Press release April 2012 - A review of consumer trends
The year 2011 has ended with a deep impression of high inflation, which not only put a heavy impact on the economic landscape but also influenced everyday life of millions of people all around the country. Obviously, consumers tried to manage their different demands to afford the uplift in prices, which shaped an overall saving trend for the whole year. Yet, other trends were also observed among consumers, which suggested new developments for FMCG (Fast Moving Consumer Goods) market.
Coping with price hike: rationalizing, bulk buying and down-trading patterns prevailed.
With high inflation concern in mind, consumers were saving a main part of their budget for bare necessities, especially among the middle and low income segments. Under price pressure, urban households were forced to rearrange their FMCG budget towards packaged groceries at the expense of beverages, home care and personal care. According to Kantar Worldpanel, an average household spent only one fifth of their FMCG budget for packaged grocery in 2010. One year later, it cost them up to nearly one quarter and, at the same time, pushed other sectors to shrink themselves to fit in the tight budget under price hike times. However, the largest part was always dairy, which accounted for more than one third of urban FMCG spending.
Apart from rearranging their share of wallet, consumers also dropped some products off their basket. Research findings from Kantar Worldpanel showed that non-food categories such as personal care and household care were those which suffered the most from this trend. For instance, nice-to-have categories such as glass cleaner, air fresher, shaving foam, lipstick and hair-styling seemed not to stay high on the shopping list, or worse, to be left out when necessary.
Bulk buying – the fact that consumers go shopping for FMCG less frequently, yet increased their trip size – was also observed as another reaction of consumers during inflation time. In addition, smart consumers went for big pack sizes as an economical solution to their annual basket. According to a Lifestyle Survey conducted by Kantar Worldpanel, nearly two third of urban housewives agreed that “I will buy bigger pack size because the price is usually less expensive”. As a result, more and more households were heading for big pack sizes when they go shopping for FMCG products. However, this did not mean that consumers just went out to their favorite stores and picked up the biggest packs available. According to Kantar Worldpanel Lifestyle Survey, 56% consumers agreed that they often looked at the price per kilo/liter, not just the pack price!
However, not all consumers had the same reaction towards inflation: if the majority of the consumers were buying smart with bulk-buying pattern, down-trading trend was found among low-income shoppers, who were switching to more affordable solutions. This group was seeking for both lower prices and smaller pack sizes disregarding the relatively lower quality. One of the most noticeable reactions of those shoppers towards high inflation was buying shampoo and hair conditioner in sachets instead of bottles. They also chose powder detergent of low price brands or private labels in replacement of mainstream ones.
Smarter shoppers seeking for healthier food, better quality and more convenience
Even during inflation time, health continued to be among key concerns of Vietnamese people this year. Consumers kept seeking for fresh, nutrient and energy foods. According to Kantar Worldpanel Vietnam, 88% urban housewives agreed that they worried about their health more than before and 81% were ready to pay a higher price for healthier foods. Consequently, healthy foods and drinks like functional milk, soya milk, tonic food drink, liquid milk and energy drink were among those FMCG categories which showed the best growth in 2011. This health trend was not only reflected in consumer choice of food and drink but also in non-food categories as well. For instance, urbaners were leaving unbranded dishwashing liquid for more qualified brands, even at a higher price.
While down-trading was one of the most significant trends among low income households, up-trading was a rising need among middle and upper class. Research findings from Kantar Worldpanel highlighted that 90% urban consumers of middle-high income agreed to buy brands of good quality, even if they were more expensive and 54% believed that higher price product meant higher quality. More sophisticated needs for premium products were observed across FMCG categories; some examples could be listed such as premium toothpaste with advanced benefits, perfume scented fabric conditioner, liquid detergent, premium soya sauce, pants (ready-to-wear baby diapers) and so on.
Beside the sophisticated needs for healthy and good quality products, consumers were also demanding more and more convenience. According to Kantar Worldpanel, around two third of urban housewives liked to prepare foods that did not require much time. This trend opened a new horizon for taste enhancer products, with the launch of Meal maker category. Convenience trend was not only present in food sector, but urban consumers were also looking for more convenient options in drinking beverages. Findings from Kantar Worldpanel Lifestyle Survey showed that three out of four urban drinkers preferred beverages that they could drink straight from the container. Hence, consumers’ drinking habits were moving away from powder towards liquid as it helped to save time and proved to be more convenient. Tonic food drink powder, ground coffee and powder milk were gradually replaced with tonic food drink liquid, instant coffee, and liquid milk.
To sum up, consumers are not homogeneous. Just like two faces of the same coin, there are two different consumer trends happen at the same time in the FMCG market. While low income consumers focus on different tactics to manage their spending including seeking for cheap prices, the upper class may not find themselves so strongly affected by high inflation and remain a better-value-for-money attitude in their choices. Therefore, the key to success lies in the flexibility in understanding and adapting different demands of different consumer groups. Moreover, businesses should also be well prepared to catch the initial signs of recovery and lead the tide.