The new Latam shopper sets the pace of the FMCG market
For the FMCG sector in Latam, the third quarter of 2018 has seen a consolidation of the trends we witnessed in Q2, when for the first time in 10 years volume consumption failed to grow. The market has contracted for the second consecutive quarter, with a volume decline of -1.6%. This was driven by Brazil and Mexico, the region’s two largest markets, while the alarming situation in Venezuela continues with a drop of -19% in just one quarter. FMCG consumption is growing in only three countries – Chile, Colombia and Bolivia – and even there it is only marginal.
It is now certain that the year will close with a small but significant negative volume trend of -0.8%, with Latam shoppers buying fewer FMCG products at the end of 2018 than they were at the start. There is still Christmas to come, but consumption will need to rise a lot to compensate for the year’s earlier declines.
Total FMCG value sales across Latam are still increasing, with annual growth of 2.6%, but this is still below the rate of inflation: in real terms consumers are spending less, as well as buying less.
While consumption is slowing, the speed of change in shoppers’ habits, and also the structure of the retail market, is accelerating.
Millions of households have changed the way they shop, with the economic situation driving their brand and channel choices. They are leaving behind channels, brands and categories to try new alternatives that meet their needs while enabling them to save money. To control their budgets they are switching from premium brands to give more space in their baskets to economy brands and private labels.
The face of the retail landscape is also changing, with the arrival of new wholesale, discount and e-commerce formats that offer cheaper prices and better value for money. Every day ‘smart’ discounters are opening new stores that have smaller sales areas, offering a limited but varied assortment and an improved shopper experience.
A number of traditional channels are also proliferating, such as street markets in Chile and mercados in Mexico, which have gained in popularity with less affluent households.
There are still growth hotspots in Latam, but these have shifted. Brands and channels are achieving double digit growth by taking advantage of opportunities within the new scenario, recognising and meeting the needs and characteristics of the new Latam shopper.
This year has been a story of disruption: shifting consumer habits, shifting retail structures and shifting brand strategies. With expectations for Latam GDP growth remaining at 2% for the year, and unemployment at 8.5%, higher than the global average of 5.5%, we predict that this trend will intensify in 2019.
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