Pack pricing for small and entry-level products can feel like walking a tightrope for FMCG brands in Australia. On one hand, small packs are a crucial part of your sales strategy, providing accessibility to price-sensitive customers. On the other, rising production costs and shrinking profit margins make it increasingly difficult to keep these packs priced low without compromising your bottom line. If done wrong, however, it could harm your relationship with customers, who are always on the lookout for value. Let’s explore how you can price these packs effectively while maintaining customer loyalty and driving sales.

 

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The Importance of Small and Entry-Level Pack Pricing in FMCG

 

Small packs are not just a minor part of your product range—they’re a critical part of your business model. These packs are often the first point of contact for new customers. The AUD $0.09 pack of chips or the AUD $0.18 bottle of soft drink may seem insignificant, but they play a huge role in driving FMCG sales in Australia. Small packs offer convenience and affordability, which is why they make up a substantial share of FMCG sales today.

 

However, these small packs present unique challenges when it comes to pricing. Rising production costs and the need to protect profit margins make it difficult to maintain low prices without compromising your bottom line.

 

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Risks of Shrinkflation in Small Pack Pricing and Consumer Price Sensitivity

 

One of the strategies some FMCG brands use to offset rising costs is shrinking pack sizes while keeping the price the same. However, this can backfire. Consumers are quick to notice when they’re getting less product for the same price. It might seem like a small change, but when customers realise they’re paying more for less, their trust in your brand can diminish.

 

Take a moment to consider a scenario: an FMCG brand reduces the size of its cereal pack from 500g to 400g but keeps the price at $3.00. Initially, the price appears unchanged, but customers might feel misled when they notice the reduction in size. This feeling of being cheated can drive customers to competitors, eroding brand loyalty and reducing sales.

 

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Pack Pricing Strategy for Small and Entry-Level FMCG Products 

 

So, how can you price small and entry-level packs in a way that boosts sales while retaining customer loyalty? Here are a few strategies that can help you navigate the complexities of small pack pricing.

 

1. Transparency is Key

 

One of the most effective strategies is to be upfront about any changes. If you need to adjust prices or shrink pack sizes, communicate this clearly to your customers. Transparency shows that you’re not trying to hide anything and helps maintain trust. Explaining why prices are increasing—whether due to rising production costs or inflation—can make customers more understanding of the changes.

 

When customers feel informed, they’re less likely to feel betrayed. They may even be more willing to accept slight price increases if they understand the reasoning behind them.

 

2. Reframe Small Packs as Valuable

 

Small packs may seem insignificant, but when marketed properly, they can become a valuable offering for your customers. Emphasise the convenience of smaller sizes, especially for consumers who are looking for quick, on-the-go options. Small packs are ideal for people who may not need a large quantity or are simply looking for an affordable introduction to your product.

 

Focus on the value that your small pack offers. Rather than seeing them as “getting less,” consumers can view small packs as an opportunity to try your product at a lower cost with minimal commitment.

 

 

 

3. Consider Offering Tiered Pricing

 

Tiered pricing allows you to offer different size options at different price points, catering to a range of consumer needs. Instead of reducing the size of your entry-level pack, offer multiple sizes with varying value propositions. For example, the small pack could be priced at AUD $0.09, while a larger pack offers more products at a better price per unit.

 

This approach gives consumers a choice: they can go for a more affordable option with the small pack or spend a little more for a larger, better-value offering. This strategy encourages customers to spend more while still catering to those with a tighter budget.

 

4. Understand the Impact of Australia’s Unit Pricing Code

 

Australia’s updated unit pricing code makes it easier for consumers to compare prices based on weight, volume, or unit. While this promotes transparency, it also means FMCG brands can no longer rely on misleading pricing tactics. The price per unit is now more visible, so you must be mindful of your pricing structure and ensure that your products are competitively priced.

 

When making changes to small pack prices, ensure they remain in line with consumer expectations and the unit pricing regulations. This helps avoid potential backlash and maintains the value perception of your products.

 

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5. Avoid Shrinkflation As Much As Possible

 

Shrinkflation—reducing pack sizes while keeping the price the same—may seem like an easy way to manage costs. However, it’s a risky strategy that can harm your brand’s reputation, especially in Australia, where consumers are highly price-conscious. Instead of shrinking packs, consider other ways to manage costs without sacrificing perceived value.

 

Look for cost-saving opportunities in packaging, production, or supply chain management. By focusing on efficiency, you can maintain the size of your packs while controlling costs more effectively.

 

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The Future of Small Pack Pricing in FMCG

 

Small packs can be a goldmine for FMCG brands, but only if you approach them thoughtfully. Small packs aren’t just a way to offer smaller quantities at lower prices—they’re a crucial part of your sales strategy and brand identity. Pricing them effectively requires balancing transparency, value, and strategic choices that protect customer loyalty. 

 

If you’re unsure where to start or need help fine-tuning your approach, we are here to assist. Reach out, and let’s explore how we can make your pricing strategy work for you and your customers. After all, a thoughtful approach today leads to stronger customer loyalty tomorrow.

 

For a comprehensive view of maximising growth in your company, Download a complimentary whitepaper on How FMCG Can Generate Profitable Growth Faster.

 

Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

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