The latest IRI Markets Dashboard report has reviewed the FMCG trends to watch and implications for food and drink brands, retailers and supply chains as the world continues to battle the effects of the coronavirus pandemic.
For the first time, the monthly report incorporates US market analysis, in addition to seven Western European countries (France, Italy, Spain, Greece, Netherlands, Germany and the UK).
Key trends to watch in the US and Europe include:
- After unprecedented value sales growth (up to +9% at the peak) due to panic stockpiling, FMCG demand growth remains high, but has recently slowed down in Europe (+3%), with the exception of the Netherlands (+13%) and France (+7%). In the US, demand remains 10% higher than year-ago levels.
- Food value sales outperform non-food, but declining trends have stabilised in most European countries and the US.
- Private label sales are slowing down in food and drink in Europe, except in the Netherlands. Brands of mid-size and small companies are the winners in most countries. This aligns with consumer expectations for more local and healthy products. In the US private label sales have not increased as anticipated.
- In terms of range optimisation that retailers have undertaken, private label in food and drink is significantly more impacted than brands, shrinking respectively by -6% and -3%. E-commerce is the only channel where range is not impacted.
- Channels: Online growth remains high. Recently hypermarkets in most countries have seen their performance increase as they are seen to be the best place for social distancing with all products available ‘under one roof’. Despite a favourable economical context, discounters are struggling against other channels; lack of investment in e-commerce is a weakness.
- Price growth has started to decrease (+2.7%) as promotions are back (+6.4%) in Europe with the exception of the UK where inflation remains high in food and drink (+7%) until the Every Day Low Price (EDLP) strategy that retailers have recently adopted has an impact. In the US, promotions remain down compared to a year ago, but with some easing evident.
Opportunities in FMCG:
- As consumers work from home and dine out less, they will continue to eat more at home, impacting the demand for convenient, healthy and affordable price options. Demand for categories such as healthy food, treats, ready- to-cook, ready meals and home-cooking ingredients will remain high: chilled pastry sales in the UK are at +31.1% value sales.
- Shoppers have a national supportive behaviour and prefer to buy national to save jobs but at the best price.
- Price is important as unemployment is rising again in most European countries and the US. As promotions return to support weak demand, there is an expectation of weak prices (estimation for Italy: average 2021 -0.3%) in the context of a price war.
- The growing EDLP strategy is mainly in the UK for the moment. It will require suppliers to adapt products to this low-price expectation.
- Innovations will shift the focus from price to the consumer experience. Brand equity and innovation is the must-have that drives category growth and/or the footfall that retailers need: for instance, a collaboration to provide meal solutions that combine national brands and private label.
- Range reduction is also an opportunity to refocus the portfolio and align range with demand in the ‘new normal’, ensuring that the right products with the right attributes are available in the right channels.
- As e-commerce remains the winning channel, supply chain will need to sustain this growth, avoiding out-of-stock issues that is a blocker for shoppers. The momentum of hypermarkets in Europe highlights interest for bricks and mortar as a marketplace.
- The success of local and small brands can be acquisition opportunities for companies that need to expand in new consumption universes.
Additional reports and analysis can be found on the IRI COVID-19 Impact Portal and IRI CPG Economic Indicators, which include FMCG demand and supply indexes and inflation trackers, and more on how the pandemic is impacting FMCG.
IRI is also hosting a series of in-depth discussions with C-level leaders on how businesses are managing through the COVID-19 pandemic.