Sales growth of fast moving consumer goods hits 7-year low

“In line with regional trends, Thailand’s FMCG growth is decelerating both in urban and rural areas. In the first nine months, FMCG growth was only 1.2 per cent because local households, particularly in rural areas, are tightening their belts, focusing on necessary products,” Kantar Worldpanel commercial director Gareth Ellis said yesterday.
FMCG sales growth this year is estimated to be at the lowest level since 2009, when it was 4.3 per cent, followed by an upward trend to 5.6 per cent in 2010 and 2011, 9.5 per cent in 2012 and 9.6 per cent in 2013. The growth began sharply declining last year, which posted 3.3 per cent.
Ellis believes that next year’s growth in FMCG sales across the country should be around 1-2 per cent because economic growth and consumer sentiment will remain fragile. According to the company’s survey of 4,000 households nationwide, consumers are more cautious about their purchases, focusing on necessary products for daily use. They are less likely to pay for premium products or non-essential ones like bird’s nest beverages, premium toothpaste, premium infant and adult milk, and body scrubs.
The company also found that the number of product categories bought per year in urban areas including Greater Bangkok declined to 40 in September from 42 in the same month last year.
“Interestingly, consumers had decreased their shopping frequency, saying [they made] one less trip per household bimonthly, but they had planned their shopping trips before going to department stores,” he said.
During economic downturns, marketing promotions become more important for boosting FMCG sales. The firm’s research found that in September, shoppers felt that 33.4 per cent of their purchases were influenced by deals or promotions such as discounts, free gifts, lucky draws, free extra items and multi-buys. This figure increased from 30.6 per cent in September last year and 28.1 per cent in 2013.
“We expect to see intense competition among hypermarkets and supermarkets by conducting a series of promotions to attract consumers to spend money at their stores next year. The percentage of on-promotion revenue will unavoidably hit more than 40 next year,” Ellis said.
“From a consumer’s perspective, it will be good for them to choose the right products with reasonable prices. But it might be a different story both for retailers and manufacturers,” he explained.
Large-format stores will be challenged by traditional trade and convenience retailers because of the change in consumers’ perception on price gaps between supermarkets and convenience stores and mom-and-pop outlets.
“We have found that 50 to 60 per cent of FMCG categories have small price gaps between those two formats,” he said.