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The advantages and disadvantages of a “sachet economy” in the Philippines

In the Philippines, sachets are inescapable. There are sachets for shampoo, for toothpaste, for detergent,
for coffee, for lechon sauce, and even for cigarettes. Whether or not a product is bought from a
convenience store, chances are, it is also available in smaller quantities packed in sachets.

The sachet business is practically a gold mine, turning people of lower income brackets into customers
with products delivered in quantities they could afford. Making products of all sorts available in sachets
has seen much success in third world countries where most of the population have significantly less
spending power.

An excerpt from the March 4, 2005 article from Brand Strategy, entitled BRAND PAPERS: A sachet
economy.(in Philippines goods are sold in small quantities) says:

“Manufacturers in the US may be driven by the 'super-sized', bulk- obsessed consumer but in
the Philippines, orders come bit by bit,” says Tina Arceo-Dumlao.

In the Philippines, big profits come in small packages - from cigarettes sold by the stick to little
plastic packs of pepper. A recent Synovate Global Omnibus study revealed that nearly 90% of
Filipinos buy items in sachet sizes, including non-food goods such as shampoo (90%),
toothpaste (47%) and detergent powder (13%). This archipelago has become one of the world's
biggest markets for goods sold in small quantities, earning itself the nickname, the 'sachet
economy'.

But does it all add up? Surely logic dictates that buying individual aspirin is more expensive in
the long run than buying a thousand in one go? Not so. The Soap and Detergent Association of
the Philippines claims that the introduction of sachets, made possible by the use of composite
materials, has made the quality products offering hygiene benefits, such as toothpaste and
shampoo, accessible to the poorest part of the population.

One can easily think of many advantages to the prevalence of what is now coined the “sachet
economy.” First, it makes available many necessities, even some luxuries, albeit in small quantities, to
Filipinos of the least spending power. Any product that could be divided into usable portions that fit in
sachets, could be sold in these small uniform packs that are conveniently suited for modest budgets.
Second, small quantities in sachets offer a chance for an inexpensive product trial, a way for a new or
unfamiliar product to get its foot in the door. Of course the risk of picking an unacceptable product isn't
any lower just because there are trial sizes, but the amount of money wasted on what turns out to be a
bad product is far less than it would have been had the purchase been made on a larger size. Third, it
enables consumers to buy a larger variety in one transaction at less cost than it would with bigger
minimum sizes. Fourth, it allows a consumer to buy just one sachet, i.e., about as little as possible.
Fifth, they are portable, so they are convenient for travel or for emergencies.

These are the obvious advantages of a sachet economy for consumers. It is a point of view that only
gives half the picture because it says nothing about the costs of having a sachet economy – costs that
aren't so obvious when only paying attention to advantages.

While it is true that the poor have the same needs, and often even the same wants as the wealthy, the
former can only enjoy some of the same products afforded by the latter in small quantities at a time, if
at all. The problems become more apparent when the costs of a sachet-heavy economy with consumers
practising this on a daily basis are considered.

First, the same quantity of product costs a poor person more money than it does a wealthy individual,
simply because buying piecemeal over time costs more than buying in bulk in fewer purchases. It was
already understood in the excerpt above saying “Surely logic dictates that buying individual aspirin is
more expensive in the long run than buying a thousand in one go?” In the absence of a valid
counterargument following it, the logic still holds.

Second, the consumer is made to shoulder more of the cost of packaging sachet products than those of
larger sizes, thus more of the money the consumer spends goes into recouping the manufacturer's
packaging cost, not just the product contained. Dividing a large quantity of product into smaller
packages requires that each separate package have its own container, which costs money.

Third, display space in stores costs a lot of money in Philippine supermarkets. Manufacturers and
distributors spend money on getting each product carried by a store, and spend more money on the
most visible display locations inside stores on a rental basis. To be carried by a store there must be
something paid to the store in return such as some monetary support like participation in promotions,
exclusive supplementary discounts, even in-store customer interfacing that drive up the stores' sales
volume. Needless to say, getting products into a store costs money, and getting the same products off
the shelves costs even more money, and these costs are recouped by being factored into the
manufacturer's price. The consumer unwittingly shoulders these costs even when they are buying the
smallest packs.

Fourth, a more macroscopic view would show that a sachet economy is most profitable where most of
the population are poor. The low income classification are a captive consumer base due to their more
restricted spending power. With a system that could be exploited this way, companies like Unilever
whose 20+ billion peso sachet business in the Philippines represents more than two thirds of its gross
annual revenue from domestic sales, cannot deny that the business prospers while the system stays that
way.

Lastly, with tremendous demand for packaging material, a country run by a sachet economy would
generate far more waste wrapper material for a given quantity of product than prosperous countries
would. The consumption that generates so much waste has so much environmental impact, and costs
Filipinos (1) their health in enduring pollution hazards, (2) their modest savings in trying to regain their
health, (3) even their homes after storms like Ondoy wreak havoc on them when floodwater combines
with thrown-away packaging material and similar garbage.

This broader perspective on the implications for a country stuck with a sachet economy shows clearly
that this entire arrangement only benefits (1) the companies that profit from the growing business of
sachets and (2) the government's tax coffers proportional to the sachet businesses' income, but sadly at
the expense of the Filipino people, most especially the poor. The implications are definitely something
to think about and consider before picking a sachet over a larger size.

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