Omnichannel 2020 - Latam
A view on how COVID-19 is transforming FMCG and the retail environment in Latin America and across the globe
Winning Omnichannel:
Latam focus
A view on how COVID-19 is transforming FMCG and the retail environment in Latin America and across the globe
Issue 4 | August 2020
Welcome
Read on to explore how COVID-19 has transformed the FMCG and retail landscape in Latin America.
Adapting to
the unknown
The extraordinary events caused by the COVID-19 pandemic have had a profound impact on our daily lives – not least in the way we shop – and there’s likely to be continued disruption in buying behaviour for some time to come.
From stockpiling at the start of lockdown, to adapting eating and drinking habits for our new routines of working and socialising at home, there have been several ways in which COVID-19 has disrupted the FMCG industry.
In this unique Winning Omnichannel: Latam Focus report, as well as providing a global overview of how the COVID-19 crisis is transforming FMCG and retail dynamics, we drill down into the data for Latin America, to examine how it is affecting the retail and shopper landscape at a regional level, and help you navigate its complexities.
The data we originally collected and analysed for 2019 was suddenly irrelevant within the context of COVID-19. It quickly became apparent that we needed to prioritise what was happening in the moment for our clients.
We will briefly touch on the pre-COVID-19 FMCG retail picture across the world and in the Latam region, before taking an in-depth view of the impact the pandemic has had on individual countries, channels and categories.
We call this new environment Liquid Retail—a fluid space where the lines are blurred between home delivery, ecommerce, in-home and out-of-home.
Through these insights, you will be able to adapt your strategies and find new growth opportunities in these unprecedented times — whatever the future holds.
2019 global picture at a glance
In 2019, the Global FMCG spending grew from 2.1% to 2.4%, thanks to the recovery in the US. In this market, the rise of discounters and proliferation of ecommerce through Amazon and Walmart led to a 0.8% increase, to +2.4% annual growth. In nearly every other region we analysed, FMCG growth was slower in 2019 than the previous year.
The picture in Western Europe was similar—slowing from +2.2% growth in 2017 to +1.2% in 2019. France and Italy experienced just +0.8% growth each, Germany +0.7%, and the UK +1.4%.
In Asia, growth was fragmented. Indonesia (+6.3%), India (+5.3%) and China (+5%) all performed well. However, the likes of South Korea (+1.2%) and Japan (-0.9%) fell behind.
For the first time, growth in Latin America was flat—largely due to the financial crisis in Argentina, as well as poor growth in Colombia, Bolivia and Central America. The two biggest economies in the region – Brazil and Mexico – still performed well with +6.5% and +4.1% growth, respectively.
Without the impact of Argentina
and Chile, consumption in the
region would have risen by 1%.
E-Commerce (+204%), Wholesalers (13%) and Drugstores (12%) with 2-digit growth over 2018. (CI LATAM Q4 2019).
Slowing global population growth is the one trend that will impact every region, with FMCG growth likely to follow suite. By 2050, the global population growth will slow to just 0.5% per year, compared to 2.1% in 1969.
Where are Latam consumers shopping?
Ecommerce enjoyed triple-digit growth between 2018 and 2019, with value sales soaring by 204%. This huge rise was due to the channel’s low penetration in the region.
Cash & Carry offers a value-for-money proposal that meets Latam consumers’ needs. This channel’s 13% growth in value sales was mainly driven by Brazil, where it reached more buyers, and also increased their loyalty – the percentage spent in the channel versus their total spend across the entire market.
COVID-19 dynamics: FMCG under lockdown
We entered 2020 with similar expectations for the FMCG industry as recent years—that it would continue to grow at a sluggish pace in most regions, but we were wrong.
Latam experiences its highest FMCG
volume growth since 2010
The arrival of COVID-19 changed purchase behaviours significantly in Latin America, driving the highest volume growth seen for 10 years during Q1 of 2020. Shoppers everywhere were buying more FMCG, stocking up on certain types of goods as they prepared for lockdown and possible supply shortages. This resulted in total volume growth across the region of 4.8%
In Brazil and Mexico the pandemic strengthened an existing volume growth trend, while in Argentina and Chile it reversed declines.
Drivers of growth during COVID-19
This rise in FMCG value can be attributed to four key trends:
1. Stockpiling before lockdown
At the beginning of lockdown, it was inevitable that shoppers would add extra items to their baskets when faced with restrictions to circulate and possible isolation for becoming unwell. This led to people making additional shopping trips and buying slightly higher volumes than normal. In Latin America, after the stockpiling, the frequency declined and the purchases are bigger, increasing the importance of stock-up missions
2. Out-of-home transfers to in-home
With restaurants and cafés closed in many countries, the opportunity for out-of-home consumption disappeared overnight. Bars, fast-food chains and restaurants were the most impacted channels, directly reflecting on the performance of ready-to-eat food and beer categories. In Brazil, the biggest retraction occurred in the last week of March. Lunch and afternoon snacks have been the main moments of consumption to contribute negatively, which reflected in an increase of +27% new in-home consumption occasions for foods and beverages. (CI Brazil Q1 2020).
3. New occasions outside of core moments
The dynamics behind meals eaten in-home has been significantly disrupted by the lockdown. With the majority of people working from home and children off school for the foreseeable future, we’ve seen an increase in eating occasions. In Mexico, 8.1% more eating occasions were generated, mainly due to people snacking between main meals as they craved pleasure and ‘pick-me-up’ moments throughout the day – these occasions grew by 3%. There was also a renewed focus on some occasions. For example, without the morning rush, families have been spending more time preparing and eating breakfast together. In Mexico, people have been spending 5.5% longer in the kitchen preparing breakfast, 1.4% longer making lunch, and 2.2% longer cooking dinner.
In Colombia, 90% say they are eating healthier and 61% are testing new recipes at home.
Latam vision:
-
New values and concerns influence consumption habits
-
Brick-and-mortar stores are driven by new attributes
-
The demand for delivery grows and online channels accelerate
4. Heightened focus on health and hygiene
The constant stream of advice laid down by health authorities during the pandemic has led to a surge in sales of hygiene and health-related products.
Economy brands winning
in Latin America during lockdown
New values and concerns are changing shopping habits. In Latin America, 79% (vs. 60% global) are concerned about the economic future. Unlike the global trend, due to the economic concern and situation in Latin America, the demand for economy and private label brands has increased since the beginning of the COVID-19 pandemic.
Spotlight on private label
In Colombia, the success of discounters – whose value share increased by 39% – boosted the performance of manufacturers’ own brands, which increased in value share by almost a third (32%). This was despite the 214% growth of online channels, where major brands have a greater presence.
Channel
trends: online acceleration
Although the two overarching features of the FMCG landscape in recent years have remained consistent – stagnation and channel fragmentation – we’ve witnessed some shifts in how growth is distributed between channels and across countries.
Channel growth in Latam is a complex and varied picture, driven by two particularities: the level of quarantine restrictions in individual countries, and the channel structure that already existed in the market.
Two distinct trends have emerged. On the one hand, where restrictions were heaviest, shoppers favoured smaller-format stores because of their proximity to home. This was the case in Argentina, where lockdown was strictest, as well as Colombia and Peru.
Where restrictions were less tight or with more specific measures in each city or country, including in Mexico, consumers tended to favour the modern trade (large format stores). These gave people an opportunity to make larger purchases, and reduce the number of trips they made.
Whereas modern trade channels were growing in Brazil at the beginning of the quarantine, as the rules became stricter, proximity became more important.
More than 7 million Latam shoppers bought FMCG via ecommerce
Ecommerce was already growing fast in Latin America, but COVID-19 accelerated the trend, mainly due to new users trying the channel for the first time. This led to an increase in penetration: 6% of households across the region bought something via ecommerce during lockdown.
Other factors included the entry of new delivery platforms, the growth of existing platforms, and ecommerce players partnering with discounters to offer home delivery.
Penetration is highest in Colombia at 11.9%, which has overtaken Argentina as the Latam ecommerce leader. Most of its growth came from people who already shopped via this channel, but there was also a high number of new users – which suggests there may now be a lower barrier to entry.
In Mexico, ecommerce expenditure grew tenfold during quarantine, with triple-digit growth in value share (122.8%) that came in part from a high proportion of new buyers. The shift was also driven by shoppers switching from other channels, such as self-service, supermarkets, minimarkets and traditional trade.
Channels that stand
out in the current context
Discounters
In Latin America, Colombia bucked the trend of stagnation in the discounter channel that was observed across the rest of the globe. Already well developed in the country, the COVID-19 pandemic has stimulated further growth within the channel: discounters increased their sales value by 39% during the three months of lockdown, and reached 88% of households.
Down the Trade
Until the year 2019, Down the Trade had been losing importance. With circulation restrictions in the COVID-19 context, this channel is gaining importance in most countries in Latin America. The stronger and longer the restriction, the more prominence the channel has gained.
At times like these, nutrition and health become even more important, as well as the search for affordable prices, with Mercados, or Central Markets, being a well perceived channel for these attributes in Peru.
This channel gained 7 pp importance in April vs. MAT 2020
In Brazil, the current picture has brought on changes in the consumption journey, with emphasis on the Traditional Retail, which attracts more than 1.5 MM households, more frequently. Regarding home supply, shoppers declared that the most relevant attributes for choosing the POS are: channels with less concentration of people and proximity.
For the Traditional Trade, the main shoppers are in Social Class D/E, up to 29 years old and with young children, with emphasis on the increase in payment methods Cash (+2.7 p.p.) and Meal Vouchers (+1.8 p.p.)
Likewise, 15% of all households emphasize "there are brands that can only be found at this channel”.
In a context where there were different levels of restrictions during the pandemic, we saw completely different developments by country in terms of channels and shopping missions. Proximity has become key in countries that did experience a true lockdown, such as Argentina. The traditional trade was redefined during confinement and managed to grow on stock-up & replenishment shopping missions, in addition to the daily purchases.
The Traditional Trade has reached a historical share, driven by more buyers and higher purchase frequency in Street Markets and Stores in Chile.
The post-
COVID-19 picture: less demand, more downtrading
There is a big ‘unknown’ hanging over predictions about the post-COVID-19 FMCG landscape. The latest reports suggest that global growth will struggle to bounce back from the lockdowns, and just how long it will take to fully recover is up for debate.
The resurgence of private label
Private Labels grew the most in baskets that have the highest share of Premium brands in Latam: Personal and Home Care.
Although private labels have suffered during lockdown, we predict that the economic climate will provide the ideal playground for them to thrive again in the future. A survey of French shoppers in April found that 53% are struggling to pay for groceries, suggesting that many shoppers will look to make savings at the till for the foreseeable future.
Furthermore, there is also a huge untapped potential for private label in certain markets—particularly in Asia and Latin America. As lockdowns begin to ease, we predict that private label will begin to rise in these regions.
In contrast with the rest of the world, the COVID-19 crisis has benefited private labels in Colombia – particularly in the personal hygiene and household cleaning categories. Manufacturers’ own brands now hold a 19.1% share of total FMCG value, an increase of 32% on the same period last year.
Liquid Retail
As the aforementioned channel trends are amplified by the COVID-19 crisis, we have begun to enter a new phase of retail. It’s one that is constantly shifting – a fluid space where the lines are blurred between home delivery, ecommerce, in-home and OOH. This is Liquid Retail, and competition is fiercer than ever.
Two unknowns will redefine FMCG and retail: future levels of unemployment and distancing. The amount of employment across markets will dictate the extent of disposable income and the consequence of this will be more (or less) downtrading. Lower employment will see an accelerated phase for development and private label, and a price war between retailers coming under increasing margin pressure.
The second unknown, distancing, will also have big implications. A return to lockdown measures and more time spent at home will mean further development of e-commerce and home delivery. It will also mean category shifts towards more home cooking and a decrease in personal care.
A further element is the expectation for people to move outside of cities for reasons of safety and quality of life. If these factors are combined, we will see a world of less demand and more competition.
How to win in times of COVID
If there is less consumer demand, retailers will need to rethink ranging and their shelves based on category essentials. Price and promotional strategies will need to be reviewed, with more value-sensitive shoppers in mind. Private Label demand will increase as a consequence and retailers will need to ensure their offer in this space has clear value benefits, to retain shoppers and drive margin.
Manufacturers will need to adjust their product portfolio to cater for new behaviours. They will need to define specific actions based on new routines in personal care and beauty, price elasticity and packsize. A clear understanding of promotion mechanics will be needed in order to optimise trade actions, while in store price communication will be critical to attract shoppers.
On the other hand, with more competition comes the need for retailers to accelerate their digital transformation. This is no longer just an option, but a necessity. They have a fantastic opportunity to broaden their horizons and win share against restaurants through the provision of ready-to-eat meals delivered at home.
For discounters, building a full ecommerce strategy is critical—even more so if new lockdown restrictions come into place. For manufacturers too, the need to accelerate investment in e-commerce is obvious. A window is opening to develop comprehensive D2C options, while also proposing solutions for older and rural targets who are spending significantly more time online.
In Latam, were we are having the longest quarantine across all regions, we see a slowdown in consumption due to the recessive times.
- New product choices are inevitable to preserve the shopping baskets as much as possible.
- What can be done depends on the categories
- New balance in store choice attributes
- Resumption of promotional activities, balance with other activators (trade)
- Digital channel - Liquid Retail
- More competitive setting
Conclusion:
six rules to win
There are six rules to follow in order to understand
and anticipate the retail dynamics of our new world.
Combine OOH and in-home performance for food and drinks, to define the right strategy.
Split your ecommerce strategy and track bricks and mortar, pure players and D2C performance.
Track omnichannel performance beyond hyper- and supermarkets. 82% of growth in 2019 was outside these channels, and its accelerating.
Measure category evolution in line with changing shopper behaviours, splitting inflation, downtrading, store and brand or private label choices.
Start looking into food home delivery as a new channel to capitalise on.
Do not forget the new targets on the rise. They are not millennials, metropolitan, nor the wealthiest. They are the rural, the old and the unemployed.
With Thanks
Omnichannel 2020 is a Kantar initiative. Thanks to our partnerships with Europanel, GfK, IRI and Intage we have been able to offer countries outside of the Kantar footprint.
Data for Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Germany, Hungary, Italy, Poland, Romania, Russia, Serbia, Slovakia, the Netherlands and Sweden was provided by GfK.
Data for the USA was provided by IRI.
Data for Japan was provided by Intage.
About Kantar
Kantar is the world’s leading evidence-based insights and consulting company. We have a complete, unique and rounded understanding of how people think, feel and act; globally and locally in over 90 markets.
By combining the deep expertise of our people, our data resources and benchmarks, our innovative analytics and technology, we help our clients understand people and inspire growth.
Find out more
If you’d like additional information on Winning Omnichannel, please visit our website or get in touch with your usual Kantar contacts or email:
Lenita Vargas Mattar
Latam Shopper & Retail Director
Worldpanel Division
lenita.mattar@kantar.com
Stéphane Roger
Global Shopper & Retail Director
Worldpanel Division
stephane.roger@kantar.com
Benjamin Cawthray
Global Thought Leadership Director
Worldpanel Division
benjamin.cawthray@kantar.com
Food for thought
Explore our publications and webinars to discover how we help brands and retailers grow.
Webinar: How the COVID-19 crisis is transforming FMCG and retail
Brand Footprint
Latam - 2020
How COVID-19 is impacting our eating and drinking habits
Omnichannel: Create an effective retail strategy
Spanish version
Portuguese version
