BANGKOK: FMCG growth in Thailand slowed to less than 2% in 2016 as consumer confidence remained fragile and the country experienced its worst drought in decades.

Latest data from research firm Kantar Worldpanel, reported in The Nation, show that, at 1.7%, the rate of growth in sales of consumer products was the lowest for ten years.

The consumer confidence index stood at 73.7 in December (a level below 100 indicates weak consumer sentiment) and has averaged 79.54 over an 18 year period, peaking at 112.4 back in December 2003, according to figures from the University of the Thai Chamber of Commerce.

Weak consumer confidence has been compounded by high levels of household debt, while consumer spending was further hit by the death of King Bhumibol Adulyadej in October last year. Rural consumers, especially in the north of the country, were affected by severe drought in the first part of the year.

"Besides being hard hit by those negative factors, consumers in rural areas particularly are now tightening their belts and considering the purchase of necessary items only, while other shoppers remain cautious about the current situation," said Aitsanart Wuthithanakul, new-business development manager at Kantar Worldpanel (Thailand).

He identified growth areas for 2017, including food and household products, while the personal care category is also expected to see increased sales via e-commerce.

More generally, Kantar Worldpanel is bullish about the prospects for online retail in Thailand and sees major opportunities for the FMCG sector as purchasing patterns shift towards digital.

At present, online shopping accounts for only 0.6% of total retail sales, but the value of purchases via this channel almost tripled in 2015 and doubled in 2016.

Traditional trade, meanwhile, is being squeezed, and Aitsanart advised the creation of marketing campaigns that would engage with target customers through relevant sales channels in addition to offering products in appropriate pack sizes and prices to encourage purchase.

Data sourced from The Nation, University of the Thai Chamber of Commerce, BBC; additional content by Warc staff