Latin Americans seek value as boundaries are redefined
In most Latin American countries FMCG consumption has dropped (-1.7%) in the last 12 months, although the decline slowed down in the second quarter of the year. Latin American households have spent 5.4% more than last year as a whole, but if Argentina (a high-inflation country) is excluded spend has only increased by 2.4%. In other words, consumption has been increasing less than inflation. The reduction in spending is due to the preference for more affordable brands (private label and mainstream manufacturers) and channels (discounters, street markets, cash and carry, bulk sales).
Source: % Volume Growth | FMCG | MAT Q2 2019 vs. YA | Total Latam
What differentiates the region?
The dairy sector is the hardest-hit in Latin America, particularly across Ecuador (-5%), Brazil (-3%), Mexico (-2%) and CAM (-2%). Homecare meanwhile continues to grow in several markets, 8% in Ecuador alone.
Half of Argentineans’ spending is allotted to mainstream brands, and that has risen 8 percentage points (p.p.) over the three past years. In turn, premium brands have lost 3 p.p. in Brazil and gained 3 p.p. in Mexico. Private label is already successful in CAM (mostly in Panama and Costa Rica) and Colombia.
In a setting of shrinking consumption, there are markets that manage to expand consistently, such as beer, whose penetration has increased from 60.9% to 63.6% over the past few years. This means 12 million additional households are now consuming the category.
What is changing?
There are opportunities across niche segments (such as lactose- or gluten-free) where specialty products proliferate, and Latin consumers have already incorporated new shopping habits (such as e-commerce).
It is time to redefine the boundaries of markets in a context where biscuits compete with yogurt and soft drinks with beer. Consumers choose across a set of categories, not across a set of brands, depending on their needs for each consumption occasion.
Learn more about how Latin Americans seek value in the FMCG sector downloading the summary of our latest report through the button on the right of this page. Also, please get in touch with our expert if you would like to know how your category or your business is performing.