Unfolding trends

The influence of macroeconomic pressures – and Digital Wallet

In 2023, according to the National Economic and Social Development Board, GDP growth expanded by 2.7% – mainly supported by the recovery of tourism, continuity of domestic demand, and an increase in the use of Buy Now Pay Later. Growth in private consumption was driven by restaurants and hotels, and the food sector.

Looking at the ongoing and emerging trends for 2024 and 2025, we expect the biggest issues to remain high household debt, higher commodity prices, and the possible implementation of Digital Wallet, which – if it happens – will impact the FMCG industry. Bank Of Thailand has shared a GDP forecast for both with and without Digital Wallet: GDP is expected to grow 3.8% in 2024 if implementation takes place, and then slow down in 2025.

However, with a Digital Wallet policy in place, GDP in 2025 will grow less than it would without one. Inflation in both scenarios remains more or less the same.

To predict what could happen in the FMCG industry if Digital Wallet is implemented, we can look back at Kantar Worldpanel's historical data from 2012, when a lot of money was injected into Thailand's First Car Policy. FMCG value grew at all time high of 7.7%, with increased spend per buyer of 4%, driven by both a greater number of shopping trips and higher spending per trip. Another time consumers were supported by a government subsidy campaign was during COVID-19 in 2021. FMCG grew 3%, driven by bigger basket sizes (+10%), while consumers shopped less frequently.

We can expect similar shopping trends to follow a Digital Wallet policy; however FMCG will not grow as much as it did in 2012 or 2021. This is because we are in a period of recovery, with a 3.3% decline in FMCG, and consumer spending is still coming under pressure due to high Consumer Price Index (CPI) and food inflation.

Nevertheless, anticipating similar behaviour patterns of frequency and spend per trip will help brands plan not only better production and supply chain strategies for this year, but also their promotion, assortment, pack size and price strategy.