The news cycle related to COVID-19 no longer influences trends on the FMCG market in Southeast Asia. Instead, new socio-economic and behavioural patterns are shaping the future state of the industry, according to a study by Nielsen.
New drivers of consumption patterns are underpinned by worsening unemployment situations and uncertain financial prospects in the region, with consumers changing across four dimensions identified by the research firm: The basket reset, homebody reset, rationale reset and affordability reset.
The study presents how behavioural responses could differ according to the circumstances and level of personal impact the pandemic has had on consumers. Predictions are made across the spectrum of two, polarised consumer groups: Insulated spenders and constrained spenders. Across Asia, nearly two out of every five consumers (38%) said they have been impacted by COVID-19, versus 32% consumers globally.
The basket reset
Nielsen anticipates that consumers will start to re-prioritise what goes into their baskets, and that broad-based adjustment reflects a fundamental consumption reset. Throughout measured Southeast Asian markets, key FMCG categories like alcohol (-9%), healthcare (-3%), personal care (-5%) and beverages (-8%) are seeing sales declines in the year-to-date period ended in June.
The firm believes these trends reflect signs of consumers pulling back and minimising added basket expenses brought on by the pandemic. Stockpiling behaviour hasn't persisted to the extent of March and April, reflecting the lack of correlation previously seen between news stories on the rates of virus transmission and FMCG sales spikes. It also signals that the basket composition is being reset, and consumers will place additional scrutiny on basket decisions now and moving forward.
The homebody reset
Another consumer shift that will reshape FMCG markets is the evolving routines of consumers at home. 'Do-it-yourself' (DIY) behaviours and demand for in-home branded experiences have persisted even beyond living restrictions and store re-openings in many Southeast Asian markets.
In the Philippines 24% consumers switched pack size, suggesting that they are seeking FMCG that suit homebound lifestyle. Across Southeast Asia consumers continued to demonstrate a focus on in-home consumption, where food and dairy saw strong uptake in markets like Singapore (up by 42.6% vs last year), the Philippines (11.4%) and Malaysia (6.8%).
In Malaysia, sales of hair colourants increased by 22.8% as consumers opted for hair grooming at homes; similarly, in Singapore, at home eating led to an increase in consumption of processed frozen food (sales up by 113.7%). In Vietnam, 82% consumers said to reduce out-of-home consumption occasion, corresponding to heightened sales of instant noodles (up by 14.1% vs last year), sterilised sausage (17.9%), meal maker (7.4%) and mayonnaise (31.0%).
The rationale reset
Consumers may soon redefine the significance and meaning of the FMCG goods they buy. As measured via The Conference Board conducted in collaboration with Nielsen, 83% of consumers in Asia Pacific said they were cutting down their expenses in Q2 2020 (vs. 73% in pre-pandemic Q4 2019), and among surveyed consumers who have changed their spending, 30%% or more are spending less on takeaway meals, holidays, out-of-home entertainment and new clothing. Nielsen predicts that consumers will turn to consumer goods to fulfil emerging entertainment and experience gaps in smaller ways.
Across Southeast Asia, there are already signals of strong demand for FMCG categories that could benefit from this rationale reset: key segments in Singapore have experienced an acceleration in sales during the year-to-date period ended in June, including snacks (+25%) and alcohol (+15%).
The affordability reset
With less disposable income in their pockets, consumers will search for ways to optimise their basket spend to prioritise both health and value needs. More than one-third (36%) of surveyed consumers in multiple markets around the globe have noticed a decline in promotions across stores they've shopped at, and retail measurement confirms it.
Channel preferences are also shifting as the criteria for affordability evolves in the minds of consumers. In Malaysia, mini-marts are gaining importance with almost 18% rise in sales in June 2020 (versus 9% last year) as these outlets provide close-to-home access for everyday grocery shopping at desired pricing in comparison to distanced large-format stores.
In Vietnam, Modern Trade channel posted positive sales growth in YTD June 20 (+13% value sales vs last year) with the number of stores on a constant rise (+35% stores in Jun 20 vs Jun 19), driven by the minimarts format (+51% stores in June 20 vs June 19).
Sourced from Nielsen