FMCGs reduce pack sizes to navigate economic slowdown

In the crowded, colour-coded aisles of India’s kirana stores, a quiet revolution is playing out. It is measured not in the number of shoppers, nor in footfall data, but in the weight of the packets leaving the shelves. As inflationary pressures mount, stoked by geopolitical tremors in West Asia and a volatile commodities market, the Indian consumer is engaging in a pragmatic form of austerity: trading down to smaller, more manageable units. For the country’s fast-moving consumer goods (FMCG) giants, this trend represents the defining economic challenge of the year.

The phenomenon is stark. Since April, sales of small packs, especially those retailing between INR 5 and INR 20, have been outpacing larger SKUs by a margin of 4-10 percentage points. The logic is simple: when budgets shrink, the psychological barrier of a price hike is high, but the flexibility of a smaller portion size is perceived as a hedge against inflation. Companies like Parle Products and Britannia Industries report that packs priced at the lower end of the spectrum now comprise the bulk of their sales, Britannia’s INR 5 and INR 10 offerings account for up to 65% of its total turnover.

For corporate India, this shift has forced a tactical retreat into the well-worn territory of "shrinkflation." With input costs for packaging, palm oil, and fuel rising, companies are finding it impossible to keep price points stagnant while maintaining weight. Instead of raising the sticker price — a move that risks alienating price-sensitive consumers — manufacturers are quietly trimming the grammage. Dabur’s leadership has openly acknowledged this balancing act, noting that while altering popular price points of INR 10 and INR 20 is a non-starter, the underlying volume can be recalibrated.

However, the government is looking to inject clarity into packaging. The Department of Consumer Affairs has recently moved to standardise pack sizes for edible oils, introducing a strict framework under the Legal Metrology rules. By mandating nine standard pack sizes, from 200-ml to 20 litres, regulators hope to restore "structural sanity" to the market. Industry veterans, such as the Indian Vegetable Oil Producers’ Association, have welcomed the move, arguing that it creates a level playing field where consumers can finally compare prices across brands without the distraction of proprietary, non-standard unit sizes.

 

Yet, amid this belt-tightening and regulatory tightening, there remains a narrative of strategic growth. In his recent address to shareholders, Manish Tiwary, the new chairman and managing director of Nestle India, offered a more nuanced view of the Indian consumption story. He described the current environment as a "push-pull" dynamic, where urban resilience clashes with uneven rural sentiment. For a company like Nestle, the answer lies in a strategy it calls "RUrban" which is an ambitious, tech-enabled effort to bridge the gap between rural and urban markets.

 

Tiwary’s roadmap for Nestle, rooted in his own nostalgia for the simple kirana experience of his youth, aims to replace intuition with data-led discipline. The goal is to move from being a largely urban-centric player to one that can calibrate its assortment and route-to-market execution based on the subtle, street-by-street differences in local demand. By leveraging technology to strip out non-value-added costs, Nestle intends to deliver volume-led growth, even as food inflation continues to influence everyday choices.

 

The broader lesson for India’s FMCG sector is clear. The era of blind growth is over. Future market share will be won by companies that can reconcile two seemingly contradictory objectives: maintaining high-level premiumisation in urban centres while executing granular, hyper-local strategies in the rural hinterlands. As companies grapple with the Iran war’s impact on raw material costs and the government’s new packaging mandates, they must remain fast, focused, and flexible.

 

In this tightening cycle, the winners will not necessarily be those with the largest budgets, but those with the most responsive supply chains and the sharpest grasp of consumer truth. Whether through the humble INR 5 biscuit packet or the refined "RUrban" data models, the future of Indian consumption will be defined by an unyielding focus on the consumer’s pocket. For now, the grammage is shrinking, but the expectations are growing. The gamble is whether these brands can innovate fast enough to keep both in balance.