GEMMA CANDELARIA is a mother of 10 who relies solely on her husband’s earnings as a company driver for the family’s expenses. But just like other wives with shoestring budgets, Candelaria has become an expert on stretching every peso, especially on days when she has only P100 for food. And so since last year, food in the Candelaria household has come in mini-size: 100-gram cans, 20-gram boxes, or 9-ml sachets.
“It’s better this way,” says the 36-year-old housewife. “It’s cheaper and it saves us money. If you haven’t much money, you pick whatever is cheaper.”
For Candelaria and millions of other Filipinos, size does matter these days — the smaller, the better, because then they can afford to buy it. With the disposable income of Filipinos shrinking almost daily, many families now find buying in large quantities simply out of the question, and consumer-goods manufacturers seem to have introduced micro-marketing, also known as the make-it-small-and-snappy selling tactic, just in the nick of time.
Actually, this package-downsizing trend began in the 1990s with nonfood items. But it was only in the last three years that processed food started to be sold in ever-smaller quantities. Explains Jonathan Chua, unit manager of the multinational Procter & Gamble: “Downsizing is in response to consumer coping behavior. With harder times, income is flat and the cost of goods is rising. The budget remains the same, say P1,000. So families try to buy the same items, but in smaller quantities.”
Micro-marketing has also left cash-strapped consumers feeling less oppressed. Chito Macapagal, general manager for corporate development of Unilever Philippines, says, “We have such low salaries. You feel deprived if you can’t buy things that you really need. (Micro-marketing) is a way of (satisfying) that need.”
Even if it means just having a taste of what you want. Vicky Abad of Taylor Nelson Sofres (TNS), a global market information group, says, “If you wanna try ice cream and you can’t afford (a big one), a pint would allow you that experience for something less.”
At the same time, mini-sizing has meant big business for manufacturers who are now able to tap a segment of consumers they had previously been unable to reach when they were selling items in larger portions. Abad says manufacturers cannot ignore the sizable number of the population that belongs to the D and E socioeconomic classes, which account for 80 percent of the population. Obviously, manufacturers are going to lose out in the end if they cater only to the perfumed classes.
Nearly 90 percent of Filipinos, most of them from the D and E classes, now buy products in sachets and mini-sizes, according to the Global Omnibus Survey of Synovate, a marketing research firm. But even many among those who belong to the A, B, and C classes have turned to mini-sizes. Coffee, creamer, juice, chocolate and milk powder, soy sauce, and vinegar topped the list of the 30 percent in those segments who said they bought food items in smaller sizes.
|Milk/milk powder||3||Fish sauce||12|
|Food flavoring/Powdered juice||1||Rice||4|
Source: Asiabus April 2004, Synovate Philippines
Mini-sizes also rule in the canned meat category. TNS saw that since 2003, more and more people have been buying canned food in 100- to 200-gram size, which now eat up more than half the market-volume share.
But it is the flexible or sachet phenomenon that is perhaps one of the most visible aspects of micro-marketing. Macapagal says it was the use of composite materials or flexibles that enabled Unilever to downsize its products. In fact, Unilever Philippines claims to be the first in the country to package shampoos in flexibles. That was back in the late 1970s when it commissioned the very first British sacheting machine. The simple technology of coupling polyethylene or PE, with plastic, and topping that with another layer of PE allowed Unilever to produce Clinic shampoo in pillow pack, the forerunner of today’s sachets. Toothpaste in aluminum packs followed, skin products came next, and food in sachets just recently.
“When I saw our Mayo, Say Cheez coming out in sachets, I was pretty excited,” says Macapagal. “If you can find value in doing it in sachets for personal care, there’s value doing it for the food side.”
PACKAGING a la Lilliput itself is not an entirely new idea, though, and has been in use for decades in the airline and fast-food businesses. Up until recently, however, it had not been applied to target the individual consumer — with the exception of the homegrown tingi-tingi system, or by-the-piece selling that has long been practiced in this country. Even P&G’s Chua admits that the manufacturers are Johnnies-come-lately in selling stuff the tingi way.
All over the Philippines, neighborhood sari-sari stores and stalls at the wet market employ a crude system of repacking items into smaller quantities. Food items are the most popular candidates for micro-repacking, and it is common to see oil, vinegar, pepper, sugar, or achuete sold in tiny, plastic bags. They used to go for as low as five centavos each, but today the price is at P1 to P5.
Steve Villarize, who has run his own sari-sari store for the last 21 years, still sells in tingi. “Even in the past, people were buying in tingi because that’s what they could afford,” he says. “Cooking oil, soy sauce were measured in cups and then transferred to the bottle or glass brought by the customer.” His wife says that hard drinks were also sold in tingi, “paisa-isang shot.”
The preponderance of the tingi system is borne out by a consumer preferences survey of Synovate, the market research arm of global communications specialist Aegis Group PLC. Sixty-three percent of the respondents bought items in tingi, with the D and E segments making up the majority. Of those who live by tingi, 17 percent said they bought nonfood items while 94 percent said they bought food, primarily cooking oil, soy sauce, vinegar, salt, and sugar.
Reasons Consumers Buy Sachet/Mini Size and Tingi
|Price (e.g. cheap, affordable, can buy with just P1)||42||32|
|Economy (e.g. fits the budget, able to save, just the right amount)||39||29|
|Contents (e.g. many contents, small size, little content)||1||1|
|Usage (e.g. easy to carry, can control usage, good for 2 persons)||31||17|
|Purchase (e.g. readily available, to save time in buying)||32||46|
Source: Asiabus April 2004, Synovate Philippines
The unique retail structure of the Philippines has also fueled the move toward smallness. Sari-sari stores — often little, wooden huts carrying 50 items or less — account for nearly 90 percent of the country’s total retail outlets. TNS’s Asiapanel division notes that in 2003 the traditional trade continued to gain share in the market, particularly in poorer rural areas. According to AC Nielsen, these small neighborhood stores have grown to nearly 560,000, making them the top retail outlets in the Philippines. That number is expected to rise to over 900,000 in five years.
In places like Japan, Thailand, and Hong Kong, modern trade retailers remain bullish in the sector where hypermarkets and discount stores continue to grow. But nations like the Philippines and Vietnam have a less developed trade structure, with traditional stores outperforming modern supermarkets. Based on the 2004 results of its Consumer Panel Survey spanning four years from 2001, TNS observes that expenditures at sari-sari stores have grown over time, with 42 percent of all purchases coming from these outlets. Supermarket expenditures, meanwhile, have been flat while consumer spending in grocery stores has been declining.
So strong has been the performance of sari-sari stores, Abad says, that when a manufacturer comes in and first looks at the retail trade structure, he wonders, “How am I going to sell the 400-ml in a small store?”
P&G’s Chua says that because a lot of the sari-sari stores in poor neighborhoods have a small rolling capital, products in these stores are “100 percent” sachets or mini-size. In fact, he says, stores in squatter areas would have no products in bottles at all.
Though sari-sari stores may impose uneven markups, consumers find these stores more convenient, especially for emergency purchases. Teresa Deocaresa of TNS says sari-sari stores have evolved into some sort of the Pinoy’s extended pantry. The fact that they provide credit gives them another plus in the harried consumer’s budget book.
AC Nielsen notes that while the “AB class prefers wide product assortment, the DE would buy on need basis, mostly small-size packs and on credit.” And while these consumers buy in smaller volumes, it says, their huge number make up for the slack. For the supermarkets alone, data show that the D and E segments account for more than P61 billion in estimated sales annually while the A and B classes contribute only about P5 billion. Sachets and products in smaller packages enjoy wider reach in rural areas than in urban areas, says AC Nielsen.
Overall, shampoo, detergent, soap, and toothpaste remain the top (and growing) items in the nonfood category, according to TNS. These products, apart from being the most basic necessities of a consumer, all happen to come in sachets or smaller packs. Even favric softeners are now fast becoming sachet-driven, says TNS account executive Omar Carlos.
THE DOWNSIZING phenomenon, which Unilever’s Macapagal says started largely in the Philippines, has caught fire in other countries in the region, particularly in India and Indonesia. These countries, he says, have a high ratio of low-income earners with minimal disposable income. Manufacturers in India have had to shift to smaller pack sizes with the growing demand for lower-priced goods in towns and villages.
But there would be no such mass mini-sizing without a more complex technology of packaging, which has enabled manufacturers to produce metallized, multi-layer sachets called flexible composites. The result is light but very strong packaging. A shampoo sachet, for example, would have thick plastic as its first layer. The second layer is aluminum that protects the product from the sun, thus preventing chemical reactions that might cause the contents to deteriorate; it also serves as a barrier to contain the fragrance of the product. The next layer would be for printing that is then coated with another type of plastic to protect the ink engraved on the surface.
“Packaging serves as our window to the consumer,” says Christophe Joyeux, development manager for Unilever Philippines. “It’s what the consumer sees. From the marketing point of view, the function of the packaging is to be able to say this is the product, its content.”
Packaging’s second function is to protect the product from the sun, especially when placed in a sari-sari store. Joyeux stresses that the wrong type of packaging could result in, say, bacteriological contamination of shampoo. A home cleaner or a shampoo should be able to last for two years in a sari-sari store although its average lifetime would be three months, he says.
Macapagal points out that it was flexible packaging that made sacheting for food possible and started brainstorms among food manufacturers who began asking themselves, “What is realistically worth consuming in such a size?” Snacks was one of the answers. Macapagal notes that while Unilever used to offer soups only in a family pack for four to five people, it now has a 15-gram, single-serve soup a busy office worker can enjoy even without leaving the workplace. “If you’re hungry…just pour water and you have your soup ready,” he says.
Yet while convenience has certainly been one of the come-ons of buying in sachets, consumers cite price as their number-one reason for purchasing downsized items. And it’s not only because they just a few pesos to spare. Filipinos actually end up saving when they buy items in sachets versus goods in plastic or glass bottles. It’s the exact opposite of what is happening in the United States, where the consumer market has grown bulk-obsessed and gone for super-sized products in part because they believe they save money in doing so.
Production-wise, sachets are 10 to 20 percent cheaper than other types of packaging because they consume less packaging material, explains Joyeux. The selling price correspondingly goes down. At Unilever, for example, the suggested retail price of a 100-ml bottle of shampoo is P48. A 10-ml sachet of shampoo costs P3.15, which means 10 sachets, equivalent to 100 ml, will total only P31.50.
“When you buy a sachet, you pay less packaging material than when you buy a bottle. Consumers pay for the product, not the packaging. And that’s what makes it (sacheting) a success; it’s low cash outlay,” Joyeux says.
The same holds true for some food items, although the savings aren’t as much as in nonfood goods in sachets. For instance, a consumer would pay just P1.75 more when he buys a 385-ml bottle of Silver Swan Soy Sauce instead of purchasing several smaller plastic pouches equivalent to the same amount of toyo. And in some cases, it’s cheaper to buy food in bigger cans and boxes than in sachets. Buying a 500-gram tin of Milo chocolate powder, for example, would result in savings of P10 compared to buying the same amount in 80-gram sachets.
PRICE POINTS aside, micro-marketing has also given the lower-income group access to branded, hygienically packaged goods. Rather than having mayonnaise or ketchup dispensed from large containers in wet-market stalls, consumers can now have them for almost the same price in single-serve or foil packs. In India, where increasing health consciousness has prompted the move toward packaged, branded formats, people are now more conscious about the quality of water, standard cooking oil, and calorie intakes, Euromonitor reports. This is the reason flexible packaging is fast becoming popular for food items like milk and biscuits.
In the Philippines, downsizing used to be primarily about cost but secondary benefits have kept the trend going strong, says Abad of TNS. Controlled usage is one such benefit. A consumer tends to use more of a product when it comes in a bottle or box, Abad says, but perceives the sachet to contain just about the right amount.
(in million pesos)
| RANK IN TOP 1000 CORPORATIONS
by gross revenue (2003)
|Nestle Philippines Inc.||53,373||9|
|San Miguel Corp.||49,811||12|
|Coca-Cola Bottlers Philippines Inc.||30,258||19|
|San Miguel Foods Inc.||26,930||24|
|Universal Robina Corp.||19,874||33|
|Unilever Philippines Inc.||16,779||40|
|Jollibee Foods Corp.||13,912||49|
|Dole Philippines Inc.||12,932||52|
|Monde Nissin Corp.||12,132||56|
|Del Monte Philippines Inc.||8,814||85|
Synovate’s data show that for the A, B, and C classes, one of the main reasons for buying single-serves or mini-sizes is that usage is controlled (they also liked the packets’ handy size that make them easy to carry around).
Abad says consumers have also somehow developed a perception that small packs tend to be more concentrated, in the same way that they feel soda drinks in one- to two-liter bottles tend to lose their fizz faster than those in 12-ounce cans. That’s not true, of course, but as Abad points out, “You have people buying 12 sachets from the supermarket, and it’s not because they’re trying to scrimp.”
Sociologist Arnel de Guzman, however, has another theory about the sachet mania in this country. “On the surface it’s an economic necessity; the poor cannot buy in bulk,” he says. “(But) I tried to look at it on a theoretical basis, and one possible explanation is na-instill na yung ‘smallness’ mentality. It reflects the Filipino mentality. This is everyday culture, it’s a lifestyle and we cannot get out of the near-sightedness and smallness.”
Abad, though, has a much less negative view. She says that downsizing not only allows the D and E classes to buy what they need at the moment, it also offers the average consumer variety and a chance to get to know the product. Or as Macapagal says, “How can you fall in love with a product if you haven’t tried it?”
Micro-managing also addresses the variety of wants in a family, he notes. “The ones with children, what are they buying? They’ve got four children, they have four different things that they want. You can’t buy one big container to just satisfy one,” Macapagal says.
That’s a situation mothers like Gemma Candelaria find themselves in frequently. In the her home, she’s the only one who likes the Cheezee spread and Nescafe coffee. Only one of her kids likes Milo. Some of her children prefer soap over shampoo for their hair. There used to be a lot of whining, but now she’s able to satisfy everyone by buying in sachets. Marketing whizzes themselves can’t stop smiling. And so long as we have a basket case of an economy, they will continue chanting, “It’s a small, small world” as cash registers ring merrily in the background.