Omnichannel Latam 2021
COVID-19 impacted everyone and every industry differently. The way we shopped was transformed. Some of the trends we have seen in previous years...
Winning Omnichannel Latam
The future of FMCG and Retail
post COVID-19
2nd edition, 2021
Welcome
Was 2020 really that great for FMCG?
COVID-19 impacted everyone and every industry differently. The way we shopped was transformed. Some of the trends we have seen in previous years accelerated, others fell back.
In Latin America, the pandemic reversed a scenario of consumption decline and even drove 6% growth. In-home became the moment that all shoppers focused on.
Much of this growth came from the transfer of out-of-home consumption occasions to in-home moments. Spend was boosted by government support, mainly in the form of direct cash transfers to consumers.
Some of the trends that we’ve seen in 2020 are common across all markets while others are more local in nature. What’s still not clear is which of these trends will be most important once COVID-19 ceases to dominate everything we do.
This second edition of Winning Omnichannel for Latin America will share what moved the FMCG market in 2020 and provide important reflections on the future.
We’ll compare what’s been happening around the globe to illuminate Latin America’s own retail transformation in 2020 and identify new growth opportunities in 2021.
2020 Global picture and expectations for another pandemic year
In 2020, global take-home FMCG value growth quadrupled to 10%, from 2.5% in 2019 – an increase of $220 billion.
Except for Eastern Europe, all regions saw faster growth. The impact of COVID-19 was most pronounced in Latin America, the USA, and Western Europe, all moving from flat or slow growth to double-digit.
FMCG growth in Latin America was driven by consumers adapting rapidly to the new circumstances. With COVID-19 rampant they evolved their shopping habits: they significantly increased consumption of categories they consider relevant to their daily lives, totally abandoning the odd indulgence, and they optimized the time they spent shopping, visiting outlets as little as possible to stock up.
Governments provided support to hard-pressed consumers, particularly the low-income demographics. This injection of economic stabilization funds and social plans allowed hard hit families to provide their households with the essential consumer goods they needed.
Although the end of the year saw some relaxation in mobility restrictions across the region, new habits have not been abandoned. The winning retail channels (Wholesalers and Online shopping platforms) as well as the way we shop (fewer shopping trips) have not returned to pre-pandemic patterns.
The outlook for 2021 will be determined by the uneven pace of vaccination in the region and by the scale of the economic crisis triggered by the pandemic.
Two key factors will have a significant impact on shopping baskets. First, the reduction in government assistance that helped sustain consumption last year and, second, the structural changes to the way people live – the impact of their new home-based lifestyle on what they chose to buy.
The 2020 is a year that shows the speed of shopper adaptation: rapid response to the socio-economic context and health crisis shaping their FMCG purchases at each stage of the pandemic.
The 360° degree view: The migration to
in-home
Over the course of the year, pandemic habits became consolidated. But these new patterns of purchasing were not positive for the Food and Beverage industry overall.
Mobility restrictions brought an end to out-of-home consumption and, despite the significant increase in spending for in-home consumption, this was not enough to eliminate the drop in total revenues.
Even in Brazil, where restrictions were not so intense, out-of-home consumption fell from the beginning of the pandemic before showing some stability in Q3 once measures of confinement were partially relaxed. Towards the end of the year, however, the negative trend resumed despite the holiday season.
Delivery
Delivery is becoming a way of life across the region and in Brazil, fast food spending has grown by up to 62% through applications or phone orders.
Delivery rates grew gradually through the year, driven mainly by wealthier consumers, with metro areas such as Sao Paulo particularly benefiting.
After-dinner screens
The indulgence of the dinner table moved seamlessly into a need for entertainment. Screen usage across the day increased but was markedly higher in the evening. In Mexico, for example, screen time peaked after dinner.
Faster food
Consumers may have eaten at home more in 2020 but they spent less time preparing their food. Data from Mexico shows that while health was on the menu in the morning but indulgence became more important in the evening.
Optimized shopping trips
Consumers changed the way they shopped in 2020, buying more categories on each trip as they sought to make every minute spent out of home count.
Stock up trips – those where consumers bought items from at least 10 categories – dominated. Year-on-year the number of such trips rose but the value of each trip fell. This trend was particularly evident in countries such as Brazil, Mexico, Colombia and Ecuador.
The new equation for retail was a rise in frequency but a decrease in the quantity of products bought and hence a fall in the total basket value.
Fragmented cross-channel purchasing
Liquid Retail
Before 2020, there were two constants in every edition of our global Omnichannel report. Online was the fastest-growing channel globally and Super- and Hypermarkets – the biggest global channel – was the slowest, losing share and relevance.
Globally, E-commerce was again the fastest-growing channel, with 45.5% growth—more than doubling its growth rate from 2019. The channel gained +1.6% share and now takes 6.5% of the total global FMCG market.
Despite this level of growth, however, it was not the biggest contributor to FMCG success in 2020. This honour fell to Supermarkets, which contributed 38% of FMCG growth.
In Latin America, there was a slightly different picture.
E-commerce was the big winner in growth terms with E-commerce or app-based shopping up by 238% year on year. Retail chains retained some of their lost in-person shopping trips through this channel.
The big winner, however, driven by its relevance in Brazil, Mexico and Argentina, was the Wholesale channel, followed by Independent Supermarkets and Mini-markets.
It’s also worth noting that, Hyper and Supermarkets accelerated away from the global trends in this region, up 15%.
The preference to make major purchases in the Wholesale channel rose during 2020, with Discounters and Hyper and Supermarkets also benefiting.
This boosted consumption in Independent Supermarkets and Mini-markets, which together with fairs and specialized supermarkets, had been losing relevance.
Pharmacies and Perfumeries were hit by the drop in beauty category purchases and the Convenience channel lost the momentum it had in previous years thanks to mobility restrictions.
The growth in turnover at Wholesalers and Independent Supermarkets will give them more power to continue gaining relevance with consumers, while the Modern channel – Hyper and Supermarkets – can grow still further, particularly in countries such as Brazil and Argentina, where it is well established.
The big learning is that no brand can afford to be without a multi-channel strategy. This has become business critical in Colombia and Peru, where the decline in the Traditional channel has created space for the Modern channel to start to play a significant role.
Challenges for the Modern channel in 2021
The Modern channel had a good year in 2020 but its Achilles’ heel is the need to regain frequency and shopper loyalty.
In all markets it is a vital component of FMCG consumption – attracting 35.7% of household spending. More than 88% of Latin American shoppers use a range of formats; Hypermarkets, Supermarkets, Discounters and Convenience outlets.
In Colombia we see growth in FMCG being driven by Discounters, while in markets such as Ecuador and Peru, Supermarkets are gaining relevance over Traditional channels.
MT achieves 35.7% of household spending in Latam
88.6% of households purchased in the channel during 2020
106.4 MM households chose it as part of their channel mix and 1.2 MM were recovered during the year
Loss of purchasing frequency cost to the modern channel USD 2.7 billions in 2020
The opposite occurred in Chile and Argentina, due to mobility restrictions which benefited the Traditional channel.
Across the region, the channel saw growth of 14.3% driven by a significant increase in household spending. This occurred despite a reduction in the number of visits – down 5.4% – thanks to an 18.1% increase in average purchase value (price increase) as many consumers decided to indulge in more pricy options (product mix more premium).
Retailers will have to rely on a safer environment for people to move around and work hard to restore shoppers' confidence in the safety of purchasing in their stores.
Private Label continued to gain share globally
Private Label continued to steal share from brands, albeit at a slower rate than previous years.
In Eastern Europe and the US, Private Label gained share. The result was a +0.3% share gain in the US and significant gains in Romania (+2.5%), Serbia (+2.2%) and Hungary (+1.9%).
Although Private Label remains much smaller in Latin America, it did experience the biggest gain of any individual market with +3.5% in Colombia, where growth was driven by the rising power of discounters.
Other Latin American markets where Private Label performed well are Peru and Ecuador, where it was the fastest growing type of brand, albeit from a much smaller base than in Colombia, where it now has 22% value share. Value share in Ecuador rose from 3% to 4% and from 2% to 3% in Peru.
With economic challenges set to continue in 2021, own brands and value brands are likely to continue to gain space in shopping baskets.
Promotional intensity reduction
Promotions have been a key tool helping FMCG retailers and brands to grow. When done well, they encourage incremental growth through additional purchasing, which wouldn't ordinarily have happened.
E-commerce now takes more than 3% of sales in 15 markets worldwide, up from eight in 2019. There was also a step change in who uses online shopping. It used to be predominantly a channel for time-poor families who required big weekly shops, but it is now a channel for everyone.
The potential for growth in Latin America is even more pronounced and E-commerce value grew 238% year on year, with frequency of purchase up by 14% across the region.
As in other regions of the world, there is a strong skew towards E-commerce's popularity in big cities from Shanghai where online share is 32.1% (v 25% total market), to São Paulo where it is 1.1% (v 0.5% for Brazil as a whole).
Across Latin America the main platforms for E-commerce are the online shopping platforms and applications developed by supermarket chains. We also see alternative channels taking advantage of messaging applications such as WhatsApp.
This platform is increasingly becoming a way for independent stores and informal channels to connect with their shoppers. At Kantar LATAM we have the ability to monitor all E-commerce channels, including these non-traditional uses of messaging platforms.
The story of E-commerce in 2020 wasn’t a constant uphill stroll, its growth broadly reflected the impact of mobility restrictions. As restrictions decreased later in the year, the channel dropped from its Q3 highs.
Lots of households had the chance to experiment with this channel and it is now part of their basket of retail options. When the pandemic recedes, it will remain at a higher level of usage than in previous years and growth will continue, although the pace may slow down.
Regional highlights
The number of new digital shoppers in Brazil grew by more than two million in the second half of 2020. E-commerce reached into nearly 13% of Brazilian homes, with access via WhatsApp accounting for five percentage points of that total.
In Argentina, E-commerce gains came from those at highest risk from COVID-19 backed up by spending from E-commerce natives in other categories, including young people with strong purchasing power. Loyalty to E-commerce among these shoppers is extremely high and its growth represents an offline to online migration among modern channel shoppers. It’s vital for FMCG brands to a strong O2O strategy.
Nearly 18% of Colombian households made at least one E-commerce purchase in 2020. Once life returns to normal after COVID-19, 53% of digital shoppers said that they would continue to buy online in the future and 12% said that they would spend even more online.
Spotlight on Brazil WhatsApp
WhatsApp democratising E-commerce
Whilst E-commerce remains relatively small in Brazil, the growth there is still impressive, with two million more shoppers in the second half of the year compared to the first half, creating an additional 18 million new buying occasions.
This doubling of penetration in Brazil is partly down to messaging apps such as WhatsApp, with almost 40% of online shoppers using WhatsApp to make an FMCG purchase.
WhatsApp has enabled smaller, traditional retailers (which are more prominent in LatAm than any other region) to have an online presence. It has given consumers a route to shop online in a country where smartphone ownership is higher than that of personal computers. It also provides households outside of metropolitan areas an E-commerce option, with E-commerce purchasing via WhatsApp higher in the countryside.
WhatsApp is not just accelerating E-commerce growth in Brazil. It is doing so across most of the Latam region where WhatsApp is the main communication app for many.
Three insights about the current scenario and new purchasing behavior
1. Adverse Context
We are still waiting to find out the full economic impact of the lockdown and the timings for a drop in government support but brands should expect shoppers to react quickly and move to a more restrained consumption mode. Those at the bottom of the social pyramid will be the most affected.
2. Wholesale consolidates its position
With economic uncertainty on the horizon, the wholesale channel represents a refuge for shoppers who seek to stock up and make their budget work harder. There is no evidence that this channel is losing relevance as vaccination continues to advance across the region.
3. Multichannel options
Shoppers are diversifying the way they connect with channels and seeking both economic convenience and practicality.
E-commerce will have an important role as a growth space for the modern trade and as an accessibility tool for other channels.
What will drive behaviour
There are two key areas where brands will need to watch carefully to ensure they stay well prepared:
The first is the balance between mobility and vaccination. Vaccination is taking place at different rates across the region. That means that mobility restrictions could come into play at different times in different countries. The potential reintroduction of restrictions will alter the balance between in-home and out of home consumption as well as the channels that shoppers use.
The second is the impact of cuts in economic aid. Shoppers are likely to move to a more rational consumption model. Expect to see shoppers move into crisis mode as they change their channel and brand mix. The outlook could be a price and promotions war as retail brands seek to earn shopper loyalty.
FMCG brands will need to be adaptable. They should focus on maintaining their relevance to the buyer and closely follow any changes in each market. Above all, agile execution will be required to ensure they maximise their success in each retail format.
With Thanks
Omnichannel 2021 is a Kantar initiative. Thanks to our partnerships with GfK, IRI and Intage we have been able to offer markets outside of the Kantar footprint. This years reports covers 42 markets representing 66% of the global population and 83% of GDP.
Data for Austria, Belgium, Croatia, Denmark, Germany, Hungary, Italy, Poland, Romania, Russia, Serbia, 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 Latam, 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
Lician Tomimatsu
Marketing Latam Director
Worldpanel Division
lician.tomimatsu@kantar.com
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