Sachet Economy of the Philippines | THE CATHOLIC ECONOMIST 10/06/2017, 9:04 PM

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Philippines

Sachets in the Philippine Context

Posted on July 8, 2015 by The Catholic Economist Standard Reply

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Author: Miguel D. Fernando

Date Published: 22 June 2015 (Ateneo De Manila University, Philippines)

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It would be nearly impossible not to encounter a sachet while in the Philippines. The sachet has
become an integral part of everyday life for Filipinos. According to a survey by Proctor and
Gamble, Filipinos prefer sachets to bottles of their products with a ratio of 2:1 (Ang and Sy-
Changco 12). Practically everything that is consumed on a regular basis can be found in a sachet.

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Examples of this would be toothpaste, coffee, and shampoo. This paper will seek to enumerate the
pros and cons of having such rampant consumption of sachet products and figure out if this is a
sustainable model of consumption for the Philippines in the long run.

There are a number of benefits for both the consumer as well as the producer associated with
sachet products. Perhaps the number one benefit for the consumer would be the low prices of
sachet goods. According to the income effect, this lower price would give more purchasing power
to the consumers income. This would allow people at the bottom of the economic pyramid to
consume normal goods as opposed to inferior goods at similar prices, albeit at smaller quantities.
The second benefit of sachets for the consumer would be a decrease in risk when purchasing a
new product. In the case that the product does not meet with the consumers taste or preference,
the loss of money would be significantly less than if the consumer bought the larger unit of
product. This is of significant importance because of the low income of the majority of Filipinos
which stems from the high poverty incidence of Filipino individuals as well as the low minimum
wage. As of the first semester of 2014, the poverty incidence of Filipino individuals was 25.8%
(Poverty incidence rises). They would be less willing to take a gamble on the full size packages
of a new product thus making it harder for producers to introduce new goods into the market. The
third benefit would be that this consumption model is actually of lower cost, and therefore, more
economical for the consumer on a price per volume basis. It is cheaper compared to the same
product in bottles with larger quantities. This price advantage is attributed to technological
advancements in the packaging techniques of sachets. For example, according to a chart from
Proctor & Gamble, the price per milliliter of shampoo for sachets would be 0.00720 US dollars
while the same product in a bottle would be 0.00770 US dollars per milliliter (Ang and Sy-Changco
12). A comparison of prices of sachets versus bottles in local stores would likely yield the same
result. These savings would allow consumers to allocate more of their income to other goods or
even luxuries. Contributing to this would be the fact that the sachet market accounts for a
significant volume thereby giving manufacturers the economies of scale necessary to create such a
price advantage.

The benefits of sachets do not stop with the consumers. The producers would also benefit from
this system of packaging their products. Firstly, they would be able to tap the market of minimum
wage workers or the bottom of the economic pyramid. In the Philippine context, the bottom of the
economic pyramid would have a large number of people due to the low minimum wage, high
unemployment, and high underemployment. This means that there would be more people who
would have the purchasing power to purchase their products thus providing the producers with a
higher income. It would also allow them to compete with substitute goods of lower price and
quality which the consumers of the bottom of the pyramid would otherwise consume if sachets
were not available. Secondly, the high demand for sachet products would mean they would be
able to produce and sell more of them, and reduce the risk of having a surplus of said product.
This high demand would stem from the law of demand. According to the law of demand, the
lower the price of a good, the higher the demand. Thirdly, in the Philippine context, there would
be more sellers of their product due to the numerous informal stores or sari-sari stores. In 2003,
according to De Veyra (2006) and Capistrano (2005), there were a total of 509,345 sari-sari stores
operating in the Philippines. Such a high number of stores which could sell their product would
allow them to produce and profit more than if they exclusively sold their products in bulk. This is
also in part due to the nature of the sari-sari stores which often only sell goods piecemeal or tingi.

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Lastly, as mentioned earlier, it would be easier for producers to introduce new products or test the
responsiveness of a market to a new product through the sachet method. The distribution is easily
facilitated through the sari-sari stores, the portions are affordable and the results from the reaction
to new products, immediate. This would also benefit the consumer in that they would have a
wider variety of products to choose from

While there may be numerous benefits to both the producers and consumers of having a sachet
economy, there are also downsides for both the consumers and the producers. One of them would
be the effect on local producers of consumer goods. The local producers cannot compete with the
efficiency in the manufacturing and distribution, additionally, the low prices of the sachets of
larger multinational companies, consequently making them go out of business. This would also
lead to the loss of jobs which would hurt the purchasing power of consumers as a result of lower
GDP per capita. Another downside for producers when putting their goods in sachets is the risk of
undermining the business of their SKUs or stock keeping units (Pornpitakpan et al 5). Producers
wouldnt want to risk the current sales of their SKUs in favor of introducing sachet versions of
their products.

The biggest effect of continuous consumption of sachet goods would be on the environment,
which would have a negative effect on both the consumers and producers. The nature of sachets
would have the consumers purchase more often compared to if they purchased the bigger
packages of product. This would lead to more waste which would have a huge effect on the
environment which would consequently affect both the consumers and producers. Sachet
packaging is not recyclable like that of the packages of goods in bulk such as big bottles, jars, or
boxes. The packaging is of a one-time use nature, leading to a tremendous amount of waste.
According to a study conducted in 2004 by a multinational fast-moving consumer goods
manufacturer, in every 15 tons of garbage generated in the Philippines, there is approximately
1,500 kg worth of empty sachets (Consumer Guide: Sachets). In fact, companies such as P&G are
trying to push people to buy the bigger packages due to the sachets being very wasteful and non-
biodegradable (Pornpitakpan et al 2). More often than not, these empty sachets are not disposed of
properly and they are often found polluting bodies of water, blocking canals and sewer systems, or
filling up landfills too quickly. This would consequently hurt the consumers in the end because
they may lose their jobs or livelihoods. In addition, it may also lead to the price increase in goods
due to the destruction of land or the decrease in manpower resulting in lower supply and thusly
higher price (Vidal 2014). For the producers, the pollution caused by these sachet wrappers could
affect the natural resources which they utilize to produce their goods or give their services. This
would force them to drive up prices and consequently lose income due to the people who stop
purchasing their products as they look for cheaper alternatives.

In conclusion, the high consumption, demand, and production of sachet goods is an appropriate
model of consumption for the Philippines. It has a considerable number of benefits for both the
consumers and producers. Notwithstanding a few downsides, its benefits seem to outweigh them.
However, it is important to note that the sachet economy may not be very feasible in the long term
due to its negative environmental impact. Perhaps the best way to keep this model of consumption
going for the long term is for these companies to invest in new technology which would make the

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sachets biodegradable or even recyclable. This would, however, increase the price of sachets in the
short-term as a considerable investment would be required in research and new technology. This is
really the most feasible way for this model of consumption to work in the long run.

Works Cited:

Ang, Rodolfo, and Joseph Sy-Changco. The Phenomenon of Sachet Marketing: Lessons to Be
Learned from the Philippines. Advancing Knowledge Development in Marketing 18 (2007): 5-15.
Web. 20 June. 2015.

Jaiswal, Annand. Fortune at the Bottom of the Pyramid: An Alternate Perspective. IIMA (2007):
26-1. Digital. 20 June, 2015

Pornpitakpan, Chanthika, Singh, Ramendra, and Joseph Sy-Changco.Mini-sizing Consumption

or Whetting the Appetite? Managerial Insights on Sachet Marketing Strategies for Consumer
Goods Companies. ANZMAC (2009) : 7-1. Digital. 19 June, 2015

Vidal, John. We Expect Catastrophe- Manila, the Megacity on the Climate Frontline. The
Guardian. The Guardian, 31 Mar. 2014. Web. 19 June 2015

Consumer Guide: Sachets Pros and Cons. Manila Bulletin. Yahoo!, 8 Mar. 2015. Web. 20 June.
2015.

Poverty Incidence Rises in Philippines. ABS-CBN News. ABS-CBN News, 6 Mar. 2015. Web. 21
June 2015.

BLOG AT WORDPRESS.COM.

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