Emerging Trends And Challenges In The Fmcg Market

Covid-19 has accelerated most of the FMCG industry trends bringing forward digitilisation, health, and environmental consciousness. With the outbreak of Covid-19, food and household goods manufacturers saw significant growth in revenues in 2020 with revenues increasing by 18% and 4% respectively, on a global basis. In addition, the food and personal care e-commerce segment grew by more than 40% in 2020. It is expected that this segment will continue to grow in the next five years, but growth rates will slow after the acceleration experienced in 2020.

What are some of the global trends and challenges in the FMCG space?

The consumer mindset is changing

The Covid-19 pandemic has heightened the consumer’s awareness of health and wellness. There is a growing demand for natural and organic brands with consumers paying more attention to sustainability across the value chain and choosing brands that align with their lifestyle and personal goals, such as cruelty-free and vegan products. Consumers are also demanding digital-first experiences, alongside relevant and engaging communication. This will result in the FMCG sector using data insights to continuously improve on customer experiences by making more personalised products and delivering them in an engaging and interactive way.

Consumer habits are changing

Driven by lockdown restrictions, e-marketplaces and online purchasing will continue to grow even post Covid-19. Purchasing flexibility and omnichannel shopping is fast becoming the new norm. Omni-channel retailing, a multichannel approach to sales, provides the customer with a seamless experience whether they are shopping online from a mobile device, a laptop or in a store. Only when a customer has gathered as much information about a product from a variety of sources to support their purchase decision, will they then decide to buy. Thus digitilisation becomes more and more important to capture market share. Lockdown restrictions and social distancing have led to a shift in shopping patterns. Consumers have reduced the frequency of shopping trips and have opted for increased average basket size to avoid public places. With reduced foot traffic in actual stores, the level of impulse buying has been affected. In addition, average household disposable income has been negatively impacted by Covid-19 with the knock-on effect of consumers trading down to less expensive products and seeking value-for-money products. This increase in price sensitivity will result in discounters coming into their own as consumers will expect a better assortment in terms of size and improved quality.

FMCG producers are enhancing their operations with new technologies

Digital transformation is of paramount importance for FMCG companies allowing them to produce and distribute products efficiently using new technologies. Those companies who started their digitilisation journey early have the edge over their competitors.

What are the trends and challenges in the SA market?

The SA consumer is gradually changing and increasingly adopting a healthier lifestyle which has been accelerated by the onset of Covid-19. In 2019, the share of South African consumers who prefer to eat healthily reached the same levels as in other developed and developing consumer markets, such as the USA, the UK, Brazil, India and China. SA consumers are paying more attention to the issues of sustainable consumption, preferring to choose more responsible brands and products. While consumers become more aware of deforestation, marine and animal life depletion, and climate change, they tend to link these environmental factors with FMCG producers. These consumers will continue to seek purpose driven brands which are responsive to environmental, social and governance (ESG) concerns. Producers are therefore expected to pay more focus to protecting the environment in the upcoming years. In a 2020 survey conducted by McKinsey into the purchase of sustainable, eco-friendly products, out of 1000 respondents, the following is notable:

In line with global trends, the pandemic accelerated the growth of online shopping. According to STATISTA, retail e-commerce sales in SA are expected to grow at a CAGR of 10% between 2021- 2025. The trend of using digital channels for grocery and other consumer goods shopping is expected to continue post-Covid. Of the respondents in the above-mentioned survey, 54% will continue to shop online once the pandemic subsides.

Since most SA consumers experienced some reduction in income because of Covid, they are looking for ways to save money and optimise their spending. SA consumers are on average more price-sensitive compared to other emerging global markets. In a survey conducted by McKinsey in 2019/2020, 65% of respondents indicated that they are paying more attention to prices. Of the respondents mentioned in the above-mentioned survey, 55% are looking for cheaper products.

As the South African consumer continues to experience pressure on disposable income, with additional increases in fuel, electricity, healthcare, and the like, I believe that this price sensitivity element is likely to intensify. Consumers will continue to seek products and packaging which are not harmful to the environment. Those early digital adopters in the FMCG value chain which now heed their customers’ preferences regarding price and environmental issues, will be first out the starting blocks.

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