As input costs are constantly rising, consumer goods manufacturers are amending packaging and reducing quantities—so that they can keep their sales price constant. Unlike developed economies, the price per weight (any unit) is not displayed, only the MRP is imprinted on packages
Thanks to inflation, petrol price hikes and rice in prices of agricultural products, consumer goods are getting costlier. Nevertheless, inflating prices outright may not always be the best way to go about it, that’s what the FMCG (fast-moving consumer goods) companies seem to believe. They have opted for a less conspicuous route—package a reduced quantity, at the same price.
“Recently, I purchased a pack of potato chips manufactured and packed by a renowned multinational company in India. I was shocked to note that contents of the pack were reduced to just 63gm instead of the earlier 75gm with Maximum Retail Price (MRP) kept the same as earlier,” renowned RTI (Right to Information) activist Subhash Chandra Agarwal told Moneylife. According to him, this equals cheating the customer, and makes a strong case of bringing private companies and corporates under the RTI Act.
It is quite a common practice in India—and abroad—to reduce the quantity of products instead of increasing prices in case of inflation. In 2008, during the recession, an IMRB International (formerly Indian Market Research Bureau) representative had explained why sales volumes have gone down for washing detergent powders, to a business publication, “In household care, categories like laundry-care (detergent powder) showed a decline mainly due to reduction in the quantity done by many washing-powder brands. Companies kept the price constant but to tackle the rising input costs, they reduced the quantity of powder in the same pack.”
In developed countries, bread is a product which is noted for being marketed at the same price but in a reduced quantity. Other products which are most likely to follow are wine, canned foods and biscuits.
One can easily manipulate quantities packaged in products like cereals, beverages and powdered items, because it is difficult to spot a difference in weight on the spot. Other products like soap and shampoos have also started following this trend. A leading brand of shampoo earlier used to come in a stout, broad bottle. After an ‘image makeover’, now the product comes in a sleek and narrower tube, though it is slightly taller. However, the weight of the product is the same, but then, it is advertised as ‘30% more’.
A very common thing to do in such a case is to change the packaging; to hide the fact that the amount inside is reduced slightly—and then charge the same price. There are a few soaps which have become wider and bigger in girth, and have become more expensive. But, they have also become thinner, which keeps their weight approximately the same.
The cure, as Mr Agarwal said, is to have the ‘unit price’ being printed on each unit sold—like pills, cough drops, etc which are sold in strips. Otherwise, one should read the weight written on packets. It may not be easy to find substitutes, but it is good to be aware of this fact.
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The company had a typical MLM business model and claimed income after one became a distributor; it used Oommen Chandy’s picture, taken during a casual meet, to attract prospects
Money-chain and multi-level marketing (MLM) schemes keep coming up, and all of these fraudulent schemes sport some unique model to gain legitimacy. But all of them have a typical MLM business model, which is not sustainable in the long run. Take the case of Royal Life, an MLM company based in Kerala (it has shut shop now). But potential ‘investors’ were lucky—Royal Life was operating in a state where investigating agencies have banned many such similar companies, and this one was no exception.
Moneylife has learnt that Royal Life had used the picture of Kerala chief minister Oommen Chandy to promote its MLM scheme, ostensibly to try to exhibit its political clout. But in reality the story was different.
According to a source based in Kerala, who spoke to Moneylife preferring anonymity, “The company officials met Oommen Chandy with the help of a local Congress leader. They (the officials) posed for a photo; this was being used to lure innocent people who ultimately became victims to the chain fraud of Royal Life.”
Royal Life claimed to be a promotional arm of ALGA Marketing Pvt Ltd, which it said was a “unique and innovative marketing plan.”
It is also reliably learnt that the company shut down after police action. Moneylife has earlier reported on how investigating agencies in Kerala were coming down heavily on money chain schemes mushrooming in the state. (Kerala gets tough with money swindlers and MLM companies ).
The business plan of the company was an MLM business model. One had to become a distributor of its products and earn income under various heads. The company claimed, “When you become a Royal Life Distributor, you can share this business opportunity with your friends or relatives, for which Royal Life rewards you with five streams of income (such) as Binary Income, Referral Income, Royalty Income, Royal Performance Bonus and Residual Income.”
In its product range, it displayed various products ranging from facial creams, energy pendants, balms and bracelets. The cost ranged from Rs1,000 to Rs12,800. On getting two more people to become distributors, the company was to pay binary income of Rs1,000 for each pair. This would have increased as more people join. Similarly, 10% of the ‘pair’ income was supposed to be earned by every distributor as ‘referral’ income, which also had no ceiling or capping. Then there was a Royal Performance Bonus to top it all, after 15 pairs were enrolled in three weeks coupled with ‘residual income’.
Of course, Royal Life had a huge product portfolio. It claimed to be operating in the e-commerce business, mainly selling medicines for cholesterol, diabetes and obesity—among other ailments. Now thanks to the Kerala police authorities, Royal Life has got a royal boot. But what about the numerous other chain-marketing, MLM and Ponzi schemes which continue to thrive all across the country?