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.
Looking at five key markets during the period since China went into lockdown in January, the message is clear that FMCG is growing—and growing fast.
The UK, Spain, France and Brazil all grew by 17% between 20th January and 19th April—representing a rapid
improvement on the 2.4% global average in 2019. China was the only market in decline due to the period clashing with Chinese New Year celebrations.
This astronomical rise in FMCG value can be attributed to four key trends:
Out of home transfers to in home With restaurants and cafes closed in many countries, the opportunity for out-of-home consumption disappeared overnight. In the UK alone, it is estimated that an extra 503 million meals – mainly lunches and snacks – will be prepared and eaten at home every week for the foreseeable future. However, a transfer from out of-home to in-home is not enough to generate incremental value growth – in fact, the combined out-of-home and in-home spend dropped between 10% and 30% during lockdown, despite volume increasing. The primary cause of this decline is price – for example, the average spend for in-home occasions in the UK is £1.30 compared to £4.40 out of home.
New occasions outside of core moments The dynamics behind meals eaten in the home have 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 a renewed focus on some occasions. For example, without the morning rush, families have been spending more time preparing and eating breakfast together. People are also snacking more between meals as they look for ‘pick me up’ moments throughout the day.
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. In Spain, hand soap is the product that has seen the greatest increase in sales, entering 1.5 million new homes in April. During this period, in fact, hand soap has made its way into more homes than Coca-Cola—the world’s most chosen brand. Furthermore, one in four Spaniards state that they have bought vitamins to boost their immune system to ward off infection.
Big brands winning during lockdown As we revealed in this year’s Brand Footprint, the biggest brands have disproportionately won during the lockdown period. In the UK, the top five brands across household cleaners, beer and lager, fabric detergents and deodorants were all chosen at a faster rate than the category. During April 2020 alone, the number one brands in each category grew by an impressive +11.7%, compared to +6.1% for private label.
A big driver of the success of big brands during this period is the channel mix. Brands have a higher share of trade online and have benefitted through the strong growth of this channel to increase their sales at a faster rate than private label.
Spotlight on private label Before the outbreak of COVID-19, private label was growing thanks to the continuing rise of discounters around the globe. In 2019, private labels made up 38% of value share in Western Europe, 22% in the US, and rose 3.3 points during the previous 12 years, globally. As we have seen, the biggest brands have been winning during lockdown at the expense of smaller brands and private label. In Spain, private label stopped gaining share altogether during lockdown. This was caused by a reduction in the number of buyers at discount stores, where private label makes up the bulk of the product range. During this period, Lidl lost 3.1 million shoppers and Mercadona lost 2.9 million.
