also form part of the actual product and provides functional benefits (e.g. being easy
to use, fitting into storage space, etc.). If packaging is unwieldy it can hamper the

32
relationship with the brand for instance if it breaks easily, doesnt fit in the fridge,
can cut the consumer, etc., the experience with the product can be negative.

Marketing Role - Brand Identity and Differentiation:

As the only part of the marketing communication that the consumer takes home,
Packaging plays a key role in communicating and reinforcing brand values over
time. Packaging has the power to make, but also to break brand relationships.
A key example of the latter, is a case cited by Hofmeyr and Rice, where a change in
pack design contributed towards a drop in a leading beer brands market share by
more than 20% in the space of just one year. Nothing other than the packaging had
changed the product itself had not changed in any way. The pack change, although
not dramatic (the same style but with lighter coloring) led to a perception that the
beers quality had been compromised and that it was now weaker. This caused many
previously loyal consumers to lose faith in the brand and to move to the brands
stronger competitors instead. This is a clear example of the power of bad
packaging. Although a non-favourable advertisement might be quickly forgotten,
poor packaging (if it remains with the brand throughout its usage cycle) provides a
continual reminder of the brands perceived failing.

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 2.4. Factors Influencing Packaging Decisions

Packaging decisions are important for several reasons including:

Protection:
Packaging is used to protect the product from damage during shipping and handling,
and to lessen spoilage if the protect is exposed to air or other elements.

Visibility:
Packaging design is used to capture customers attention as they are shopping or
glancing through a catalog or website. This is particularly important for customers
who are not familiar with the product and in situations, such as those found in
grocery stores, where a product must stand out among thousands of other products.
Packaging designs that standout are more likely to be remembered on future
shopping trips.

Added Value:
Packaging design and structure can add value to a product. For instance, benefits can
be obtained from package structures that make the product easier to use while
stylistic designs can make the product more attractive to display in the customers
home.

Distributor Acceptance:
Packaging decisions must not only be accepted by the final customer, they may also
have to be accepted by distributors who sell the product for the supplier. For
instance, a retailer may not accept packages unless they conform to requirements
they have for storing products on their shelves.

Cost:
Packaging can represent a significant portion of a products selling price. For
example, it is estimated that in the cosmetics industry the packaging cost of some
products may be as high as 40% of a products selling price. Smart packaging
decisions can help reduce costs and possibly lead to higher profits.

34
Expensive to Create:
Developing new packaging can be extremely expensive. The costs involved in
creating new packaging include: graphic and structural design, production, customer
testing, possible destruction of leftover old packaging, and possible advertising to
inform customer of the new packaging.

Long Term Decision:

When companies create a new package it is most often with the intention of having
the design on the market for an extended period of time. In fact, changing a
products packaging too frequently can have negative effects since customers
become conditioned to locate the product based on its package and may be confused
if the design is altered.

Environmental or Legal Issues:

Packaging decisions must also include an assessment of its environmental impact
especially for products with packages that are frequently discarded. Packages that
are not easily bio-degradable could draw customer and possibly governmental
concern. Also, caution must be exercised in order to create packages that do not
infringe on intellectual property, such as copyrights, trademarks or patents, held by
others.

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 2.5. Packaging as a Medium to Increase Sales

Catching consumers attention is the first step in making the sale

Packaging plays an important role as a medium in the marketing mix, in promotion

campaigns, as a pricing criterion, in defining the character of new products, as a
setter of trends and as an instrument to create brand identity and shelf impact in all
product groups. The findings of many other research projects are supplemented by
the survey carried out by IRI (Information Resources Inc.), which provides
information about this subject from extensive, in-depth interviews and POS polls,
specifically including the issue of multisensory appeal, which is a particular trend. It
also presents new arguments and evidence confirming a central conviction held by
the packaging industry: that the shopper appreciates and in fact explicitly wants to
receive stimulation for the buying decision he is making when standing in front of
the supermarket shelf, often even preferring this to other forms of communication.

He is keen to be informed and inspired, tempted and pampered by surprising and

persuasive functions, emotions and sensual impressions. The top ten requests about
packaging: Even though the consumer is not dissatisfied with the packaging
available on the market, he would still like to be tempted by functional and attractive
packaging ideas, by multisensory appeal and creative design - preferably with
packaging ideas made from board. He acknowledges additional benefits and appeal
and is even willing to pay an extra charge for them. Good starting points for
improvements, changes, innovations which optimize the features of packaging that
determine buying decisions and thus generate new market potential can be
summarized in consumers' top ten requests about product packaging:

1. Eye-catching appearance:
A distinctive, unmistakable and eye-catching appearance is a signal at the POS to
which all consumers and particularly the younger ones respond positively. Whatever
stands out clearly in the monotonous competitive environment, whatever is
surprising scores points with the consumer. Special effort makes a special
impression - and is allowed to cost more too.

36
2. Design, shape and color:
The purpose of well-considered design, creative printing and finishing is to entice
the consumer to devote attention to the pack and its contents at the POS. Aesthetics
and attractiveness are major distinctive features - and are in fact essential in some
product segments: beautiful packaging design is of central importance in the
cosmetics and confectionery product groups. Consumers like to buy agreeably
designed and decorative products!

3. Functionality:
Functional aspects are the basis for all successful packaging and for thus greater
product success too. Product and aroma protection, hygiene and tightness,
environmental responsibility and practical handling (in both use and storage) are just
as important here as ideas that improve comfort: closure mechanisms, portioning,
see-through windows, for example.

4. Innovation:
Novelty has exceptionally strong appeal. An innovative pack can even make "new
products" out of familiar ones. Unusual solutions, functional new developments and
originality not only set design trends but also boost sales!

5. Material:
What is printed on board is read particularly willingly, while what is packaged in
board sells particularly well. Sustainability, easy disposal and, above all, great
design variety and potential are particular features of the material. Popular
with consumers, particularly high appeal and many other advantages too.

6. Efficient communication:
The packaging is the credible medium at the point of sale and is consulted willingly
and intensively (see "Material"). This makes it an efficient means of communication
and, in addition, one that gets closer to the consumer than all others. If several of his
senses are appealed to as well, he can be persuaded particularly successfully.

37
7. Multisensory appeal:
Anyone who approaches consumers via several of his senses attracts greater
attention, intensifies perception and stimulates interest in buying. Packaging that can
be felt, smelled and heard as well as looked at wins the customer's favour. So much
so that he is willing to pay a higher price for this multisensory appeal.

8. Appropriateness:
For the product Packaging is considered to be an important indicator of quality. The
quality of the product therefore has to be communicated by good packaging and not
just by promises of quality made in the text on the packaging. A credible "overall
work of art" is created as a result, in which the contents and the packaging are
coherent and the consumer is convinced by their consistency.

9. Value Packaging:
It is an excellent way to communicate sophistication, class and value. This makes it
an ideal strategic option for expressing premium positioning - as well as being the
instrument of choice when a product needs to be upgraded or a brand needs to be
revitalised. Products in classy packaging are particularly popular presents too.

10. Additional benefits:

Successful packaging not only combines what is pleasant with what is functionally
useful but also provides additional benefits. For example, as a gift or for
presentation, with entertaining components or simply by making it possible to
continue using the packaging for something else after the product has been
consumed.

Increase Sales with Functional Packaging:

THE NEXT time you buy a product, consider the work that goes into its packaging.
There are several aspects that make up the packaging, but often consumers do not
realize the amount of thought that goes into the design, manufacture, and role it
plays in marketing. Prior to the advent of the modern supermarket and department

38
store, manufacturers shipped merchandise in bulk containers such as barrels, sacks,
and tubs. Retail merchants repacked the contents into smaller, more convenient
packs to meet customer needs. With the growth of mass merchandising and self-
service, manufacturers realized the value of packaging as a marketing tool. Today, it
is a vital part of a firm's product-development strategy; a package may even be an
integral part of product itself, for instance, the aerosol spray can for insecticide. It is
estimated that US$75 billion is spent annually on packaging, and makes up about 10
per cent of a typical product's retail price. This amount is higher for such products as
cosmetics and electronics--as high as 40 cent or more. The complete package design
of a major product might several million dollars for specialized machinery and
production. Packaging decisions must serve both the distributor channel and final
consumer needs. Plans are often made in conjunction with production and logistical
factors. James Shi, design director of Cre8tive Labels, a design firm, says a
packaging label indicates the product's brand name, the company logo, ingredients,
promotional messages, inventory control codes, and often, directions for use. Inserts
can take the form of detailed instructions and safety information that are carried in
drug, toy, and other packages or can be coupons, prizes, or recipes.

According to Clive Simmons, a Singapore-based design consultant and part-time

lecturer at a Singapore design school, packaging is that part of product planning in
which a company researches, designs, and produces its packages. "It consists of a
product's physical container, label, and inserts. The physical container may be made
from a wide variety of materials like cardboard, metal, plastic, or wooden box; a
cellophane or wax paper wrapper; a glass, aluminum, or plastic jar or can; a paper
bag; Styrofoam; some other material; or a combination of these," says Simmons.

The Changing Role of Packaging:

Product packaging has evolved in its role in marketing strategy. For many years,
packaging received little, if any consideration as part of the product. It merely
provided a storage function. Then, when marketers understood that brand
associations related to packaging are held by consumers. Thus, packaging became
part of brand building efforts, with notable examples being Coke's contour bottle and
Apple's all-in-one iMac. Today, packaging takes on an even more prominent role

39
and can actually be a point of differentiation. Packaging can enable product use in
different situations (e.g., Yoplait's Go-GURT), product easier to use (e.g., Heinz
ketchup in bottles designed for refrigerator doors), or shape a brand image that can
command a price premium (Apple iPod and I Phone). In the future, product
packaging will take on greater significance for what it does not do... waste natural
resources. Concern about protecting the environment has spurred a call for coming
up with ways to reduce the amount of materials used in product packaging. Wal-
Mart has a Packaging Scorecard initiative that assesses its suppliers efforts to
reduce packaging waste. Focusing on packaging cannot result in a successful
marketing outcome; it is the socially responsible thing to do!

The Importance of Packaging:

Packaging is a very important marketing strategy to glamorize your product in order
to attract the consumers attention. Sometimes packaging is so important that it cost
more than the product itself in order to lure the consumers to buy it. Packaging
should definitely be included in the 4 major Ps of marketing (product, place,
promotion and price). Most consumers judge a product by its packaging before
buying. So it is logical to say attractive packaging is crucial in order to get the first
time buyers to buy your products. Without attractive packaging, who would buy it in
order to try it? Your first step to enter the market is crushed if the packaging is ugly.
Having attractive packaging doesnt mean you should neglect quality either. In fact,
you need to make high quality products in order to have repeated sales. Converting
first time buyers into loyal customers should be the main goal of your business and
packaging is the door to it. Packaging is one of those crucial steps that are often
neglected in business. Ask yourself this question, would you buy a plain looking
item or something excitingly packaged that makes anyone drool?

Role of packaging on consumer buying behaviour:

I have no doubt whatsoever that packaging influences consumer behaviour. The
question, however, asks whether the degree to which packaging influences consumer
behaviour is significant. This makes for a more interesting debate. Let's go back to
the beginning. What is the function that packaging fulfils?

40
If we consider packaging as a communications medium, which we surely must as
companies spend as much money developing innovative new packaging solutions as
they do on many other elements of the marketing mix, in order for it to be successful
it must deliver on both a functional and an emotional level. Content without
creativity is just plain boring, but creativity in the absence of content is simply
noise! The role of packaging, as with any marketing medium, is to help move the
consumer further along the buying cycle - it may simply raise awareness, help us to
research alternatives, to form a preference etc.

From a functional perspective packaging can influence behaviour - especially if the

product is highly commoditized. Given the choice of two options, one with an easy-
to-open, re-sealable container, the other that takes 10 minutes and a tool box to
extract the product, I know which one I'd go with. OK, so this is an extreme
comparison, but we often make this decision as a matter of everyday life. On a
simpler level, the physical state of packaging influences our buying behaviour - the
dented can of food will remain on the shelf, the wet carton of milk will stay in the
chilled cabinet. Packaging is protection. Well-packaged items are less likely to be
damaged in transit and engender a sense of quality. Poorly packaged items suggest
the quality of the product itself may be suspect.

If we are looking to purchase an unfamiliar product, packaging can play an

important role - what information does the packaging contain, in what language? A
lack of familiarity with a product leads to an increased level of risk associated with
the purchase - clearly labelled contents with an image of the contents can help offset
the risk. By raising the topic of risk, we touch on another influencing factor when it
comes to packaging - the emotional connection. This is where the almighty brand
comes into play. On a fundamental level, packaging allows potential consumers to
identify brands that they are familiar with at a glance. So, packaging is also an
advertising medium - and we all know how much influence advertising has, right?
One last thing: Cynics will say that packaging is simply trash waiting to happen.
With the environment becoming an increasingly important influencer of purchasing
behaviour, big-business cannot afford to overlook the importance of the choice of
packaging materials

41
 CHAPTER- 3
SURVEY ON

OBJECTIVE OF THE STUDY

HYPOTHESIS
SIGNIFICANCE OF THE STUDY
METHODOLOGY
SAMPLE DESIGN
QUESTIONNAIRE ANAYLSIS AND RESEARCH FINDINGS

42
 Survey on: Consumer Behaviour towards Packaging of
FMCG Products Statement of the Problem:

Consumer Behaviour towards Packaging of FMCG Products

Objective of the Study:
Important attribute in our research Convenience, Materials, Aesthetic,
Information.
To find out these Attributes affect Consumer Behaviour Significantly.
Is there any significant difference between the Variables as there is change in
Products?
To find out the Consumer Attitude towards the new Packaging of Preserved
Products.
Is Packaging Influence Consumer to switch from one to another Brand?

Hypothesis:
Packaging has least influence on consumer buying behaviour
Packaging only provide information
Packaging cannot be used as a tool of marketing

Significance of the Study:

The aim of this survey is to find the role of packaging on consumer buying
behaviour. The basic purpose of behind it is to find out how such factors act behind
the success of packaging. According to this research I try to find the positive
relationship between independent variable and dependent variables. For collecting
the data I will use the questionnaire. The significance of the study, its delimitation
and limitations are discussed.. The consumer buying behaviour is dependent
variable. The packaging is the most important factor. Packaging elements like
Packaging color. Background Image, Packaging Material, Font Style, Design of
wrapper, Printed Information and Innovation is taken as predictors. Due to
increasing self-service and changing consumers lifestyle the interest in package as a
tool of sales promotion and stimulator of impulsive buying behaviour is growing
increasingly. So package performs an important role in marketing communications,

43
especially in the point of sale and could be treated as one of the most important
factors influencing consumers purchase decision. Literature analysis on question
under investigation has shown that there is no agreement on classification of
package elements as well as on research methods of package impact on consumers
purchase decision. By this article we seek to reveal elements of package having the
ultimate effect on consumer choice. Taking into consideration that package could be
treated as a set of various elements communicating different messages to a
consumer; the research model was developed and tested in order to reveal impact of
visual and verbal package elements on consumers purchase decisions.

44
Methodology:
The methodology for the survey on Consumer Behaviour towards Packaging of
FMCG Products is the Questionnaire method where in questionnaire are answered
by 100 respondents of 4 age groups.

Sample Design:

Age group Respondents

15-21 25
21-35 25
35-50 25
50-above 25

Pie-representation:

Age group

50+ 15-21
25% 25%

35-50 21-35
25% 25%

45
Questionnaire Analysis and Research Findings

1. Does packet of a product influence your buying behaviour

Yes no sometimes
c c c

Yes No Sometimes
Age
group
15-21 22 0 3
21-35 23 0 2
35-50 18 5 2
50-above 13 10 2

Description:
From the above results we can say that there is a high degree of impact of packaging
on consumer behaviour. Out of the 100 respondents 76 says that they get influenced
by the packaging of the product. The packaging have a greater impact on the age
group of 15- 21 and 21-35. However the rest of the higher age group sometimes
tends to change the product due to packaging

25

20

15 yes
no
10
sometimes
5

0
15-21 21-35 35-50 50+

46
2. What is your priority towards packaging?
Protective package eco-friendly packing
Attractive packing all above

Response
Tabular representation
Age Protective Eco Attractive All of
group packing friendly packing the
packing above
15-21 3 4 13 5
21-35 3 5 8 9
35-50 8 5 5 7
50+ 6 7 2 10

Description:
A consumer wants that packaging of the product should be a mixture of a material
that should be eco-friendly and the main aim of packaging should be the protection
of the inner goods. The age group between 15-21 wants that particular product
packing should be attractive The age group between 21-35 wants attractive as well a
since of environment is there in these group because of which they demand for an
eco-friendly packaging. The age group between 35-50 and above 50 wants a mixture
of all the factors and have lesser say on attractive packaging and have a focus on the
protection that packaging should provide them.

14
12
10 Protective packing
8 Eco friendly packinges
6 attractive packing
4
All of the above
2
0
15-21 21-35 35-50 50+

47
3. Do you switch your brand due to change in packaging of existing brand?
Yes No Sometime

Response:
Tabular representation
Age group yes No Sometimes
15-21 8 5 12
21-35 5 6 14
35-50 3 11 11
50+ 4 13 8

Description:
There is a lesser degree of a consumer to change there brand due to change in the
packaging of the existing products. In the age group of 15 -21 these factor has
relatively higher impact, these age group people tends to change there brand if they
find change in the packaging of there existing brand and can switch to other brands
which have attractive packaging.

Bar diagram

14
12
10
yes
8
no
6
4 sometimes
2
0
15-21 21-35 35-50 50+

48
4. Which of the following aesthetic factor attracts you towards the purchase of
the product?
colour shape & size
text & Graphics

Response
Tabular representation:
Age Group Colours Shape & text &
size graphics
15-21 11 8 6
21-35 8 9 8
35-50 5 15 5
50+ 6 11 8

Description:
A consumer wants that packaging of the product should be a mixture of a material
that should be eco-friendly and the main aim of packaging should be the protection
of the inner goods. The age group between 15-21 wants that particular product
packing should be attractive. The age group between 21-35 wants attractive as well a
since of environment is there in these group because of which they demand for an
eco-friendly packaging. The age group between 35-50 and above 50 wants a mixture
of all the factors and have lesser say on attractive packaging and have a focus on the
protection that packaging should provide them.

49
Bar Diagram:

16

14

12

10
colour
8 shape & size
text & graphics
6

0
15-21 21-35 35-50 50+

50
 CHAPTER- 4
RECOMMENDATION & CONCLUSION

51
 4.1. Recommendation
Brand is important and its strategy is in consideration in the units. Product
packaging is valuable for brand equity, product differentiation, market
segmentation, new product introduction, pricing, promotion etc. Brand name
using plan implementation must be effective in the units.
All the marketing units pay attention for good packaging. They accept that
poor packaging is one of the causes of product failure in the market. It is
necessary to set the packaging standard and to implement accordingly for
better protection and promotion of a product.
Consumer new product manufacturers mostly use the label in their products.
Basically they describe that made it, where it was made, when it was made,
what it contains, how to use it etc. Further more they believe that the
consumers are properly guided by label to use the products. The information
given in the label and its value have to be highlighted while promoting the
product in the market. It must also be more useful technically.
I do believe that culture difference does have an impact on companies
initiatives to design the product package, for instance, during our research;
the choices of packaging colors are quite different between the West and Far
East. Thus, we think that it is important for international companies to take a
consideration of culture differences when they design the product package.
Areas of future research
Suggested areas for future research include a more in-depth analysis into the
relationship
Between product attributes and total product assessment how exactly does
the research
Process influence overall opinions, what is the best way to gain insight into
preference
Without biasing the results? Is this possible? More research into the elements
of pack design and how it influences consumer perceptions are there
universal rules or do they differ by product category, culture, etc?

52
 4.2. Conclusion
Results of research on role of packaging on consumers buying behaviour
stipulated following conclusions:
Package could be treated as one of most valuable tool in todays marketing
communications, necessitating more detail analysis of its elements and an
impact of those elements on consumers buying behaviour.
Appropriate and vivid picture or packaging color which delivers them a
happy feeling, or an easy handle/open/dose/dispose package shape. All these
elements contribute each important effort to catch consumer attention and
interest. Besides each elements single function, we think that a good
combination of those elements may let the product more eye-catching and
attractive.
The impact of package and its elements on consumers purchase decision can
be revealed by analyzing an importance of its separate elements for
consumers choice. For this purpose main packages elements could be
identified: graphic, color, size, form, and material of packaging are
considered, wrapper design, printed information, innovation while product
information, producer, country-of-origin and brand are considered as
important ones. Moreover, the impact of package elements on consumers
purchase decisions should be evaluated depending on the consumers
involvement level, time pressure or individual characteristics of consumers.
Empirically testing the research model proposed, package elements having
the ultimate effect on consumer choice in a case of different products from
group of convenience goods were determined:

53
CHAPTER- 5
ANNEXURE

54
 Annexure:
Questionnaire:
Survey on: Consumer Behaviour towards Packaging of FMCG Products
1. Does packet of a product influence your buying behaviour
Yes no sometimes
c c c

2. What is your priority towards packaging?

Protective package eco-friendly packing
Attractive packing all above

3. Do you switch your brand due to change in packaging of existing brand?

Yes No Sometime

4. Which of the following aesthetic factor attracts you towards the purchase of
the product?
colour shape & size
text & Graphics

55
CHAPTER- 6
BIBLIOGRAPHY

56
 Bibliography

Web Sites:
http://www.indiapackagingshow.com/
http://packnomics.com/Where_s_The_Money_.html
http://www.indianmba.com/Faculty_Column/FC337/fc337.html
http://www.brandchannel.com/papers_review.asp?sp_id=1492
http://gdpackaging.wordpress.com/2010/03/01/introduction-to-packaging-
design-article/
http://www.packagingtoday.com/
http://www.print-packaging.com/education.htm
http://www.cosmetic-packaging-manufacturers.com
http://www.wasteonline.org.uk/resources/InformationSheets/Packaging.html

57