PACKAGING IN FMCG SECTOR

Chapter 1: INTRODUCTION

1.1 Executive Summary

Packaging can be defined as a method to protect and contain
foods with the foods with the aim of minimizing the
environmental impact of our consumption.
The Packaging Institute International (PI) defines packaging
as the enclosure of products, items or packages in a wrapped
pouch, bag, box, cup, tray, can, tube, bottle or other container
form to perform one or more of the following functions:
containment, protection, preservation, communication, utility
and performance. If the device or container performs one or
more of these functions, it is considered a package
In this project, we will also be looking at the history of
packaging and how the earlier packaging was different in
relation to the modern packaging methods.

Packaging is the subdivision of the packing function of

marketing. It involves more than simply placing products in
containers or covering them with wrappers.
Philip Kotler defines packaging as an activity which is
concerned with protection, economy, convenience, and
promotional considerations.
Until recently packing was being considered as a minor
element in the marketing mix of a product. But now it has
become an integral part of the product itself. Packages act as
the major means-of creating product preference. It is a vehicle
by which the brand of a product is carried through the
consumer. It is a powerful selling tool. Hence, it has become a
highly important area of managerial decisions.

In recent years, apart from all the other brand marketing

strategies available and
used by brand marketers, packaging has also gained
momentum and is now considered as a vital brand marketing
strategy for increasing a brands
effectiveness.

Additionally, in the FMCG sector, where there are gazillion

products available in
all different categories, packaging plays a very important role
in not just keeping
the product safe, but also in creating a brand value and
resonance amongst the
consumers. People purchase most of the products because of
the attractive
packaging, and because of the way it stands out from the rest
of the products on the shelf. Furthermore, Product packaging
creates its own niche in the marketing mix. If the product is
marketed tremendously, even it is priced correctly but if the
packaging is haywire or not up to the mark, there is no way
that the consumer will be willing to buy the product, because
“what is seen is what sells”

The Fast Moving Consumer Goods Sector or as we know it,

the FMCG sector is the best case study to understand the
effectiveness of packaging as a brand marketing strategy.
Amongst the millions of products available in the market,
only a few of them are really successful in growing and
maintaining their brand value and make sure that each time a
consumer recalls their brand and keeps coming back every
time.

In this project we have also touched upon the fact that

packaging holds such an
importance in marketing, it is now viewed as one of the Ps in
the marketing mix.
All in all, packaging has been and will always be an important
factor in building a brand and this is what we will be covering
in detail in this project.

According to Nielsen, the Indian FMCG industry grew 9.4%

in the January-March quarter of 2021, supported by
consumption-led growth and value expansion from higher
product prices, particularly for staples. ... The FMCG sector
grew by 36.9% in the April-June quarter of 2021 despite
lockdowns in various parts of the country
1.2 INTRODUCTION TO PACKAGING

Definition: The Packaging refers to all those activities related

to designing, evaluating and producing the container for a
product. Simply, the box-like container, wherein the product
is stored to protect it from any physical damage and at the
same time attracting the customer through its appeal is called
as packaging.
The product might have three layers of packaging, such as, a
toothpaste come in the plastic tube (primary package), then it
is packed in a cardboard box (secondary package) and then
finally is packed in a corrugated box (shipping or third
package). Nowadays, the packaging is not limited to the
protection of a product alone, but it has been used as a
marketing tool for building the brand equity and boosting
sales.
The term packaging has been used interchangeably with the
word “packing” since
a long time. These two words do not mean the exact same
thing. Packing is the
wrapping that helps in keeping the product safe from any
externalities, whereas
packaging is something that comes above packing, i.e. it not
only keeps the
product safe, but also helps in making the product more
marketable.
In today’s scenario, most of the companies use packaging as
an important marketing tool because of the following factors:
• The packaging enables the self-service, as in the case of
purchases done in the supermarkets and retail mart the
customers select the products on their own without any
assistance from the retailers. Thus, the company must design
its product package in such a way, that it is capable enough to
draw customer’s attention towards it.
• It helps in increasing the consumer affluence, which
means the customers are willing to pay even more for the
convenience, appearance, dependability of the better
packages.
• The packages help in increasing the brand recognition
among the customers. As soon as the customers see the
package, they can instantly relate it to the company or brand.
For example, the Brooke Bond’s Taj Mahal Tea comes in the
blue pack with an image of a Taj Mahal on its box; this gives
an identity to the brand.
• The innovative packaging also helps in bringing huge
profits and benefits for the firm. Here, the company gives a
unique design to its product package with the intent to grab
customer’s attention. For example, the calcium Sandoz bottles
targeted at children and women have been designed to make
them attractive to the target segment (A dog shaped bottle for
kids, while a lady-shaped bottle for women).
Thus, the packaging is capable of influencing a buyer to
initiate sales since the buyer comes in contact with the
package first and then after with the product.
According to Arens (1996), “Packaging is the container for a
product
encompassing the physical appearance of the container and
including the design,
colour, shape, labelling, and materials used”. To begin with,
the history of
packaging has various sources, it would not be wrong to say
that packaging has
been around for a very long time, since the beginning of
mankind.
packaging are basically done to protect the product. During
the present days however these function have assumed several
additional objectives in addition to protection.

The following are the objectives of packaging:

1. To Provide Physical Protection

2.To Enable Marketing
3. To Convey Message
4. To Enable Product Identification
5. To Enhance Brand Image
6. To Enhance Profits
7. To Enable Self-Service Sales

Important aspects of packaging :

1.Promotional Aspect of Packaging :

Packaging of a product plays an important role in promoting
the product in the international markets. With the advent of
self-service starts and super markets, the package of a product
serves as a ‘silent sales man’. It is capable of performing
many of the salesman’s tasks.

When there is no salesman to promote the product in the

stores, the package as kept on the shelf must attract the
attention of the consumer, describe the product’s and
producer’s features, project the confidence and make a
favourable overall impression. Good packaging thus leads to
improved consumer acceptance because it carries and projects
various qualities of the product as well as the manufacturer.
Good packaging must reinforce the integrated marketing
concept. Brand names occupy a dominant role in marketing
which is popularised through advertisement. But the
reminding of brand names and making brands acceptable to
customers are achieved through proper packaging.
Packaging must, therefore, support and reinforce the brand
identity the company is trying to build. In this way, good
packaging creates demand for the product and brings large-
scale production and distribution gains.

2. Protectional Aspect of Packaging:

The second important aspect of packaging is its protectional
aspect which it provides to the product, consumer packaging
intends to offer better convenience to consumers in use and in
storage.
It protects the product from:
(a) Pilferage and adulteration – It cannot be adulterated with
any other product unless repacked.
(b) Product loss – Oil, petroleum products etc. are lost if
remain exposed.
(c) Contamination by dirt or dust, e.g., clothing, food
products.
(d) Moisture gain or loss, e.g., cement or sugar,
(e) Chemical change.
(f) Insect attack, e.g., moth in woolen garments.
It has been estimated that good packaging increases the unit
value realisation approximately three times if we are able to
develop and bring about retail packs for a large number of
exportable items. It also increases the popularity of the
product.

3.Transport Packaging Protection during Transit:

The basic function of transport packaging in international
marketing is to ensure that the goods will reach safely in the
hands of consumers. To ensure the goods is no excuse for not
bothering for damages or pilferage in transit. Good packaging
is essential irrespective of the fact whether the goods are
insured or not.
Improvements in packaging are needed to avoid transit losses
due to environmental hazards, i.e., climate, moisture, etc. and
to achieve greater speed in handling and deliveries. The
materials used in packaging should be such that protect the
goods from the ill-effects of moisture, gas, light, air, etc. so
that goods may preserve its attributes, shape, weight, stability,
fragility, rigidity, surface finish and durability etc. Thus
packaging plays an important role in the storage, preservation,
protection and distribution.
The type of packaging which ensures that the goods will be
delivered in a good condition to the foreign buyer will vary
depending upon the various factors such as-
(a) The product,
(b) The poor of destination,
(c) The length of the journey,
(d) The climate of the place of delivery and place of
destination,
(e) Eat and measure to which the goods are subjected during
the voyage,
(f) The loss of the importing and exporting countries
regarding packaging of goods,
(g) Mode of handling the goods etc.
In many cases, the packaging conditions are specified in the
contract itself and therefore the exporter should not be
bothered about. He must adhere to the conditions laid down in
the contract. Even when the importer has not laid down any
condition as to packaging, it is the prime duty of the export to
provide transport packaging of the type which may ensure the
safe arrival of the shipment in merchandise condition and
must adhere to the above factors.

4.Legal Provisions:
The mandatory provisions as to packaging of the goods
imported also have important bearing on the packaging of
goods. Most developed countries have enacted comprehensive
legislation on the type of containers, both bulk and consumer
especially for food items. For example, exports of food
products to the USA must conform in all respects to the
provisions of the U.S. Foods and Drugs Act.
Similarly, Australia bans the imports of any packing material
containing vegetable matter in order to check insect
contamination of the country’s wood resources large
consignments of Indian goods were repacked at the Australian
Port of entry at the exporters’ cost. In 1978, the USA directed
that all Indian export consignments in wooden packing’s be
first fumigated before they are unloaded at U.S. ports.
The laws of the importing countries may also specify the
labelling requirements to be shown on the packages imported.
However, these rules may vary from country to country.
These rules require the following information to be shown in
the label:
(i) Name and address of the manufacturer/importer;
(ii) Clear description of the product’s composition;
(iii) Net weight or volumetric measurement;
(iv) Duration of the product’s life;
(v) Storage conditions required after the package has been
opened;
(vi) Manufacturer’s instructions for use or preparation, if any.
Factors to be considered for Package Designing.
5P’S OF MARKETING: WHY PRODUCT PACKAGING IS
NOW PART OF THE MIX

Too often, companies still view their product packaging as an

afterthought. So much time, money, and care go into the
meticulous creation and perfection of their products, but if it’s
not packaged properly, all those efforts will go to waste.
Leading brands understand the importance of packaging not
only in keeping their goods safe, fresh, and protected, but also
as an essential part of their branding and marketing efforts.
Your packaging is the signature you leave everywhere, and it
has the ability to attract today’s customers much better than
outdated sales and advertising tactics.

Your packaging should never be considered an afterthought or

just a random part of the marketing mix. It should be viewed
as a key place of focus, as it incorporates all other elements of
your sales and marketing strategies. Packaging is what
maintains the freshness and quality of your product while
using vibrant designs to tell your brand’s story. It is the place
where government regulated information, like nutritional facts
and allergy warnings, is located, therefore keeping consumers
safe and illustrating your brand’s commitment to transparency
and providing products that are beneficial to their lives.
All of these Ps are very much important in bringing the
product into the market,
targeting the right set of audience and also making profits by
selling it at the right
place and time. Packaging was earlier considered as a part of
the product mix,
because marketers believed that packaging and products went
hand in hand and
not much of an extra thought was given to packaging.
As time passed, it was realised that if the packaging was not
up to the mark, there
is no way the product will do well. This in turn made
marketers realise the
importance of packaging, so much that now it is considered as
the 5th P of the
marketing mix.

Packaging enhances the overall product and the complete

marketing strategy as a
whole. It displays the product in the best light and it
complements the overall
product making it attractive, conveying all the necessary
information, and placing
the product right where it needs to be. Hence it is important
that packaging is not
looked at as an mere afterthought, because when a customer is
walking through an
aisle in the supermarket, with a dozen of products in the same
category, it is the
packaging which makes a particular product stand out by
catching the eye of the
consumer and that tempts them to buy the product.

Because of the fact that packaging holds such an important

place in the success of
a product, marketers now consider it as the 5th P and it holds
as much importance
as the rest of the Marketing Mix.

1.2 THE FMCG SECTOR IN INDIA

What is the meaning of FMCG sector?

Fast-moving consumer goods are products that sell quickly at
relatively low cost. These goods are also called consumer
packaged goods. These goods are purchased frequently, are
consumed rapidly, are priced low, and are sold in large
quantities.

Fast-moving consumer goods (FMCG) sector is India's fourth-

largest sector with household and personal care accounting for
50% of FMCG sales in India. ... The urban segment (accounts
for a revenue share of around 55%) is the largest contributor
to the overall revenue generated by the FMCG sector in India.
India has the most attractive FMCG market in the world. It is
the fourth largest market of Indian economy. The market size
for 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 percent of the overall market.
Personal care 22 percent and fabric care (12 percent) comes
next in terms of market share. Easier access, growing
awareness and changing lifestyles have been the key growth
drivers for the sector. Read more to know about the FMCG
industry in India.
companies which also allowed government intervention to
incentivise foreign FMCG companies to operate in India.
The Indian FMCG industry generates massive employment
opportunities and currently employs more than 3 million
people. Departmental stores, grocery stores, and supermarkets
are the places where consumers buy the necessary products
for daily consumption. In the 21st century, people don’t want
to move across different stores to acquire the common
household goods. Hence, the introduction of supermarkets,
where customers have a variety of choices for different
household products, into localities are proving to be extremely
convenient to the customers. Some of the most common stores
in India are: Reliance Retail, Big Bazaar, D-Mart, Easy day,
MORE, Spencer’s, Spar, HyperCity, and Star Bazaar.
Although the operations of supermarkets are profitable, local
grocery stores are suffering due to lack of variety of products.
Unlike other emerging FMCG industry around the world,
FMCG sector in India is still quite conventional. Despite
street markets are still one of the most visited places for
shopping in urban and rural settings, online platforms are
leading the way to buy FMCG products

FMCG Sector – History

Between 1950 and 1980, there was a limited investment in the
FMCG sector. Local people had lower purchasing power,
which meant that people opted for necessity products rather
than premium products. The Indian government was inclined
towards favoring the local shops and retailers.
The period from the 1950’s to the 1980’s did not see much of
a growth in this sector owing to the low purchasing power of
Indians and the government pushing for small scale sectors.
HUL and Amul were one of the only companies that stuck
around and evolved as market players.
Between 1980 and 1990, people wanted more variety of
products which encouraged FMCG companies to increase the
availability of products. FMCG Industry started getting
traction and other companies started entering the industry.
The media industry in India also boomed during the same
time which gave new companies even more incentive to make
their business profitable.

Prior to 1991, when globalization and liberalization occurred

in India, western apparel and foreign food products were not
available to local customers. Common people weren’t very
aware of brand recognition. After 1991, the FMCG industry
was inspired by international companies which also allowed
government intervention to incentivize foreign FMCG
companies to operate in India.
The economic reforms of 1991 not only brought a higher
number of domestic choices but also imported products. The
lowering of trade barriers encouraged MNC’s to come and
invest in India. Rising standards of living coupled with the
growing purchasing power of rural India saw companies
introduce products targeting both rural and urban markets.
Companies started investing in distribution networks,
products upgrade, as well as new product ranges. As an
outcome of increased choices to the consumers and positive
euphoria after liberalization, many of the affluent consumers
who always had money but limited choices started splurging.

 
FMCG Sector – Present
Being the second most populated country in the world, there
is no doubt that India should be one of the countries with a
pioneering and growing FMCG market. Apparently, that is
indeed what is happening right now and what is more
interesting are the products that have a greater market share.
In the past few years, there are increasing number of
initiatives like farm loan waivers, Direct Benefit Transfer
(DBT) and development of infrastructure in rural areas. Under
the Union budget 2019-2020, the focus has been shifting
towards education, agriculture, healthcare, infrastructure, tax
rebate and micro, small and medium enterprises (Ministry of
Micro, Small and Medium Enterprises).These initiatives are
projected to have an impact by increasing the minimum wages
of common people, especially in rural areas. Thus, any
increment in income will be directly proportional to demand
in FMCG products.

Change in lifestyle and traditional culture is also having a

positive impact on the FMCG industry. The population in
urban areas is diverging towards premium products as
opposed to essential goods because of the rise in income of
the middle-class people. This has also lead to FMCG
companies to rethink strategies as people are willing to pay
high prices for premium products.
India’s demographic profile plays a major role in the growth
of this sector. Not only is India’s demographic young, but this
segment is also characterized by increased urbanization and
higher expenditure. Urban development initiatives by the
government, as well as the increasing middle class of India,
has led to an increase in the number of attractive markets in
the country. Ernst & Young’s research on the cities of India
highlights the emergence of 30 ‘new wave’ cities such as
Jaipur and Surat. Consumption in these cities is growing at a
faster rate than that of many of India’s metros. India’s young
population is also characterized by a high degree of
technological awareness. Growing penetration of smartphones
and better internet connectivity in India has led to a
burgeoning E-Commerce sector, which has, in turn, helped
formalize large sections of the unorganized retail sector.