======Sachet Marketing======
Sachet Marketing is a business strategy focused on selling products in very small, low-cost, single-use packages. Think of a single-serving shampoo packet, a tiny portion of coffee, or a small soap bar. This approach was pioneered by global consumer goods giants to penetrate markets in developing nations where consumers have limited disposable income and cannot afford or store larger quantities. For a value investor, this isn't just about small packages; it's a powerful indicator of a company's strategy for long-term growth. By making their products accessible to billions of low-income consumers, companies like [[Unilever]] and [[Procter & Gamble]] effectively plant the seeds of future brand loyalty. As these economies grow and a new middle class emerges, these consumers are likely to "graduate" to larger, more profitable product sizes, having already been won over by the brand they could afford when they had less. It’s a classic long-game strategy for building a dominant market position in the [[Consumer Staples]] sector.
===== The 'Small is Beautiful' Strategy =====
At its heart, sachet marketing is a brilliant solution to a simple problem: how do you sell to someone who gets paid daily and has no spare cash for a large, weekly purchase? You break down the price barrier. A bottle of shampoo might be a luxury, but a single-use sachet costing just a few cents is an affordable indulgence.
This strategy does more than just match a consumer's cash flow. It acts as the ultimate product trial. It encourages experimentation with new products (like hair conditioner or face cream) with minimal financial risk for the consumer. For the company, it's a hyper-efficient way to build brand awareness and daily consumption habits from the ground up. It’s the business equivalent of offering a free sample that people actually pay for, hooking them on the product one tiny purchase at a time.
===== Sachet Marketing and the Value Investor =====
For an investor, understanding sachet marketing is key to spotting companies with deep, often underestimated, growth potential in the world’s fastest-growing economies. It’s not about the tiny profits from each sachet, but about the massive strategic advantage it builds.
==== A Gateway to Emerging Markets ====
Sachet marketing is the battering ram that multi-national corporations use to enter and conquer emerging markets. By building a vast distribution network that reaches tiny, remote villages and dense urban neighborhoods, a company establishes a powerful competitive [[moat]]. A local competitor might be able to produce a similar product, but can they match a distribution system that stocks millions of tiny kiosks? Unlikely.
This strategy is the definition of a long-term investment. The company is essentially acquiring future customers at a very low cost. The bet is that the user of a 10-cent sachet today will become the buyer of a 5-dollar bottle tomorrow as their personal wealth grows. An investor is buying into that future growth trajectory, which is often not fully priced into the stock.
==== What to Look For ====
When analyzing a company that employs this strategy, don't get lost in the weeds of per-sachet profitability. Instead, focus on the bigger picture:
  * **Volume Growth:** Look for management to discuss [[volume growth]] in their emerging market segments during earnings calls and in annual reports. High and sustained volume growth, even if revenue growth is modest, shows the strategy is working and the customer base is expanding.
  * **Brand Dominance:** Is the company achieving number one or number two market share in these regions? This indicates that the strategy is successfully building a brand fortress.
  * **The 'Graduation' Narrative:** Does management talk about its strategy to "premiumize" or encourage users to trade up to larger packages? This is crucial for improving [[profit margins]] over time. A company with a clear plan for this is more attractive than one stuck in the sachet-only phase.
  * **Unit Economics:** While complex to calculate from the outside, the core concept of [[unit economics]] here is simple: the company must be making //some// profit on each unit and using it to build a loyal customer who will be more profitable in the future.
===== Risks and Criticisms =====
No strategy is without its downsides, and sachet marketing has significant ones that investors must consider.
==== The Profitability Puzzle ====
The primary risk is that the "graduation" to larger, more profitable products never happens, or happens too slowly. Economic stagnation in a key market could leave a company saddled with a high-volume, low-margin business that is costly to serve and vulnerable to price-based competition from local rivals.
==== The Environmental Question ====
In recent years, the biggest challenge to sachet marketing has been its environmental impact. These small, often multi-layered plastic packets are nearly impossible to recycle and have become a major source of pollution, clogging waterways and landfills in countries that lack sophisticated waste-management systems. This presents a serious [[ESG (Environmental, Social, and Governance)]] risk. Investors should watch for:
  * **Reputational Damage:** Companies are facing increasing criticism from environmental groups and consumers.
  * **Regulatory Risk:** Governments are beginning to implement bans or taxes on single-use plastics, which could directly threaten the sachet business model.
A forward-thinking investor will favor companies that acknowledge this problem and are actively investing in sustainable solutions, such as biodegradable packaging or innovative recycling and refill programs.