2023 Thailand FMCG Outlook-p
Key directions to focus on in 2023 and beyond
2023 Thailand
FMCG Outlook
Key directions to focus
on in 2023 and beyond
Introduction
<p>Not only have consumers needed to adapt to a new way of living,<br>but they’ve also changed their purchasing behaviour and media consumption.</p>
We started the year of 2022 on a hopeful note, as the market reopened once again following the several waves of COVID-19 which had hit Thailand since 2020. But while the country is recovering from the impact of the pandemic, inflation is at its highest level in 14 years.
Not only have consumers needed to adapt to a new way of living, but they’ve also changed their purchasing behaviour and media consumption. To attract new target shoppers, corporations and brands – both global and local – must act differently.
Kantar Worldpanel has been watching and analysing changes in consumer behaviour over decades. This report will reveal how consumers in Thailand have changed their product selection, store choice, and the way they use media and apps. It will give you a clearer picture of the current market, and the key directions to focus on in 2023 and beyond.
<p>The changing dynamics<br>of Thailand’s grocery market</p>
<p>The impact of inflation has resulted in significant price rises,<br>with 14 categories hit harder than average.</p>
The changing dynamics
of Thailand’s grocery market
Inflation is not a country specific issue; it is a global phenomenon that could drive the economy of any market into stagnation, or even recession. Although grocery is a sector that’s made up of categories that are necessary to consumers, it cannot be denied that the impact of inflation has been huge – with price rises ranging from a 0.5% increase for rice, to a 31% increase for cooking oil.
There are 14 FMCG categories that have experienced higher inflation than the average, with cooking oil, soybean sauce, detergent, mouthwash, canned fish and infant formula impacted the most. Brands and manufacturers in these categories need to pay more attention to price strategies and offering value for money, to ensure consumers can still afford their products and don’t trade down to lower-tier versions.
Consumers in each area of the country have been impacted differently.
In Greater Bangkok, they have more flexibility in their spending, with only 5% feeling that their financial situation is significantly worse compared to last year.
<p>Before and after COVID</p>
<p>OOH and take-home FMCG consumption are returning to normal,</p><p>but fresh food is suffering due to soaring prices.</p>
Out-of-home FMCG consumption has shown a slow recovery following the pandemic. Take-home FMCG reached its peak during COVID, with spending on fresh food in particular increasing rapidly, but the market is now declining, especially in rural areas.
Due to inflation and Thailand’s economic situation, consumers are spending less on core fresh food categories such as eggs, pork and fruit & veg. Fresh food is expensive – and as a result is facing a decrease in both sales and buyer base. Only bakery and fish have been able to recruit more buyers during this era of inflation.
When it comes to take-home FMCG consumption, consumers have reduced both shopping frequency and basket size. They have also become more selective, purchasing fewer categories, bringing the average number bought down to 39 categories in 2022. Shoppers also reduced the number of stores they visited to buy FMCG. This requires manufacturers and retailers to identify which products and categories are necessary and unnecessary for their shoppers, and create strategies that will encourage customers to buy more.
As COVID restrictions were relaxed, and consumers spent more time outside, food and beverage categories sustained growth in out-of-home occasions while in-home consumption declined. Home care and personal care shared a common theme: less subsidy support from the government, higher prices and less need caused both sectors to decline even further.
<p>Responding to the<br>evolving Thai consumer</p>
<p>A local focus and agility have helped local brands </p><p>to outperform their regional and multi-national rivals.</p>
Responding to the
evolving Thai consumer
Global, regional and Thai corporations have coped with the change in consumer behaviours differently. Local companies managed to outperform the others in all aspects, with less of a decline in FMCG sales and shopping frequency. Thai companies successfully captured the change in market dynamics, especially in home care, and fully grasped the opportunity to win more shoppers in food and beverages. Regional corporations performed best in personal care, while their global counterparts showed declines across all sectors. This indicates the need for localisation strategies and the ability to respond fast to change.
<p>Changing demographics<br>and shopper behaviour</p>
<p>The population continues to move to urban areas, </p><p>while household sizes are shrinking. As people become<br>more selective, brands must stay relevant.</p>
Changing demographics and shopper behaviour
Urbanisation is still a trend within Thailand, leading to a higher proportion of smaller households. Due to less government support and higher inflation, households of all sizes and at all life stages have cut their shopping frequency, spending, and the number of categories they buy. However, households comprised of younger singles and couples are still achieving growth in terms of sales value, but this has been driven solely by the demographic shift to urban living and smaller households.
Despite people becoming more selective when shopping, and cutting down on their purchases, some categories are still managing to grow in this difficult time. These have a few factors in common: they are relevant to outdoor living, they boost people’s health, or they have been impacted by high inflation but are still essential to consumers’ needs.
With inflation playing a big part in 2022, the categories that remain relevant to consumers’ needs will find it easier to encourage them to ‘trade up’ to a higher price per unit, or upsize to a greater volume. However, this does not necessarily result in positive sales growth. This is because consumers can leave the category or brand at any time – or cut their purchase frequency and volume – if they perceive that the higher cost is not worth the benefit it provides. This means that brands must understand consumers’ changing needs and stay relevant to them, taking into account the product’s role, pack size, and channel.
<p>Is online still on the rise?</p>
<p>Spend has shifted back to modern trade channels, </p><p>but the number of people shopping for FMCG online is increasing.</p>
Is online
still on the rise?
Online FMCG spend is still growing steadily, despite the end of COVID restrictions. With less financial support from the government, people have shifted their spending back to national modern trade (MT), which is helping this channel to win back its market share. Offline stores are having to compete not only with other physical stores, but also with online platforms.
Over time, more and more people are starting to shop online. In 2022, we saw people making smaller purchases, but shopping more often.
New online shoppers come from almost all demographics. It’s easy to assume that you can only reach younger generations, shoppers in Greater Bangkok or high-income shoppers online, but that’s not true. More opportunities await brands that can expand their buyer base.
While it’s true that personal care still dominates in ecommerce, we see people exploring and buying more categories online. However, different platforms suit different sectors, so it’s important for brands to focus on the places where their potential consumers are.
The change in media consumption
<p>Different demographic groups favour different platforms and types of content.</p><p>Understanding this is the key to reaching target audiences.</p>
The change in
media consumption
Knowing your target is only one part of the journey; you also need to know where you can reach them.
Traditional media is becoming less popular, while TikTok is making significant gains in penetration – but people spend on average less than 30 minutes using the app each day.
So how can brands effectively capture
these shifting trends?
Each generation has different needs and preferences, so they also consume different media, and in different ways. Planning the right media mix is a must to increase purchase intention and – ultimately – sales revenue. Generally, young singles and couples who use Instagram and TikTok will spend most on FMCG via these platforms, while Line and YouTube are preferred by the silver generation.
To target consumers better, understanding the content they’re interested in is vital. On YouTube, drama, concerts and cooking content is the best way to reach young couples and singles. To trigger their interest while also achieving higher reach, brands should focus on travel and fashion content, which is their preference. To choose the right form of content, brands must be clear on their objective for spending on ads: whether it’s to drive engagement or awareness, or to generate real sales.
What’s next?
The questions you need to answer.
What’s next:
the questions you need to answer
Shoppers
Who are our existing shoppers, and potential target groups?
How can we ensure that we have the right channels and pack size strategy for our target groups?
Which channels and pack sizes are effective at converting incremental penetration vs higher basket spend?
Manufacturers
How can we remain top of mind amongst our key target shoppers?
What are the key media touchpoints and content along the shopper journey?
How do we execute the right pack-price architecture in the right channels to meet the right need/occasion?
How can we ensure sufficient supply and production – prioritising the right product lines and new launches?
Retailers
How are various channels’ roles evolving by mission?
How do we ensure we continually have the right offer to sustain and increase sales?
How can we continue to deliver the right categories at the right pack-price for our target shoppers (existing and new)?
How do we capture and reach the wider Thai population (rural and silver generation)?
