The corona effect is fading fast, Kantar predicts. 2020 may have been an exceptional year for supermarkets and the FMCG sector, but growth is coming to an end as new challenges take their place.
A temporary phenomenon
What will be the legacy of the corona pandemic for the FMCG sector? Research firm Kantar paints a nuanced picture, with the spectacular quadrupling of global growth – from 2.5% to 10% – proving not to be a trend but purely a temporary phenomenon. Without social occasions, the beauty category, for example, went from being the fastest growing FMCG category to the only one that shrank.
Beverages, dairy products and food grew by 8.6%, 10.3% and 11.4% respectively, but it remains important to note that this is only home consumption. If you also include the out-of-home channel, there was a 2-5% decline in the food and beverage sector – even excluding alcohol. This is logical, as an out-of-home drink costs on average 1.20 euro and at home only 0.20 euro. Consumers would have to drink six times as much at home to spend the same amount as when they have one drink in a bar or elsewhere.
Only three big winners
Nor was the success by any means undivided. Actually, there were only three real winners: e-commerce, supermarkets and hygiene products. In 2020, e-commerce was once again the fastest growing channel with a growth rate of 45.5%, more than doubling compared to 2019. Across all markets, it represented the largest annual increase in market share ever. Online gained 1.6% share and now accounts for 6.5% of the total global FMCG market. E-commerce growth accounted for no less than 23% of all growth worldwide.
Nevertheless, e-commerce is not yet the biggest winner: the supermarket channel accounted for 38% of FMCG growth. Supermarkets grew by 11.5% last year, ten times stronger than the performance in 2019 and a remarkable trend reversal: a year earlier, the channel had lost 0.5% market share. Although the upturn was not seen everywhere: in Asia and the US, consumers found it more convenient to do their shopping at the supermarket in pandemic times, in Europe the preference increasingly went to convenience stores. The market share of discount chains also declined in Germany and the Netherlands, among others.
It is also true that 2020 was the year of the A-brands, but that too needs to be qualified. In the battle between A-brands and private labels, private label continued to gain market share, albeit at a slower pace than in previous years. In Western Europe, where private labels are strongest, their market share remained stagnant, with a decline in the second half of the year after a strong start. In the two largest markets – Great Britain and Germany – private label lost 0.8% and 0.5% market share respectively, partly due to the decline in discount sales.
Era of liquid retail
What should happen next in 2021? Taking into account the lingering uncertainty – will we remain in lockdown or will normal life resume? – Kantar forecasts that growth in FMCG for home consumption will slow to between 2.2% and 5.2% in 2021. The double-digit growth of last year may never even return. “It is not the 10% growth of 2020, but still a good year for the sector,” it sounds.
On the other hand, the growth story of e-commerce is far from over. Even though it will slow down this year, growth remains clearly above that of the market: if we stay in full lockdown, Kantar reckons on 38% growth. But even with easing, the market researcher predicts a 28% plus. In any case, the online channel will be well above 8% by the end of 2021. After all, 45% of consumers say they will continue to shop online.
However, this poses a challenge in itself: especially in Europe, it will be important to further increase loyalty and to serve customers with smaller shopping baskets profitably. Consumers will continue to expect free delivery, while they will place more frequent and smaller orders. Moreover, it is notable that e-commerce now reaches all groups of the population, but remains popular mainly in large cities.
FMCG is therefore entering the era of “liquid” or hybrid retail, where the boundaries between in-home, out-of-home, e-commerce and home delivery are becoming increasingly blurred. The researchers: “Home delivery companies such as Uber Eats and Deliveroo are now venturing into grocery delivery, e-commerce has grown twice as fast as in previous years and physical retailers have reinvented their offerings with a focus on omnichannel.”
