HITTING THE SKIDS
Worst performance seen in four decades
Despite promising prospects for Thailand’s overall economy, consumption of fast-moving consumer goods has been dormant.
Despite promising prospects for the country’s overall economy, consumption of fastmoving consumer goods (FMCG) has been inactive, based on the latest research from Nielsen, the market research firm.
Somwalee Limrachtamorn, managing director of the Nielsen Company (Thailand) Ltd, said the sales value of FMCG, which are daily necessities, have contracted since June 2016, reaching the biggest dip in May 2017, a fall of 7.6% year-on-year.
Sales value recovered to slight growth of 1.3% in September year-on-year, but contracted 1.8% in October.
“The FMCG market has experienced its worst performance in the past four decades,” said Ms Somwalee.
“The market has never grown less than 5-8% in recent decades, and it still managed to grow 3-4% over the past five years.”
She said the contraction stemmed from myriad factors, including a relatively high loan-to GDP ratio, which has stayed over 75% for four years, hefty household debt, the economic slowdown and declining sales of alcohol and cigarettes — the largest consumer product categories — after new government taxes and a ban on selling these products via some channels.
The National Economic and Social Development Board (NESDB) reported on Monday the GDP rose by 4.3% year-on-year in the third quarter — the strongest growth in 18 quarters — after expanding by 3.8% in the second quarter and 3.3% in the first quarter.
In the first nine months of 2017, the economy grew by 3.8% year-on-year.
The agency expects the economy to possibly expand 3.9% for the whole of 2017, up slightly from the average of 3.7%.
The NESDB has forecast GDP growth in the range of 3.6-4.6% next year, supported by favourable growth of the global economy.
THe NESDB also said an acceleration of public investment, which will be supported by the progress of key investment projects and a higher capital budget framework, the improving trend in private investment and the continual expansion of key production sectors will provide a boon to the economy.
Ms Somwalee said she believed that fast-moving consumer goods in 2018 will likewise fare better than this year.
But she said her more bullish projection does not take into account any value-added tax increases by the government.
“The market has already passed its lowest period this year,” she said.
“Moreover, manufacturers have learned to adjust themselves.”
Ms Somwalee said Nielsen’s latest research also found smaller manufacturers had performed better compared with big ones because of their sharper focus, greater flexibility, innovation, right positioning (premiumisation or economy segment) and fast response to consumers’ need.
“Premiumisation is the haven in this turbulence,” said Ms Somwalee.
“For example, sales of Downy softener products went well despite more expensive prices than other products in the same category because it has clearly positioned its products and their functional benefits.”
Modern trade also responds well to premiumisation, she added.
Shoppers were found to visit retail channels six times per month on average.
Their shoppers’ basket was 4% bigger than in the past, growing to 255 baht per household, although they shop less often.
Malls and convenience stores have also become increasingly popular due to their proliferation, product variety, status as the first movers of new goods and the overall shopping experience they provide.
Ms Somwalee said consumer goods manufacturers consider other factors than the GDP, particularly in-depth information regarding customers’ needs, before making any new investment decisions.
“They will win the game if they can identify appropriate products for different income points (premiumisation or economy segment), apply a more granular approach, seek more sales opportunities from tourist markets, particularly Chinese visitors, product innovations and expand into Asia’s FMCG market,” she said.