FMCG: No freebies on offer as price is not an issue

With pricing power returning to the fast moving consumer goods sector as consumers begin to upgrade to premium products, most companies have stopped offering freebies and reduced prices.

Sunil Alagh, chairman, SKA Advisors, pointed out that companies have realised that offers of this sort are not sustainable in the long run and that the investments instead need to be in brand building.

Apart from a few cross promotional offers from Hindustan Lever to promote its new launches like the Lakme Fundamentals range, there are almost no consumer offers in the market at present.

While one may come across a few offers at the large format retail outlets, these are generally retailer driven and specific to those formats.

Saugata Gupta, marketing manager, Marico, said consumer offers need to have a strategic fit with the objectives of the company beyond just a short-term increase in sales.

The company has over the last few months been giving away free samples of its new products with its more established brands to generate trials.

For instance, Parachute Jasmine soap was bundled with the jasmine hair oil, and the Saffola atta mix with the edible oil. Most people agree that giving away free samples works well to generate the initial trials in the case of a new product launch.

Driving product penetration is the other case where companies feel that consumer offers still make business sense, especially in rural areas.

This is no longer required in the urban markets where the penetration is uniformly high across almost all product categories.

However there are some who continue to persist. Godrej Consumer, which has an all year round 'buy three get one free' deal on all its soaps is in no hurry to discontinue the offer.

HK Press, executive director, Godrej Consumer said that despite giving away freebies, the margins were still decent for the company to continue with the offer.