Daybreak - Your grocery bill is soon going to get more expensive. But the spike might not be in the price tag

Episode Date: May 5, 2026

The Parle-G packet has cost five rupees since the 1990s. Once, when the company tried raising it by 50 paise, consumers switched to Britannia's Tiger within weeks. The price was rolled back. That's how sensitive this market is.But something else has been changing — quietly, and without announcement. The packet that was once 100 grams is now 45. And Parle-G isn't alone. Dabur, Britannia, Nestlé, Godrej — all cutting weight, all in the same quarter, all for the same reason.A war in West Asia has sent packaging costs up by 40 to 75%. The buffer won't last. What comes next?Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

One of India's most iconic and recognizable brands has offered the same product for the same price for decades now. It's the perfect accompaniment for evening chai and even the society uncles and aunties who like to feed neighborhood dogs are more likely to reach for this instead of a pedigree. With iconic jingers like Gmani genius, which means G stands for genius and Hindusan K Shakti, which means the nation's strength, this product has an unshakable place in India's. in consumer history. I'll give you a moment to guess what it is. And you got that right. It is palaji. It would be very tough to find an Indian snack cupboard without a palaji in it.

And while its consistent quality is certainly a big reason for the brand's popularity, a lot of this kind of consumer loyalty is also owed to how consistent the pricing has stayed over the years. Take the five rupees back, for example. Did you know that it has been the same price since the 1990s? In fact, once when the company did try to increase the price by just 50 per se in the early 2000s, the backlash was immediate and punishing. Volumes fell considerably in a short span and consumers began switching to other products, like Britannia's Tiger, for example.

It got so bad so quickly that the price hike was rolled back within weeks. And this incident showed just how price sensitive the market was. So for the last decade, the $5.5.5. stayed. The price point survived demonetization, GST and even COVID. But even as the price remained unchanged, that consistency came at a cost. You see, as input costs began to increase with the price of raw materials like sugar and oil, what changed was the weight of the packet. It began to decrease. What started as a 100 gram packet is now less than half that. And a local grocery chain owner in Delhi told business today that in just the last two months, the weight dropped

again, from 50 grams to 45 grams. This phenomenon has a name, shrinkflation. Basically, companies just give you less product for the same price. You know, soap bars start weighing about 5 grams less. Shampoo bottles suddenly sell 180ml instead of 200ml. Packets of chips become more air and less chip. Most people never notice because we're not usually weighing our packaged groceries. And it doesn't directly mean an increased bill.

So it's not like we suddenly see a big number and panic. Now, neither shrinkflation as a practice or the pali-jee story is unusual by itself. But turns out it's not just palaeji. This is happening across categories and

companies at the same time. Brands like Tabar, Pali and Godrich consumer have all signalled gramage cuts or price hikes all in the same quarter. And all of this traces back to an aspect that not many of us give a second thought to. Packaging. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Tricia Virki's and every day of the week, my co-host, Nikita Sharma and I will bring you one new story that is worth understanding and worth your time. Today is Wednesday, the 6th of May.

The thing is, over the last few years, the rest of the rest of the rest of the rest of the rest of the rest of price of e-commerce and consumption of packaged goods has made India the third largest packaging market in the world, with an industry size of $86 billion. The industry has also been growing at a 22 to 25% rate annually. But currently, it's under massive stress as the import of materials like plastic and aluminum have been severely impacted by the U.S.-Israel war on Iran, with prices going up by about 40 to 50%. Last week, I covered the ground reality of the shortage. Here's a quick recap in case you missed it. You see, both aluminium processing plants and plastic manufacturing factories have been

lying idle since early to mid-March. Aluminium because the factories don't have enough fuel to use in the processing procedure. Plastic because raw materials have seen cost hikes of up to 75%. And in all of this, workers are also, of course, losing jobs. Now, that's one side of the story. This is the other, the one that starts reflecting in our daily needs. Now, obviously, plastic is a major component of packaging. And here's the thing. Every plastic product begins as crude oil or natural gas. Both can be processed into something called resin. And resin is a sort of powder which can be melted and moulded into bottles, pouches, bags and all other kinds of packaging materials. Now, India is a major importer of the petrochemicals that these plastic materials are derived from.

It imports about 45% of what it needs. And around 65% of the consumer packaging in India is still dependent on flexible plastics. Think sachets and pouches, which means companies are, right now, highly exposed to price volatility. In fact, when the straight first closed in March, E.T reported that the polymer producers increased their prices five times in 11 days to a total hike of almost 60%. Sanjay Gupta, a senior vice president of packaging development at DS Group, told fortune that packaging costs in certain categories

have already risen by more than 20% over the last month. That's a general average. But for some companies like, say, KP. Mubudris, which is a Kela-based Ayurvedic products company that sells things like toothpaste, oils and shampoos, very plastic dependent, saw their packaging costs go up by 25 to 50% in weeks. The company is absorbing the cost for now, but it also told E.D. that it might soon have to increase prices by at least 15% if the situation continues.

Taranarora, the CEO of Zydis Wellness, the firm that sells Glucondi, Complan, Nutri, ever youth and more, told business today that several businesses are seeing severe pressure on their margins because packaging can account for as much as 15% of the total manufacturing cost. Nikhil Doda, the co-founder and CEOO of Lahori Zira, also said in the same report that the current packaging cost levels have already led to a 6 to 7% decline in gross margins for companies like Lahori Zira. The whole truth, the protein products company said in an Instagram post that all the their packaging is plastic laminates.

And they also highlighted that the petrochemical impact is long term and that the supply is likely to remain constrained for months to come. So that's why the cost is being offset by reducing weight. Mayank Shah, who is the VP at Palai products, told times of India that packing alone accounts for 15 to 20% of the products costs. And the plan right now is to lighten the small packs while also increasing the price for bigger ones. So why a different approach for different price points? Well, the reason for that is that certain prices like five or ten rupees, for example, are what Mohit Malhotra, the CEO of

Dabur India called sacred price points in a 22 report from business standard. They're usually targeted at rural and lower income groups where often a five rupees packet of Kaliji and a five rupees chai is a meal. And because the price itself is so sensitive, the only way for companies to pass the cost on to consumers is to reduce the volume of what they are selling. And like I said earlier, it's not just paligi. A study from Nuwama wealth noted that Britannia and Nestle are also kind of surgical when it comes to reducing product weight, especially in high volume packets of products like Good Day, Mary, Gold and Maggie so that they can actually protect the premium products.

But the thing is, even though these shrinkages are caused by specific situations, it's not like it goes back to the original weight when the situation ends. If and when input calls were to return to normal, the palaji packet that just became 45 grams is not going to become 50 grams again. Brands will just pocket the profit and each crisis will keep setting the baseline lower and lower. Still, even for companies, it's only a momentary relief. Anandrathi Research, another wealth manager, noted that there will eventually be a demand cost, which means at some point customers will realize that they're getting less for what they're paying,

lose trust and switch loyalties. Also, right now, many larger FMCG companies are able to absorb rising costs because they have an inventory buffer. They have stocked items and signed contracts with manufacturers that will tide them over for a couple more months. But as soon as that buffer starts to wear away, Bramage cuts could get more dramatic and companies will also start hiking prices. And slowly but surely, even as your grocery bag gets lighter, the bill itself will continue to weigh heavy on your wallet.