Food safety scare continued to hurt Taiwan’s food market
It has been three months since the latest food safety incident in Taiwan, but the FMCG market is still showing no signs of recovery. According to world leading research agency Kantar Worldpanel Taiwan’s latest study, the rash of food safety scandals is not only affecting the performance of total food market*, but the lack of consumer’s willingness to shop is also further prolonging the market’s recovery.
By comparing the latest food incident to the same period last year**, Kantar Worldpanel’s data has indicated that the most recent tainted oil incident has caused a rapid decrease in consumer’s shopping frequency, leading to decline of -4% in market sales volume. Interestingly, the market value remained relatively more stable, this in turn reflects consumer’s behaviour in seeking out goods of better quality by switching to more expensive items.
Chain of food safety incidents leading prolonged market recovery
Looking back on the past food safety incidents and their impacts, Kantar Worldpanel discovered that with the initial melamine (2008) and plasticizer (2011) incidents, categories affected including milk powder, beverage etc. were able to recover within 3-6 months with the effort by the manufacturers. Even with the health food market which has a lower shopping frequency, the market also returned to its peak state within a year. However it is the string of events that followed which shook the foundation of Taiwan’s consumer confidence, with the 2013 tainted oil incidents saw consumers cutting back on their shopping trips, and the most recent case only made them even more conservative, with the market showing no signs of return for the last year.
Kantar Worldpanel also found that in the face of food safety issues, families with children respond with the strongest reactions. Throughout all the incidents, data indicated that this group has always been the quickest to respond by stop purchasing the category-in-question altogether or actively switch to items of higher quality. However the latest oil incident affected a wider population as it is the dining out market that has been affected, hence encouraged more consumers, and not just those with children, to re-enter their household kitchen and join the household oil market.
How consumers react: SWITCH for essential, otherwise CUTBACK
In terms of category performance, the two consecutive oil incidents impacted the most on cooking related items, especially those with oil as a key ingredient. Examples include cooking oil, instant noodle, cooking sauce and frozen food, which all showed signs of decline; frozen food lost -14% market sales from the oil incident, and instant noodle a whopping -35%! Interestingly for cooking oil, which enjoyed 11% sales growth, contributed by consumers switching to the more expensive higher end products.
Other than the food market, oil safety issue has also brought on huge impact on the dining out market as well. According to data from Taiwan’s Ministry of Economic Affairs, there has been a short term impact on the restaurant industry, but Kantar Worldpanel states that comparing to the household market, the restaurant industry still expected to return to growth in the long term, due to the convenience factor, which is something the Taiwanese consumers values greatly.
The string of food safety events has no doubt impacted greatly on the confidence of Taiwanese consumers. Right now it is up to the manufacturers to quickly sort out problem goods, as well as tighten their internal manufacturing process to ensure similar incidents does not happen again. Paul Wu, Account Director of Kantar Worldpanel Taiwan, explains: “With these food safety events, consumers are now becoming more cautious when making their choices, and are willing to pay more for brands that communicates safety in quality. On the other hand, manufacturers must beware that non-essential items are likely to fall into a long term declining trend from the food safety scare. Hence it is essential for brand to monitor not just the manufacturing process, but also the quality of suppliers. Adding to that the successful communication in strengthening consumer confidence is now ever more vital, and will be a key factor for brands to survive this crisis.”
*Food market here refers to consumer packaged goods. Examples include packaged food and drinks.
**The study period for the latest food safety incident covers 9 weeks (2014.09.01-2014.11.02), and is being compared to the same time last year.