The sachet should not be the dearest way to wash your hair

Walk into almost any small shop in Surabaya, Davao or Kota Bharu and you will find personal care hanging in strips beside the door: shampoo, conditioner, detergent and coffee in single-use sachets, each priced at a coin or a small note. For millions of households these are not trial sizes or conveniences. They are how a family buys shampoo, a day at a time, with whatever is left after rice, transport and school. A daily-wage household does not keep fifteen thousand rupiah aside for a bottle that will last a month.

The industry tells a flattering story about the sachet. It made branded products affordable to people who could never buy a bottle, and that is true. It is said less often that the sachet is usually the most expensive way to buy the product per millilitre, and that the gap tends to widen precisely when households are under most pressure.

The coin hides the price

A sachet is sold at a price point rather than a price. In Indonesia ours is Rp1,000; in the Philippines a comparable shampoo sachet sells for a few pesos. The coin is fixed in the minds of shopkeepers and shoppers, and moving it is costly. The shop has to change its habit, the shopper has to find a different coin, and a competitor who holds the old price wins the hook by the door. So when the cost of surfactants, fragrance and film rises, manufacturers rarely change the price. They change the fill.

That is what happened across the region in 2022. Input costs for our Helaimas shampoo rose by 27 per cent in six months. Two of our largest competitors cut their sachet fills by roughly a sixth at an unchanged price, and our own finance team proposed taking our 9 ml sachet to 7.5 ml at Rp1,000. Nothing about the proposal was improper. The new fill would have been printed on the pack. But almost nobody reads the millilitres on a sachet bought for a single wash. The price the shopper sees stays the same; the price she pays rises by a fifth.

At the time, our 9 ml sachet already cost 27 per cent more per millilitre than our 170 ml family bottle. At 7.5 ml it would have cost 52 per cent more. Our least prosperous customers would have been charged half as much again as our better-off ones for the same shampoo, and the increase would have been the least visible price rise available to us.

Some premium is fair; most of it is habit

I do not argue that a sachet should cost the same per millilitre as a bottle. It should not. Laminate, filling time, cartons and the long journey through a distributor and a wholesaler to a shop that buys a few strips a week all cost more per millilitre for a small pack. When we broke those costs down for Helaimas in Indonesia, they justified a premium of roughly 15 to 20 per cent over the family bottle. Above that, the premium was not cost. It was margin, earned from the shoppers least able to compare and least able to buy in bulk.

We decided in 2022 to hold the sachet at 9 ml, raise the family bottle's price by 6 per cent and recover the rest through a smaller range and lower advertising on another brand. We also adopted a rule: the price per millilitre of our smallest pack may not exceed that of the family bottle by more than 30 per cent, in any brand or market, without the board's explicit approval. The cap sits above our estimate of the cost difference, deliberately, because pack sizes and coin prices do not move smoothly and we need room to manage. It sits far below where the industry's habit was taking us.

The rule has costs, and I should be plain about them. It cost us about S$9.6 million of gross profit in 2022. It shifts part of the burden of inflation onto bottle buyers, who are not rich either; many are households only a little further along. It limits our room to respond when a competitor shrinks, because we cannot simply match. And our finance colleagues have pointed out, correctly, that a cap expressed as a ratio can be met by raising the bottle's price rather than by protecting the sachet. We watch for that, and so does the board.

There have been commercial benefits too, though I would defend the rule without them. When competitors' sachets shrank and ours did not, shopkeepers noticed before shoppers did, because they handle the strips every day and hear the complaints first. Helaimas's share of Indonesian general trade rose by more than two points over the following two years. A brand sold to people with little money is judged on whether it treats them fairly over many years, and they have long memories.

What I ask the board to watch

The sachet premium is easy to calculate and almost never reported. For each brand and market, divide the price per millilitre of the smallest pack by the price per millilitre of the most common family pack, using shelf prices observed in shops rather than recommended prices. Report it every quarter beside gross margin. If it rises while margins recover, the board should ask whose money is doing the recovering.

Directors can ask three further questions without needing to understand formulation or distribution. When the company last changed a sachet's fill, what happened to its price per millilitre relative to larger packs, and who approved the change? Does the company know who buys its smallest packs, by income and by region, from its own research rather than from assumption? And when costs rise, is there a written order in which the company reaches for remedies, and where in that order does shrinking the smallest pack sit?

Ours now runs as follows. First come cheaper materials and simpler ranges. Second, a visible price change on larger packs. Third, a visible change to the coin price, announced to shopkeepers in advance. Only last comes a reduced fill, and if we reach it the new quantity will be printed on the front of the pack, in the local language, for at least six months. We have not reached the last step since 2022.

I have heard the argument that this is a social question rather than a commercial one, and that a listed company owes its shareholders the margin. I think it is both. A company selling personal care to Southeast Asia's lower-income households is in a long relationship with them, and the sachet is where that relationship is most exposed. Charging people more because they cannot buy in bulk is legal and common. It is also the kind of practice that eventually draws the attention of regulators, journalists and shoppers themselves, and a board would rather set its own rule than wait for someone else to set one.