Winning Omnichannel 2022 - p
The impact of COVID-19 on the take-home FMCG industry was one which resulted in double-digit value growth globally in 2020. But at the start of 2021,...
Winning Omnichannel
Our annual guide to the global
FMCG landscape
2022 GLOBAL E-REPORT: ISSUE 6
Welcome back to business as usual
How did the FMCG industry perform in 2021
after a record-breaking 2020?
The impact of COVID-19 on the take-home FMCG industry was one which resulted in double-digit value growth globally in 2020. But at the start of 2021, we were unsure what to expect for the industry.
We knew this extraordinary growth was an effect of the restrictions on movement around the globe and not a trend. Double-digit growth was not expected at a global level for an exceptionally long time – if ever again – and certainly not in 2021. We had no visibility on:
- When lockdowns would end, and restaurants reopen
- How quickly consumers would return to their old habits
- Even with freedom of movements whether people would eat and drink out-of-home like they had previously
- How many people would remain working from home, either full-time or part-time
Last year we forecast was that post-pandemic, value growth would slow down to just over +2%. That is almost exactly what happened with the industry: we saw that global FMCG growth slowed to +2.1% (a growth rate much more in line with pre-COVID levels).
So, why the shift? Well, the reality was that much of growth in 2020 was due to out-of-home consumption occasions moving to in-home. For manufacturers and brands in the food and drinks sector they actually saw a fall in value. Therefore, it’s vital we look at a combined ‘in-and-out’ view to get the full picture – and we will be sharing an update of this.
As always there are nuances by region, market, sector, and category. Throughout this report, we will explore all these different lenses to see the biggest winners and losers from the last 12 months.
A trend which is already impacting shopping behaviour in 2022 is the rising level of inflation across multiple markets. We will share thoughts on this important topic, and close with some forecasts for how the FMCG industry and channel landscape will evolve this year.
This sixth edition of Winning Omnichannel will give you the most comprehensive global view – across 50 markets – of how the dynamics of FMCG and retail transformed in 2021. We want to thank our partners, GfK and Intage, for sharing their data and insight to enable such global coverage.
As always, this paper should function as your go-to guide on how the FMCG industry performed. It will help you quantify what to expect in the year ahead, show how you can manage risk against inflation, and ultimately how you can prepare for business success, armed with the latest business insights.
2021: The state of play
The take-home FMCG industry's growth slowed between 2020 and 2021. But does the regional story reflect the global one?
In 2021, take-home FMCG value growth slowed down across all regions – even moving into decline in Western Europe. The impact of COVID-19 was most pronounced in Latin America, MEA, and the US, although their 2021 performance was still higher than 2019.
In Latin America, despite a slowdown, +9.2% was the fastest growth recorded by any region in 2021. This is due to lockdown restrictions still being very present across the region, particularly in key markets such as Brazil – plus inflation has been higher than in any other region (which these growth figures capture).
The Asia region saw a minimal change across both 2020 and 2021, with a small acceleration followed by a small deceleration, however performance remains highly fragmented. Mainland China – the largest market in the region – saw FMCG slow significantly in 2020 but despite a mini-revival in 2021 their growth remains behind the pre-COVID levels of over +5%. Conversely, India saw one of the strongest growth rates in the region in 2020, but this almost halved in 2021, while Japan seesawed from being in decline, to growth, and now back into decline. The Philippines declined two years in a row, also seeing the biggest percentage fall in 2021, having had one of the strictest lockdowns in the region.
Shopping habits: a mixed bag
From very early on in the pandemic, we saw shopping behaviours and buying habits we’d never witnessed before in the industry. Stockpiling and shifting out-of-home spend into the home meant our spend per trip increased by over 20% in one quarter. Conversely, the impact of lockdowns and fear of interacting with strangers saw purchase frequency fall quarter after quarter.
Fluctuations in both these measures have slowed considerably in the second half of 2021, but it was spend per trip which saw the biggest fall and with it so has the value sales growth. Globally, take-home FMCG saw a 3% decline in both Q2 and Q4 last year.
How ‘normality’ impacted different categories
All five of the FMCG sectors saw a slowdown in growth, but with Beverages, Dairy and Food accounting for over 70% of FMCG value it’s perhaps unsurprising that these three had the biggest impact – slowing from over 10% growth to under 3% across the board.
Beverages fared slightly better than Food and was the fastest growing sector in 2021. This is down to Sports & Energy drinks being the fastest growing individual category in 2021, also helped by Carbonated Soft Drinks’ relatively robust performance in the last 12 months with >6% growth. The biggest driver of Beverages slowdown was Wine & Champagne which bucked the trend entirely, going from double-digit growth in 2020, to decline in 2021.
Every category within the Food sector saw a slowdown, with Flour, Canned Fish and Rice being three of the worst performing categories as shoppers moved away from baking and the need of long-life staples such as canned good and rice.
The Homecare sector was impacted with key categories such as Bleaches and Household Cleaners both moving from ~20% growth in 2020 to a small decline in 2021. More regularly purchased categories like Laundry Detergents have remained steady with a small but consistent growth across both years.
The Health & Beauty sector is an area where there is a little more nuance. Despite seeing the slowest growth of all, this fact alone doesn’t tell us the whole story. In fact, it makes most sense to consider everyday toiletries items separately from other Beauty categories for analysis purposes.
For example, Hand & Body Wash (which benefitted in 2020 from the increased awareness around hand washing) moved from over 13% growth to a small decline. But, as discussed in our recent paper On Trend: The evolving Beauty consumer, the Beauty-specific side of the sector is on the road to recovery.
This is best represented by the biggest category, Face Care, which moved from -4% decline to +4% growth. Even the hardest-hit categories in 2020, Make up and Fragrances (which experienced -22% and -11% decline respectively) saw their performance improve drastically in 2021.
Across all of the categories, it’s evident that their performance, both positive and negative, are due to the outcomes of the pandemic: the closing and gradual re-opening of bars, cafes and restaurants, the easing of restrictions and ‘stay at home’ guidance – and the impact this has on our social interaction.
Despite in-home FMCG sales hitting 10% in 2020, the complete picture – one that combines sales for both Out-of-Home (OOH) and in-home – shows a decline of between 2-5% for the food and beverages sectors (excluding alcohol).
Given how important OOH sales are for food and beverage retailers, manufacturers, and brands, we need this combined view in order to give us the true state of play. Again the picture is vastly different when we compare 2021 to 2020.
With OOH in recovery, we now see a vastly improved picture for GB and Spain. Based on in-home sales alone, Spain was seeing -7% decline which reduced to -1% when we include OOH. In GB the results are even more impressive, with OOH moving a flat performance to +6%. In France and Brazil where OOH is yet to recover to the same extent, this positive impact is not yet being felt.
OOH value sales grew for the last three quarters of 2021, increasing 34% in Q4 compared with a drop of 32% in the same period in 2020.
While this overall picture is positive, looking at the evolution of OOH spend over a three year period provides valuable perspective: it was still 8% lower than it was in the fourth quarter of 2019, before COVID-19 hit.
Online adoption
Ecommerce gained over 5% global penetration in 2020. But how many of these new shoppers continued to use the channel in 2021?
Have the channel dynamics changed?
In every edition of our annual Omnichannel report, online has been the fastest-growing channel globally. Despite a lower level of growth in 2021, this remains the case, growing more than three-times faster than the next best performer, Cash & Carry.
Reflecting the sector performance earlier in the report, every channel has seen a slowdown in growth in 2021 compared to 2020. However, the slowdown of every other channel has been significantly more than that of ecommerce. This has meant that only online has made a significant share gain of +0.9% now worth 7.2% of the global take-home FMCG market.
Hyper & Supermarkets, despite remaining by far the biggest channel, underperform compared to the rest of the market (as in 2020) with growth of +0.1%. It lost 1% of market share.
Ecommerce: The importance of Asia
The share of ecommerce in Asia has always been significantly higher than any other region. At 15.3% share, this is more than double that in Western Europe (6.9%). But what’s even more impressive is the rate of growth in Asia.
There are now 22 markets in which online has a share of 3% or higher – up from 15 in 2020 and just 8 in 2019. But four of the five markets where ecommerce has gained the most all come from Asia. Only Indonesia and rural Vietnam have market share of less than 1%.
In short, Asia accounts for 45% of all online FMCG sales.
Ecommerce: Frequency-led growth
The continued growth of the channel has come from two things. Maintaining the huge increase in shoppers in 2020 and adding to it. Market penetration has risen from 31.6% in 2019 to 37% in 2020, and hit 39.8% in 2021.
But the real driver of growth in 2021 was in purchase frequency, which increased by a greater amount in 2021 than in 2020. Purchase frequency has contributed to a staggering 70% of the channel growth.
While penetration has continued to rise in Asian markets, in Europe penetration has plateaued and has in fact gone down in France. What has not fallen, though, is purchase frequency with this on the rise across both Asia and Europe.
This plateauing in online penetration in Western Europe reflects the value sales, with short-term ecommerce sales showing a decline in Q4 2021 for the first time ever. And it is the older (65+) households that were new to online shopping during 2020 that are the main driver of this decline in GB and Spain.
New Retail
Led by Mainland China, how is the industry adapting and adopting new ways of consuming FMCG products?
Mainland China leads the ‘new retail’ growth
As the most established online market globally, Mainland China always offers interesting dynamics and learnings for the rest of the world.
In this market, the share of online growth has been steadily changing over the past three years. A game that traditionally was mostly limited to two main players is rapidly expanding to include a host of new competitors. In 2020, Alibaba contributed 49% of the e-commerce channel’s growth. While still high, this dropped to 35% in 2021.
In the 12 weeks to 25 February 2022, JD.com and online marketplace Pinduoduo continued to grow share at the expense of Alibaba. Pinduoduo now holds the second largest consumer base in the market, with penetration of 29.2%.
Changes were evident in livestreaming, too. Virtually unknown before bursting onto the retailing scene in 2019, livestreaming provides immersive experiences for consumers and personalized recommendations from key opinion leaders (KOL) and other hosts.
Consumers like livestreaming’s convenience, which is also a big part of the appeal of O2O (online to offline) retailing, a phenomenon that boomed during the pandemic. O2O accounts for 7% of all FMCG value and its penetration among consumers remains above 50% for FMCG categories. While consumers turn to livestreaming for categories like makeup and apparel, they use O2O channels for products that are cheaper, handy, and require less emotional involvement. Products that consumers run out of and quickly order for one-hour delivery. As Covid-19’s effect on purchasing behaviour lessened, O2O penetration remained flat and the share of value from O2O slightly declined.
Community group buying’s popularity rose during the earliest months of the pandemic and became so important in the first quarter of 2021 that all major platforms invested heavily in it to stay connected to consumers. But the trend began to wane as its economics came into sharper focus.
The growth of these new online models, means now that the average household uses three different models.
(Most of the previous page is taken from China Shopper Report 2021, Volume 2)
‘New retail’ adoption across the globe
As we’ve already seen, much of the global growth of ecommerce is coming from Asia, whereas penetration is plateauing or falling in Europe, and online is still marginal in Latin America. With this in mind, what is the adoption for these new models like outside Asia?
In Europe, the adoption remains low for FMCG purchasing. In both GB and France, despite the rising popularity of aggregators (delivery apps like Deliveroo, Glovo, Rappi, Grab, etc) for Home Meal Delivery, they aren’t currently being used very often for grocery shopping.
In GB, despite the number of monthly users increasing three-fold over the last two years aggregators account for just 0.3% of total ecommerce grocery sales on average. In France, while 19.5% of households used an aggregator in 2021, most (18.2%) used it for meal delivery, and in fact only 2.2% of household using it for FMCG.
Penetration is similarly low for the other new online models with social commerce and quick commerce sitting at the same level.
Meanwhile, in Latin America, despite online accounting for less than 1% of FMCG sales, the adoption of aggregators for grocery is higher than France across most markets. Chile has the highest penetration in the region at 14.8%, and Argentina, Brazil, Ecuador, and Peru all have a penetration rate over 3%.
It’s not just the use of aggregators that’s on the rise in the region. Social media for FMCG has a higher penetration across every market in Latin America than France, with its usage comparable to the Asian markets. 14 million shoppers across the region used WhatsApp to initiate an FMCG purchase in 2021. (The platform is particularly relevant for Beauty where it accounted for over 40% of online spend).
Coping with inflation
With rising inflation across all regions,
how will shoppers react?
How shoppers cope with inflation
In 2021, inflation rose in almost every region in the world and in the first quarter of this year this has only accelerated. During the pandemic, many households could cope with rising prices in the grocery sector, by using savings made elsewhere (less socialising, fewer holidays). But with lockdowns now over in a large number of regions and a return to ‘normality’ the pressure of inflation will be more keenly felt.
The burden of inflation is also highly variable across regions. According to data from the World Bank, the share of consumer expenditure on food and beverages can range from over 40% in the Philippines to under 10% in GB and the US. This share is generally higher across most Asian and Latin American markets. But even in markets where this number is below average, lower-income households naturally feel the squeeze more, given their lower proportion of disposable income.
When faced with increasing financial pressures, shoppers can find a way to cope by using different levers to manage their spend. Shoppers can:
1. Reduce how much they buy
- Less categories
- Less volume/packs
2. Change where they shop
3. Change what they buy/how they shop
- More promotions
- More private label
- Cheaper branded option
Even before the end of 2021, we were seeing some evidence of these behaviours already in play.
Across most markets where the Discounters have a strong presence, the channel continued to gain share. This was particularly evident in Eastern Europe with Discounters reaching over 40% in Poland. And although the channel is now well-established in Latin America, it is in Colombia where it has now reached 25% share to become the biggest channel.
Although smaller than the Discounters globally, the Cash & Carry channel is particularly strong in Argentina, Brazil, Mexico, and the US. This channel also gives shoppers a cheaper alternative to traditional hyper/super-markets and was the second fastest channel (after ecommerce) globally in 2021, making gains in key markets, as the graph shows.
In 2020, as lockdowns increased demand for in-home groceries worldwide, retailers took advantage, with a significant reduction in promotion spend (-1.2% share), and whilst this continued to fall in GB for example, globally we saw a bounce-back in promotional share in 2021 of +0.7% share points.
Mainland China led this uplift (+0.8%), along with Germany (+1.1%) and France (+1.7%).
In Mainland China, we can attribute the continued growth of promotions to the steady rise of ecommerce in this market, as promotional share is 44% online compared to 23.8% (and falling) in hyper/super-markets. In France, rules have been in place since the beginning of 2019 preventing food products being discounted by more than 34%, which led to a decline in promotional share in both 2019 and 2020. However, this is on the rise again in France due to an increase in share across all the major channels, up +1.9% in hyper/super-markets, +1.1% in the discounters and +2% online.
Inflation Coping Impact on Grocery Spend
The last few pages were anecdotal evidence of how shoppers have been coping with rising prices. As said, the impact of inflation impacts every household differently.
Therefore, to understand how shoppers are coping, you need to analyse behaviour on a household-by-household basis. This is the only way to truly understand how shoppers are reacting to current financial pressures.
We have gathered data of this kind from Great Britain. And while the volumes are less useful at the moment, as lockdowns and the releasing of restrictions distorts the data, the changing coping strategies are important to note.
In the latest 12 weeks to 20 March 2022, we see a sharp response to inflation in product mix, i.e., shoppers trading down to cheaper branded alternatives. This is a short-term response, and it will be worth keeping an eye on this over the coming months as inflationary pressures increase. (And naturally this graph, and the spending distribution will look quite different depending on whether a household is ‘comfortable’ or ‘struggling’).
What’s in store
for FMCG?
What’s on the horizon for the industry -
and how will the market adapt?
Forecasting the future growth of FMCG
As reminded in the opening chapter to this year’s Winning Omnichannel, last year we forecast global FMCG growth of +2.2%. The reality was growth of +2.1%.
This year, as with any forecast, there remains several unknown factors that are extremely hard to predict. We are currently (publication written in April 2022) seeing one of the strictest lockdowns over the whole pandemic in Shanghai, witnessing war in the heat of Europe, and seeing inflation skyrocket.
Therefore, we are giving a range of potential growth scenarios for how the industry will perform, without including the inflation effect, ranging from +0.6% growth if the slowdown seen in the second half of 2021 continues, up to +3.8%.
"Our best estimate is that the FMCG industry will continue to slow, and we will see growth of +1.3%."
As inflation will be hitting all regions in 2022, for every +1% inflation we should expect value growth to increase by ~+0.6%.
We have applied the same forecasting model to the global channel structure and applied a longer-term view.
What we expect to see is that, online will continue to grow faster than all other channels and gain share, albeit at a slower rate. We forecast that it will gain +0.5% share per annum to reach 7.7% share by the end of 2022 – reaching over 9% share in the next four years.
Hyper & Supermarkets will continue to lose share – but again at a much slower rate than the previous two years – and will still remain at >50% share by the end of 2025.
With Mainland China being so integral to the performance of online, given the lockdown in Shanghai currently the next few months will be key to understand how the channel is performing and whether the channel will reach what we have forecast for the year ahead.
Summary and key takeaways
How can FMCG brands plan for success in the months and years ahead?
As predicted, the pandemic drove very specific behaviours that temporarily shook the industry and sent profits skyrocketing. But, with lockdowns lifting, shops, bars and restaurants opening, we see that 2020 was an anomaly: in 2021 we are largely sliding back to pre-pandemic FMCG consumption.
2022 growth for FMCG is set to be around 1%, excluding inflation impact across the globe. Of course, as inflation rises, so will spend, we are likely to see around 2-3% revenue growth, if we include inflation. And this will drive a change in behaviour of its own.
Alongside this ‘artificial’ boost to the sector due to inflation, we will see more downtrading, with shoppers seeking to cut down their higher-than-normal basket spend.
Consumers will look to own-brand labels and cheaper options, reducing impulse buying and practicing more disciplined spending overall. This will be particularly apparent across more vulnerable markets, and lower-income shoppers.
With the extra squeeze on consumers’ purses, the most relevant sectors in shoppers’ baskets will be Food and Beverages, as fast-growing sectors in 2021 – looking particularly to higher-growth categories, which will still be the go-to due to the widespread acceptance of flexible working.
Ecommerce: A growth trend
Our report has found that ecommerce is unquestionably on the rise, with an annual pace of around 15-20% growth globally. Of course, this was nothing like the growth figures forced by the pandemic, but it is a clear indication of the strength of ecommerce activities more widely, – and its upward trajectory.
In terms of finding opportunities, looking to emerging markets is likely to be beneficial, and brands should look to build out a proper retail offer across online and social channels.
As the ecommerce channel matures, we are also seeing greater sub-channel segmentation, with quick commerce, aggregators, social media, and live streaming all serving as options that compete for market share and attention. Tracking how this matures and develops further will be beneficial.
Implications for FMCG brands
With rising costs, shoppers are purchasing fewer categories and limiting their basket size. So, brands need to be chosen much more often than before, making brand visibility more important than ever – especially as there is a trend towards fewer shopping occasions post-pandemic.
Tactics to increase visibility will range from activating promotions, having an extensive range that optimises the visibility of brands across categories, and ensuring (in brick-and-mortar stores) that products maximise shopper attention by winning the battle for eye-level placement on shelves.
In terms of focus, while we have highlighted the importance of ecommerce and shoppers’ likelihood to veer towards Discounters, the continued dominance of Hyper & Supermarkets should also be considered. We project they will still be dominant in 2025.
Looking ahead, it will be vital that brands track how shoppers cope with inflation, reviewing marketing strategies accordingly. Brands will need to plan and prepare for the growth of ecommerce, to prepare for the retail landscape in 2025 and beyond.
Vitally, ‘new retail’ should not be an afterthought. Just as the department store with ‘all goods available in one roof’ threatened specialist businesses (many to extinction), the modern version of ‘total commerce’ may soon eclipse all other market shares. These companies that offer ‘all concepts available in all formats’ (i.e., Amazon or Alibaba) may reign supreme, causing us to rethink today’s more ‘traditional’, segregated forms of retail.
1. Full retail landscaping
- 50 markets ready to use Dashboard
- 3 years data update December 2021 with sales evolution, share, penetration, spend per trip, frequency, loyalty rate, e-commerce breaks, private label and promotion shares by channel, Top 10 retailers by country,
Top e-commerce players
2. Channel Forecast
- 50 markets ready to use Dashboard
- Forecast up to 2025
- Omnichannel value & sharese…
3. Inflation Coping Strategies
- Re-define your marketing & retail strategy based on how shoppers respond to inflation
- FMCG/category evolution split by shopper drivers
Omnichannel 2022 is a Kantar initiative. Thanks to our partnerships with Europanel, GfK and Intage we have been able to offer countries outside of the Kantar footprint. This years reports covers 50 markets representing 83% of global GDP.
Data for Austria, Belgium, Bulgaria, Czech Republic, Denmark, Germany, Hungary, Italy, Poland, Romania, Russia, Serbia, Slovakia, the Netherlands and Sweden was provided by GfK.
Data for Japan was provided by Intage.
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.
If you’d like additional information on Winning Omnichannel, please visit our website or get in touch with your usual Kantar contacts or email:
Stéphane Roger
Global Shopper & Retail Director
Worldpanel Division
stephane.roger@kantar.com
Ricardo Oie
Global Shopper & Retail Manager
Worldpanel Division
ricardo.oie@kantar.com
Benjamin Cawthray
Global Thought Leadership Director
Worldpanel Division
benjamin.cawthray@kantar.com
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