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Grocery Market Contracts In Historic Dip Into Decline
The latest grocery share figures from Kantar Worldpanel for the 12 weeks ending 9 November 2014, show that for the first time since Kantar Worldpanel records began in 1994 the British grocery market has fallen into decline, with sales down 0.2% compared with this time last year.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel explains: “The declining grocery market will be of concern to retailers as they gear up for the key Christmas trading season. The fight for a bigger share of sales has ignited a price war which means an average basket of everyday goods such as milk, bread and vegetables now costs 0.4% less than it did this time last year. This is bad news for retailers, but good news for shoppers with price deflation forecast to continue well into 2015.”
Aldi continues to benefit from the disruption within the grocery market. Its sales are 25.5% higher than last year and the retailer now has a record high market share of 4.9%. Lidl has also performed strongly with a 16.8% sales increase bringing its market share to 3.5%. At the other end of the market, Waitrose has grown sales by 5.6% taking share to 5.1%.
The major supermarkets have all had a difficult period, hit by both the flow of shoppers toward the discounters and reduced revenues as they competitively cut prices.
Asda has recorded the best performance among the big four. Its sales have fallen in line with the overall market and share has held steady at 17.2%. Sainsbury’s and Morrisons have both recorded a decline in share compared with last year with sales down 2.5% and 3.3% respectively. Tesco’s sales are down by 3.7% although it is worth noting that the rate at which it is losing market share has slowed.
FMCG In Emerging Markets Comes Off The Boil To Slump $8bn
New research released by Kantar Worldpanel reveals that growth in consumer FMCG spend in emerging markets has slowed significantly from 8.8% in the 12 months to June 2013, to 7.5% in the corresponding time period ending June 2014 – equivalent to $8.3 billion of lost growth – demonstrating the effect of a cooling in the global economy.
The research also forecasts a further reduction by June 2015 to 7.0%.
The drop is largely driven by a slowdown of consumption in Asia where FMCG growth is now at 5.2%, down 3.6 percentage points compared with last year – some $15 billion. The contraction was felt acutely in China where FMCG growth has fallen by a third in the past two years from 15.8%, in the 12 months ending June 2012, to 5.6% in the period ending June 2014.
Latin America is now growing at 13.0%, versus 8.7% last year. While in some countries, including Ecuador and Colombia, this is driven by underlying growth in demand, in others it is the result of rising inflation.
Although still performing strongly compared with mature markets in Europe and North America, the reduction in emerging market growth is significant.
Jason Yu, Managing Director at Kantar Worldpanel China, explains: “Slowing economic growth across many emerging economies has led to shoppers reining in their spending on everyday goods. We now face a new reality where FMCG growth is more moderate.
"Competition will become fiercer as the size of the prize shrinks. Brands will need to be even smarter when deciding which markets to target and when developing their approach within each country.
“China makes up 69% of the emerging Asian market and influences the whole region. Packaged food is the largest element of Chinese consumers’ budgets and sales have been particularly affected by the overall slowdown, growing by just 1.8% compared with 16.0% in the 12 months ending June 2012. China´s FMCG momentum will resurge when growth on packaged food spending recovers.”
Latin America’s FMCG growth has accelerated to 13.0% in the 12 months up to June this year, and is forecast to end 2014 at 14.2%. The region’s growth has been driven mainly by Brazil, which accounts for 42% of FMCG consumption. In the past decade, lower and middle income households in Brazil have been able to afford goods that were previously out of their reach. More recently, however, rising inflation has led to consumers becoming savvier and looking for ways to make the most of their household expenditure. Inflation has a strong impact in the region’s growth – Latin America’s FMCG demand in volume has only grown 2.8% in the 12 months ending June 2014.
Marcos Calliari, Managing Director at Kantar Worldpanel Brazil continues: “Inflation has not been restricted to FMCG and has been impacting the cost of other products and sectors like automotive, real estate, leisure, durable goods, and dining out as consumers decide to balance their budgets by staying in. FMCG consumption in Brazil is not an exception, and is now facing a turning point. Despite the rising inflation, demand peaked during the first quarter of 2014. Three months later, consumers have moderated their consumption. Today, the amount of products in baskets is the same as last year, but they cost more. Brands that can help Brazilians to keep a balance in their expenditure in the coming months will be those with a higher chance of success.”
Despite the slowdown in emerging market growth in general, there are still countries in which FMCG sales are performing strongly. Indonesia is one such example. Although growth in Indonesia remains high at 15.0%, it is down by 3.6 percentage points when compared to the 12 months ending June 2013. Consumer confidence in this 250 million population country is high, with GDP forecast by the International Monetary Fund (IMF) to grow by 5.8% next year. Brands that have launched new products in Indonesia this year have taken advantage of consumer appetites to try new goods. Shoppers in rural areas in particular now have more disposable income and are being attracted to spend on more consumer products. India has also accelerated its FMCG growth from 3.1% to 6.0% which is particularly important due to the size of this market.
Ecommerce in emerging markets is an increasingly important channel and should be a prime target for brands. It is performing ahead of the market in Taiwan and China while South Korea is the world-leader in FMCG ecommerce with over half of all shoppers buying online. Chinese ecommerce is forecast to account for 3.3% of all FMCG sales by 2016 and this trend will continue as investment in technology and infrastructure spreads across the region. Certain categories within the consumer goods market are still posting strong growth. Beverages, for example, are growing the fastest of any product category – 10.0% in Asia and 8.0% in Latin America. Personal care products are also performing well in both Asia and Latin America as consumers with higher spending power start to buy into these non-discretionary categories.
Jason Yu concludes: “Growth in emerging markets is still generally quite high but certain areas are slowing. Brands need to understand these changing consumption patterns, tailor their strategies to specific markets and ultimately take advantage of the opportunities that still exist.”
Asda A Big Four Winner As Grocery Market Pushed Into Deflation
The latest grocery share figures from Kantar Worldpanel for the 12 weeks ending 12 October show that like-for-like prices have declined by 0.2%, pushing the grocery market into deflation.
Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel explains: “While the supermarkets are battling it out on price, the real winners are consumers. Extensive price cutting by some supermarkets in a bid to win the price war means that customers are saving on everyday items such as vegetables and milk.
“While price is a key battle ground among the big four, at the top end of the market Waitrose secured a record grocery market share of 5.2%. Impressively, it has boosted its sales by 6.8% over the past year, continuously growing its sales every month since March 2009.”
Meanwhile at the opposite end of the market, Aldi’s growth slowed slightly compared to recent months, but sales were still up 27% versus last year resulting in a market share of 4.8%. Lidl’s sales grew by 18%, with its market share standing at 3.5%.
Fraser concludes: “We are seeing clear polarisation of the market with both the premium and discount ends of the market gaining share, while the mainstream grocers continue to be squeezed in the middle. Asda has again emerged as the winner among the big four, growing sales ahead of the market, up 1% over the past year, boosting its share to 17.3%. Tesco is yet to see substantial improvement, however it seems it may be turning a corner as sales are down 3.6%, which is the grocer’s best figure posted since June. Meanwhile both Sainsbury’s and Morrison’s sales slipped back, down 3.1% and 1.8% respectively.”