Highlights
Pricing Strategy in FMCG: Enhancing Competitiveness Without Sacrificing Margins
In the expansive and evolving FMCG market, pricing is pivotal in determining a brand’s success narrative. It goes beyond merely assigning a cost; it involves comprehending consumer behaviours, market trends, and the distinct value a brand provides. As competition escalates and raw material prices fluctuate, brands that find an optimal balance between affordability and profitability will stand out and succeed.
Understanding Modern Indian Consumers
Modern Indian consumers are knowledgeable, experimental, and value-oriented. Recent data indicates that consumers are prepared to invest more in products that deliver superior quality and convenience. This indicates that perceived value can surpass price sensitivity.
The pricing strategy has consistently focused on delivering freshness, hygiene, and authenticity rather than competing purely on price. Consumers can discern this distinction, enabling the brand to cultivate loyalty and maintain healthy profit margins. A critical lesson learned early in the journey is that competition based solely on price is fleeting, whereas differentiation based on value is enduring. This change in perspective has fostered long-term trust, moving away from the pursuit of short-term volume increases.
Smart Pack Sizes: Catering to Varied Budgets
In India, affordability and accessibility are interlinked. One impactful approach has been innovative pack sizing. Smaller SKUs allow first-time consumers to try the brand without reservations, while larger value packs encourage loyalty and repeat purchases.
For example, introducing the ‘5-Minute Gravies’ in small single-serve packs at an affordable entry price led to an overwhelming positive response. A noticeable trend of consumers upgrading to larger combo packs followed their initial experience, affirming that accessibility drives adoption, and experience fosters retention.
Nevertheless, creating this strategy presented challenges. In traditional retail, smaller packs rotated quickly but offered lower margins, whereas in modern trade and ecommerce, larger SKUs were more effective but required higher initial stocking and logistics investments. It necessitated numerous pricing trials across distribution channels to achieve the right balance between rotation and profitability.
Leveraging Technology for Efficiency
Pricing strength often stems from operational efficiency. Technology serves as the foundation that sustains competitive pricing. Investments in process improvements, from automated blending to temperature-controlled packaging, have enabled cost optimisation and reduced waste.
For instance, the ‘Cool Grinding’ technology not only ensures product integrity but also diminishes production inefficiencies, allowing for consistent output across batches. This method preserves the natural flavours and essential oils of spices. Such advancements align with a growing trend in FMCG: brands that embrace digitalisation and automation early can manage costs more effectively, witnessing reductions of around 10–15%.
Premiumisation: Catering to Diverse Consumer Segments
The FMCG sector is experiencing a notable wave of premiumisation. Consumers are not merely purchasing products; they are investing in experiences, narratives, and the accompanying values.
The brand capitalised on this trend by launching Specialty Spice Blends, created using advanced grinding and mixing technologies while preserving the core qualities of ‘Khade Masale’ (whole spices). These blends resonate with consumers desiring authentic taste and freshness, enhancing the brand’s image in both urban and tier-II markets.
An important takeaway is that premiumisation doesn’t equate to elevated pricing — it revolves around substantiating the cost through perceived value, storytelling, and consistent quality. For example, by using touchless automated processing and zip-lock multi-layer packaging, the brand distinguishes itself in the competitive spice market. These quality elements justify a premium pricing strategy and help establish consumer trust, setting the brand apart from unorganised and lower-priced competitors.
Each distribution channel provided distinct pricing insights. Ecommerce customers were particularly price-sensitive, hence value bundles and combo deals proved more effective than discounts. Modern trade necessitated attractive shelf pricing and investments in visibility, which initially impacted margins.
General trade retailers sought quick-moving SKUs and robust margins to sustain shelf presence. Balancing these various factors required ongoing learning and adjustments. It became clear that pricing is dynamic — a strategy that evolves with consumer behaviour and competitive shifts. Additionally, not all growth is beneficial; pricing strategies must reflect the brand identity.
Successful Strategies for ZOFF Foods
Digital-First Approach Through D2C & Online Channels: The brand strategically commenced its journey through digital and D2C platforms, utilising ecommerce and quick commerce to connect directly with consumers. This methodology enabled experimentation with product assortments, testing of price points, and agile gathering of consumer insights without incurring the heavy costs associated with traditional retail infrastructure.
Smart Portfolio Strategy With Tiered Offerings: The product strategy merges affordability with aspirational aspects. Entry-level price packs and value combinations attract first-time buyers, while premium collections, such as dry-fruit gift packs, appeal to consumers seeking quality and convenience. This tiered approach not only broadens the brand’s appeal but also optimises overall margins. Furthermore, India’s diversity makes the pricing strategy both complex and intriguing; a singular approach rarely succeeds. Effective brands tailor their pricing models to match local purchasing power and market dynamics.
Phased Expansion Across Distribution Channels: Rather than scaling up rapidly, a measured approach was adopted, first establishing a presence in online and quick commerce before venturing into modern trade, general trade, and kirana outlets. The recent entry into ready-to-cook gravies and marinades, available through collaborations with partners like Reliance Retail, illustrates this well-planned, cost-effective growth across distribution channels.
Retailer Empowerment Through Trade Schemes & Digital Tools: Recognising the significance of strong trade relationships, the brand employs retailer engagement platforms like Badho to connect with kirana stores, offer appealing trade margins, and implement incentive schemes. This digital approach aids in building trust with distributors and facilitates more rapid shelf movement for products across various markets.
Looking Ahead: Competing with Purpose
The future of FMCG pricing will be influenced by innovation, flexibility, and purpose. Brands that effectively combine consumer understanding with operational proficiency will continue to prosper despite cost challenges.
The belief remains straightforward: while price can draw consumers in, it is value that fosters loyalty. By committing to delivering freshness and quality in every pack, the brand understands that sustainable growth relies not on reducing prices but on enhancing consumer experiences. As the FMCG sector evolves, brands that adhere to their purpose while mastering value-based pricing will shape the next chapter of success.
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