How do the FMCGs and other retail economy players adjust fast to a recession? Going by the trends I have seen, they usually try to lower their margins yet improve their sales and increase their reach.
For example, the entry level for Colgate-Palmolive’s toothpaste in India is recently reduced from Rs. 6 to Rs 5. Why does it matter? Because the 5 rupee coin in India is more like a nickel in US: frequently used, considerable amount yet affordable for many. Especially in India’s rural economy, there is a lot of difference between being able to buy something with Rs. 5 versus Rs. 6. The next barrier is at Rs. 10, which is the typical price for a single serving of soft drinks, potato chips, chocolates, etc.
With moves like this, India’s FMCG giants are slowly unveiling their plans to stay put in a tougher economic scenario. For example, remember the last time you could buy a Coke or ThumsUp in India for Rs. 5? And the historic sales growth that move created a few years ago?
We need to see how it works this time.