Consumer staples to see a shift away from premium categories until incomes recover
FMCG firms likely to increase focus on value categories to cater to lower income levels Consumers to increasingly look for value in their purchasing decisions
The demand for consumer staples or fast-moving consumer goods (FMCG) has recovered with the easing of lockdowns but people may increasingly look for value in their purchases amid slashed incomes, prompting the companies to offer discounts and promotions to lure consumers, specifically to their premium categories, Fitch Ratings said.
FMCG remains largely immune to economic downturns and the sector staged a faster recovery compared to many other sectors since the easing of lockdowns. But the consumers could become more selective when choosing products and could shun the premium versions, as their incomes have waned with many experiencing salary cuts and some remaining unemployed.
The rating agency said this condition could force the FMCG companies to increase their focus on value categories, to cater to lower income levels. This will also prompt the FMCG manufacturers and retailers to increasingly offer discounts and promotions to drive demand until the consumer incomes recover.
“We expect consumers to increasingly look for value in their purchasing decisions amid lower income levels. Consequently, there may be a demand shift away from premium products within categories,” Fitch Ratings said in a sector-wise assessment of the financial impact of the pandemic.
If the situation for consumer staples is such, the implications of lower consumer incomes could be more pronounced for the consumer discretionary category. The processed food giant, Keells Food Products PLC, on Monday reported 18 percent lower revenues in its first fiscal quarter ended June 30, 2020, compared to the same quarter last year. Sri Lanka’s low penetration levels of online sales and e-commerce generated much lower revenue from FMCG during the pandemic-induced lockdowns, despite the products were made available through online platforms and mobile delivery channels,