Setting an MRP (Maximum Retail Price) might seem simple. In reality, most battles between competitors are fought over wholesale prices. MRP only defines the upper limit—retailers can sell at any price below it. It's just a matter of printing a number on the package, with seemingly no consequence. Taxes are levied on the selling price, not the MRP. However, at Cocoguru, we look beyond the obvious and consider not just the retailer’s interest but also the consumer’s. While retailers may set prices, it is ultimately the paying consumer who matters. Brands must not give retailers unchecked flexibility to dictate consumer prices—there must be a limit.

Retailer’s Interest

• Higher margins—Retailers are motivated by better returns for their efforts and aim to maximise profits through margins.
• Flexibility to set price—Retailers face different consumer types, sales volumes, and operating costs. Hence, they want pricing flexibility to manage suitable margins.
• Offer discounts—Retailers often attract customers by offering discounts without sacrificing their own profit margins.
• Pay commissions—Tourist-focused spice shops, such as those in Dharmasthala and Subramanya, often pay commissions to tour operators or drivers who bring them customers. Margins must accommodate these commissions while remaining profitable.
• Shift the blame—If consumers complain about high prices, retailers prefer pointing to the MRP set by the manufacturer, thus avoiding responsibility.

There is nothing wrong with protecting retailers’ interests as long as consumers are not exploited and the brand’s reputation remains intact.

Consumer’s Interest

• Low price—Consumers want affordability. Brands must account for this while setting MRP, as a lower MRP ensures lower final prices.
• Perceived discount—Consumers appreciate discounts on MRP. However, they should ideally focus on absolute prices rather than just the perceived discount.
• Consistent pricing—Consumers expect a stable price range, regardless of where or from whom they buy the product.

Challenges for the Brand

• Price fluctuations—Raw material costs vary, especially with commodities. This leads to changes in wholesale prices and MRPs. Stock held across the supply chain can result in confusion when MRPs change.
• Market diversity—Different markets have varying consumption patterns and retail operation costs, impacting the final pricing and margins.
• Balancing retailer support—Retailers are essential in reaching consumers. If retailers are dissatisfied, they may only cater to customers who specifically request the brand and otherwise push alternative products.

Conclusion

Region-specific MRPs—Coconut oil is used for cooking in coastal Karnataka, where per capita consumption is high. Retail operation and supply costs are lower due to smaller towns and proximity to our factory. Hence, we maintain a lower MRP in this region, where price sensitivity is high.

In contrast, in the rest of Karnataka, coconut oil is used primarily for hair and skincare. Per capita consumption is lower, retail operation costs are higher in large cities like Bengaluru, and the supply distance from our factory is longer. So, the MRP is relatively higher here, and price sensitivity is lower.

Minimum Markup Policy—At Cocoguru, we are not just manufacturers; we are a brand that genuinely cares for our consumers. We prioritise consumer interests, even if it means offering tighter margins for retailers. Hence, we set our MRP with a strict limit—no more than 25% markup over the wholesale price.