Whalesbook
India Tackles Shrinkflation with Standard Packaging
The Department of Consumer Affairs is reviewing a policy to reintroduce standard packaging sizes for edible oils. This comes after flexible norms were introduced in 2022, leading to a rise in non-standard pack sizes like 650g, 850g, and 870g. Industry associations, which represent about 90% of the edible oil market, believe these varied sizes enable shrinkflation, where consumers pay the same price for less product. The government proposes fixed permitted sizes including 200ml, 500ml, 1L, 2L, 3L, 4L, 5L, and bulk options of 15L/20L to help consumers easily compare costs.
From Flexible Rules to Strict Enforcement
Earlier regulations in 2021 and 2022 removed mandatory fixed pack quantities, relying instead on unit sale price declarations. However, industry insiders state that consumers typically focus on the absolute price and visual appearance of packaging rather than unit pricing. Companies have used non-standard sizes to manage decreasing profit margins due to fluctuating global commodity prices, as packaging costs can be up to 15% of manufacturing expenses. The proposed change will require manufacturers to adapt their filling equipment, with a potential three-month transition period being discussed to clear existing stock.
Production Challenges for Companies
Although the industry generally supports standardization for fairer competition, the policy shift presents immediate operational issues. Major companies like Adani Wilmar and Patanjali Foods, which depend on integrated supply chains for competitive pricing in an import-reliant market, face challenges. Retooling production lines for standard sizes could impact short-term profits, especially with current high inflation for packaging materials derived from petrochemicals. The new rules will apply equally to domestic and imported oils, ensuring a level playing field but possibly limiting how smaller brands can use custom packaging volumes to stand out.
What Happens Next
The success of these regulations will depend on enforcement by Legal Metrology authorities. If implemented, companies with large-scale distribution networks that can absorb redesign costs may benefit. Smaller, regional companies might experience more significant margin pressure during the transition. Analysts suggest that while standardization should reduce deceptive practices, the actual price of cooking oil will continue to be influenced by global import prices and the cost of packaging materials, not just the pack sizes themselves.