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FMCG major Marico is prototyping lower pack sizes at 500 ml for its premium edible oil brand Saffola to drive volumes in the urban markets.
Instead of tinkering with the price, the company has decided to drop SKU (stock keeping unit) for Saffola after its secondary volume growth dropped to 3 per cent during the fourth quarter.
“The easiest thing would be to take a price call but we want to experiment with Saffola and will have prototypes this year to get the brand back on track. There has been concern for Saffola volumes but we must have some leeway to experiment. If the prototype succeeds we will scale it up,” said Saugata Gupta, MD & CEO, Marico.
Saffola’s volumes have been impacted primarily as it has been selling at an increased price premium of ₹40 to ₹50 a litre compared to other brands.
Marico is targeting volume growth rate at 9-10 per cent for the first quarter for Saffola, which has always been an urban brand with 30 per cent of its sales coming from modern trade outlets.
The ₹5,733-crore company is also hoping for recovery in urban demand and discretionary spends in the FMCG category to revive the fortunes of Saffola. Gupta added, “Once urban growth is back, discretionary spends will come back. Saffola currently has a turnover of almost ₹90 crore and we expect it to reach ₹120 crore next year.”
Kaustubh Pawaskar, Research Analyst at Sharekhan, says, “Saffola edible oil comes under the discretionary category and its volume growth has been declining for the past two quarters. Increasing prototypes at 500 ml packs will induce trials for first time buyers of premium edible oil which should see volume growth pick up.”
During the fourth quarter, Marico has also been prototyping sensorial oils under Nihar Natural Shanti Sarson Kesh Tel (mustard oil). “Nihar Shanti Amla has been our biggest driver of growth with a 33-per-cent share and this gives us the confidence to launch a mustard oil under its franchise in the value added hair oil category,” said Gupta.
“We want to drive our overall volume growth between 15-16 per cent and do to that we need to have investment behind innovation,” added Gupta.
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