Thailand - Cooking From Home - p

The impact of COVID-19 has been hitting Thailand hard since the start of the pandemic in early 2020, and this has undeniably had an effect on shopper...

Thailand: Cooking from home

Unlock the lockdown

The evolution of Thailand’s ‘at home economy’

The impact of COVID-19 has been hitting Thailand hard since the start of the pandemic in early 2020, and this has undeniably had an effect on shopper behaviour. Government policies imposing lockdowns and curfews meant people were staying at home more. A new trend emerged as a result: the ‘at home economy’. Consumers were visiting stores less often, leading to increased online shopping, and food delivery grew fast as restaurants closed for dine-in. This accelerated a shift in shopping behaviour in Thailand, with the greatest impact on FMCG.

Looking at Food products, when the number of COVID-19 cases rose buyers tended to stock up or change out-of-home consumption to in-home consumption. However, this proved to be a short-term trend: once cases dropped, or lockdown was eased, purchase behaviour returned to normal. This switch was most marked within Consumable Foods – and as the largest sub-sector within Food, it had a major impact on value spend within the sector as a whole. In contrast, as illustrated in the chart, the line relating to Food Preparation products indicates that this trend is growing, implying that consumers are cooking at home more than in previous years.

Before we explore specific Food trends in Thailand, it’s important to understand the broader market context first. Macro trends such as shifting demographics lead to changes in shopper demand and purchase behaviour, which have an impact on everything from branding to pack sizes.

A population on the move

Urban households are increasing

Based on data from the UN1, Thailand’s population was split 50/50 between urban and rural areas until 2018, when the number of urban households began to overtake that of rural households. Purchase data from Kantar Worldpanel’s Household Panel shows the same trend, with a higher number of urban buyers than rural buyers since Q3 2019. This indicates that there is a high level of complexity in the market, as urban areas have more choice, channels and demands. All brands in the FMCG market should follow, understand and adapt to these consumers’ changing needs and behaviours.

Shrinking households impact spend

Pack size and channel strategy matter

The larger the household, the more they spend. The smaller the household, the more they grow. As Thailand’s population becomes more urban, household size is shrinking; people tend to live alone or as a couple, and after they get married or have children they often move out of the family home. This is driving tremendous growth in the number of small households, while larger families with five or more members are becoming fewer in number. This trend is not only impacting FMCG as a whole, but also main sectors within the market such as Food and even Food Preparation.

As we know, the larger the household the more they consume – however urbanisation continues to shrink households, leading to high growth in small (1-2 members) and medium (3-4 members) households. FMCG spending from large households still grew by around 3.4% in Q3 of 2021 compared to the same period in 2020, but the number of households of this size and their contribution to market share is getting lower and lower.

Why should the reduction in household size be a concern for brands? Since each pack size has its own role – for example, large pack sizes for stock up and small packs for immediate consumption – and buyers have a specific mission for each channel they shop in, pack size and channel strategy will become more important.

The rise of home cooking

Food Preparation grows in all regions

Food Preparation was the standout sector during lockdown, as more consumers started cooking at home. We saw this trend most clearly in Greater Bangkok and Thailand’s Upcountry Rural areas, while the Upcountry Urban area did not adopt it to a great extent.

What’s cooking?

Key trends in Consumable Foods, Snack and Food Preparation

This led to our next question: What do Thai consumers cook? And which product innovations and communications will capture shoppers’ differing tastes and cooking styles?

The fastest growing categories in urban areas are products that enable people to create meals and snacks instantly, showing that urban buyers are looking for speedier ways to prepare food. We can see evidence of this trend in the following sub-sectors:

1. Consumable Foods

Shoppers are looking for products that help them to cook faster and more easily. Most of the categories in this sector are ready to eat (RTE) and ready to cook (RTC) foods, and sales are rising, while raw products like Rice and Frozen Raw Material are declining. Whereas shoppers currently spend around 70% of their Consumable Food budget on Rice, this amount is reducing every year and RTE and RTC products are gaining greater share of wallet.
This raises some key questions: Are Thai people still eating rice? Are they consuming it in different, more convenient ways? Or has it been replaced with other Consumable Food categories?

The fastest rising products in terms of share of buyers’ wallets are Sausage and Cold Cut products (Sausage, Bologna, Ham and Bacon). The main growth factor here is a higher number of shoppers in every region, along with increased purchase frequency.

2. Snack

Growth in this sector has been driven by more sharing of snacks during lockdown, and more moments enjoyed at home.
Value sales in the Salty Snack category have grown more than 10% YoY for in-home purchase, while out-of-home purchase is still in decline due to national lockdowns and curfews, when shoppers switched consumption from out-of-home to in-home with their family. Shoppers are also buying less often, so they tend to choose larger packs. Purchase volume per trip has seen an 11% uplift in the past year, and volume per buyer has increased 8.5% compared with the same time last year.

The trend for healthy and organic food is on the rise in Thailand, but not in the Snack category. Potato Chips is still the largest segment in Salty Snack, and even after the COVID-19 outbreak it has been able to grow its penetration by around 3%. Other segments are losing buyers, except for Prawn Crackers, Fish Snack and Nuts & Seeds which have maintained or even grown their buyer base – in particular Fish Snack, which grew almost 10% in Q3 2021. Nuts & Seeds has also been growing strongly since before COVID-19.

While Potato Chips is the core snack that Thai buyers prefer, we spotted new growth segments in the Salty Snack category: Other Fish & Sea Snack and Other Salty Snack. This indicates that there is an opportunity for new snacks to capture unmet needs for enjoyment and variety as buyers seek to discover something new outside the mainstream products.

3. Food Preparation

When people began to cook at home, Cooking Oil became indispensable. Worldpanel’s expert team segments this category into two main types: Mainstream (Soybean and Palm) and Alternative Cooking Oil (Rice Bran, Sunflower Seed, Coconut, Granola, Olive etc.). The category overall has grown strongly through the pandemic, with a value increase of over 12% in Q3 2020 and over 20% in Q3 2021.

Mainstream is the segment contributing most to growth, with almost 92% of total value sales. However, Alternative Cooking Oil is gaining a larger share every year, with urban consumers the main buyer base. In contrast, Mainstream Cooking Oil is growing strongly among rural shoppers, and achieving good penetration in both rural and urban areas, but we are seeing some buyers start to move to Alternative Cooking Oil – even in rural areas.

The main buyers of Alternative Cooking Oil are in Greater Bangkok, with urban mid to high income consumers having the highest tendency to spend in this segment. If we consider household size, those with two members are most likely to buy, while mid-sized to large households are sticking with traditional cooking oils like Soybean Oil and Palm Oil.

Different regions, different preferences

Do shoppers in Greater Bangkok, Urban areas and Rural areas buy the same products? Our findings here are quite interesting. During lockdown Greater Bangkok and Upcountry Urban buyers purchased more ‘Western’ products like Mayonnaise, Salad Dressing and Spread. Meanwhile shoppers in the Upcountry Rural areas continued to buy traditional Thai food like Cooking Oil, Coconut Milk or Oyster Sauce.

Where do Thai shoppers buy food?

The most important channels

Hypermarkets (HPM) are on the decline in all regions, while smaller channel formats like Supermarkets (SPM), Convenience Stores (CVS) and Provision Stores (PVS) have still been able to grow during the pandemic and lockdown.

Greater Bangkok

Convenience Stores have achieved the strongest growth, contributing almost 30% of food sales in Bangkok – almost the same share as Hypermarkets, the largest Food channel in the region.

Upcountry Urban

Supermarkets are becoming more important, with share of sales almost the same as that of Convenience Stores, which are bigger than both Hypermarkets and Supermarkets in the region. However, Provision Stores continue to play a major role, with consumers still choosing to buy from this format.

Upcountry Rural

The largest region for food consumption, Provision Stores is the main channel for shoppers here, with almost 100% still buying from this format. Despite the impact of COVID-19, Provision Stores have grown more than 10% between Q3 2020 and Q3 2021, followed by Convenience Stores and Supermarkets.

Online: the emerging food shopping destination

Sustained growth in spend and penetration

Since shoppers started going out less often, online channels have stepped in to play a major role in fulfilling demand. Online has been on the rise for a few years, but COVID-19 accelerated growth and the shift from offline to online shopping. Bricks and mortar businesses might not be able to survive in the ‘new normal’ world, and could start to shift to ‘clicks and mortar’ instead like 7-Eleven, the largest Convenience Store in Thailand, which has also opened an in-app delivery service.

After the first lockdown in early 2020, the Online channel significantly grew its number of Food occasions by over 400% in Q3 2020 compared with Q3 2019. In Q3 2021, value sales grew 87.7% YOY, while penetration grew 5.6% – meaning there are now almost 1.5 million buyers who purchase Food products online at least once per annum.

So, what type of Food do shoppers usually buy online?

According to Kantar Worldpanel’s Household Panel data, all three sub-sectors – Snack, Food Preparation and Consumable – have been able to grow significantly. Food Preparation has the highest growth, but its contribution to total Food value is still low. The fastest growing category is Cooking Oil. In Snacks shoppers tend to spend most on Biscuits, while in Consumable buyers are looking to stock up on Rice.

Pure players lead the online channels: Shopee, Lazada and JD Central are the main platforms, with Shopee the leader in FMCG. Shopee’s most-bought categories are Consumable and Food Preparation.

However, the highest growth last year came from e-retailers like Lotus’s, BigC, Tops and 7-eleven – dominated by the 7-eleven app. The most-bought category from the 7-eleven app is Consumable and Snack.

Key takeaways and outlook

Take-home consumption will be more important than out-of-home consumption in most categories for as long as COVID-19 remains out there. Even though in-home and out-of-home occasions aren’t the same, brands should adapt to stay relevant to consumers’ needs for take-home consumption, then once the pandemic fades away they can continue to recover out-of-home occasions.

As COVID-19 lockdowns hit we found some stock-up behaviour in the Food sector, especially in Consumable Food. Then Food Preparation categories increased their number of buyers due to most restaurants closing or opening for takeaway only, restrictions on movement, and social distancing. These additional buyers mainly came from the Greater Bangkok/Urban area. Buyers in Rural areas increased their consumption instead.

It’s possible that Cooking Preparation products will be able to maintain their growth through next year. Even though Thai consumers are looking forward to dining in restaurants again, concerns around COVID-19 will permanently change behaviour to cooking at home more than in the past.

Buyers are looking for easy to cook or instant food products, with the top growing category in urban areas supporting this trend. The rise in popularity of Cold Cut, RTE and RTC products is also a result of consumers’ new need for convenience.

Buyers want to discover something new in Food. The growth of some minor Snack categories implies that shoppers are seeking new varieties. In addition, Alternative Cooking Oil is growing among shoppers in Greater Bangkok and the Upcountry Urban area, and some sales have switched from high income buyers in rural areas which indicates new opportunities and white space in the Food market.

COVID-19 has driven buyers to look for smaller format channels, while the Thai government’s subsidy campaign has also disrupted Modern Trade.

The Online channel became more important as shoppers changed their behaviour to reduce unnecessary contact with others, and took advantage of delivery services. Online sales and buyers have been growing significantly every year – even in the Food sector. This will be the new strategic channel for brands to drive awareness and sales in the ‘new normal’, in particular to connect with younger buyers.