Latest Fast Moving Consumer Goods (FMCG) industry research from SymphonyIRI Group highlights the extent of the pressure some of the biggest non-food brand owners are under to meet their growth projections as price inflation continues to outstrip wage growth and real incomes are squeezed.
Research from SymphonyIRI’s Topline Trends report Is Economic Uncertainty Affecting FMCG Sales and the latest household category Pulse Report show while food continues to support volume sales in the grocery sector, non-food categories like household products are showing a decline in volume sales as shoppers feel the pinch and not only trade down but reduce the frequency of purchase.
For the period up to 1 July 2012, the sales value of household goods across Europe rose 1.9%.In France the value of household grew by 4.5%, the highest in Europe, compared to a total country FMCG sales growth of 4.5% and an average of 1.9% across Europe. However, the growth in value was price driven in household goods. In the year ended Q1, 2012, the cost of household items rose on average by 3.3% across Europe, well ahead of the non-food average of 2%.
As a result, despite value sales rising, volume sales fell by 1.3% on average across Europe (for the year to July 2012). Country by country trends vary. In Greece the decline in volume sales was steepest at 3.2%. In the Netherlands it was 1%. Only Spain and Germany saw volume sales growth of 0.8% and 1.4% respectively. The former reflecting price increases of under 1% on average, the latter more likely the relative health of the economy.
As the pressure remains on shoppers and their budgets they are prioritising food above other everyday consumables, said researchers. Consumers are using household products less: trading down to cheaper own label brands; purchasing more multi-purpose products; and switching retail channels to save money on their entire grocery shop. There are also signs pack sizes are being decreased, particularly in laundry. There is a limit to how far the grocery budget can stretch but people still need to eat but they can, it seems, clean less, said SynphonyIRI.
Shoppers are also making products last longer diluting products with water and following other tricks, said researchers. In many countries, particularly the UK and Germany, discounters and even pound-style shops have begun to sell household items at low prices adding to the pressure on national brands.
In SymphonyIRI’s Retailer Private Label in Europe report released last week, private label is doing particularly well in the household category and challenging national brands as shoppers become more reluctant to pay for top names. This is particularly true in glass/window cleaners, dishwashing and hand dishwashing and household cleaners. Private label value share of household rose by 2.2% in Spain; 1.3% in The Netherlands; 2.3% in Greece; 1.2% in Italy; 0.1% in France and 0.4% in Germany. In the UK, private label value share of household fell by 0.9% as the strong national brands in these categories respond with more aggressive promotions and sharper pricing.
“As prices rise for most household items, shoppers are making savings where they can to enable them to afford their weekly grocery shopping,” said Rod Street, executive vice president of international consulting at SymphonyIRI Group. “Food is a bigger priority on the whole.
“Growth can only come if retailers and FMCG manufacturers have a deep understanding of what makes the grocery shopper tick, and are brave about innovation, which will be crucial to driving sales. Household manufacturers in particular need to review their brand propositions for saliency and value in the face of continued pressure on shoppers. This means working in partnership to analyse and act on shopper behaviour, market insights and trends.”