Post on 28-Jan-2017
FMCG acrossthe business cycle:What, so what and what next?What, so what and what next?
Helen Passingham-HughesEuropanel
Consumer price inflation
Background - Price Inflation – to December 2009Significant in 2008 – now deflation
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1
Background - Consumer Confidence – to January 2010Lowest ever in late 2008, early 2009 – now some recovery
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Consumer Confidence Indicator
2
What does history tell us?
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Contractions Shake Consumer out of InertiaBut prior levels are then re-established
0.6
0.65
0.7
0.75
0.8
Consumer Inertia over the Business Cycle
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0.4
0.45
0.5
0.55
1993 1995 1997 1999 2001 2003 2005 2007
Contraction -1 Standard Deviation +1 Standard Deviation
4
Don‘t try to price promote...dropping price won‘t save you from a recession. Ehrenberg-Bass - 2008
Advertising and New Product Introduction
Reduction Increase/ No reduction
High loss potential Recession may be opportunityBrand Equity - High
Brands and Recessionary Times?
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...recession doesn‘t change the fundamentals of marketing. Stephan Buck/Andrew Roberts – April 1991
Survival game Try to fight back?
Source: Prof. M. Dekimpe – based on published academic papers
Brand Equity - Low
5
Brands and Recessionary Times?
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� PL growth is systematically related to business cycles
� PL increase in recession not compensated by decline afterwards
� Market behaviour perpetuates this result:
� Brand manufacturers’ behaviour is cyclical
PL growth consistent with previous times of uncertaintyNot easy to get back
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� Retailers’ behaviour is countercyclical
7
Data: Belgium 1983-2004USA 1971-2003Germany 1975-2002UK 1980-2003
FMCG in 2008/9 Inflation and/or recession?
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Volume
Yr ago %
Global
Inflation the major impact on FMCG
…not recession
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Yr ago %
Change
Actuals
W. Europe FMCG
9
Volume
Yr ago %
Change
Global
Volume trend
Food inflation trend
Inflation the major impact on FMCG
…not recession
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Change
Trend
10
W. Europe FMCG
15
20
25
30
2008 2009
Growth in FMCG value continuesRemains more important to consumers
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-5
0
5
10
Value
% change
11
-5
-2
-8
-24
Value durable goods vs
previous year in %
Durables markets collapse in many European countriesOnly Germany stable
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-0.1
-4
-5
-3
-4
-7
-10
-8
-9 -39
-42
-14
-16
-12
-20
-10Quarters 1.-3.2009
12
4
6
8
10
12
2008 2009
Despite inflation and economic conditions, volumes generally upVery resilient
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-4
-2
0
2
Volume
% change
13
Spend compared to control group
year 1 year 2 year 3
bread winner
employed
bread winner - fear of
becoming unemployed
Economic hardship impacts some… and the effect is on the change
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FMCG value
Value at discounter
Value of private label
10% less
4% more
7% more
14
Inflation the major impact…recovery countries eg France
2
4
6
8C
hang
e %
Inflation (Eurostat)
FMCG Volume Change
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-6
-4
-2
0
Cha
nge
%
15
Private LabelThe effect this time
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2
4
6
8
2008 2009
Down-trading still important in Europe but has reduced recentlyDeflation also a driver now
Down/Up
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-6
-4
-2
0
17
Down/Up
Trading
%
Down
Trading
%
Down-trading in Western Europe
…driven by inflation
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Western Europe
18
Actual trend
Pre-2008 trend
Western Europe - Private Label long term growthSteady and continued
Food Inflation
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Private Label
Value Shares
Western Europe
19
Food inflation
% vs
yr ago
8
10
12
14
29
30
31
Western Europe – recent Private Label growthInflation impetus and then retained
New trend
Actual trend
Pre-2008 trend
Food Inflation
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-2
0
2
4
6
8
25
26
27
28
Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09
20
Private Label
Value Shares
Western Europe
Food inflation
% vs
yr ago
Private Label FMCG
Value Shares
France SpainUK
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21
NL Germany Poland
Discounters also gained share above expectation
- prior trend at a new level
Actual trend
Pre-2008 trend
New trend
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Discounter
Value Shares
– Western
Europe
22
Discounter FMCG
Value Shares
France SpainUK
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23
Germany PolandNL
Shopping behaviour?
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0
1
2
3
4
Frequency Basket size Penetration Volume
FMCG volumes impacted by consumer category buying- reduced discretionary buying when inflation was high
Contribution
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-4
-3
-2
-1
0To value
% change
France ‘08
25
Promotions are increasing in importance
17.415.3
22.5
11.6
17.1
28.1
32.5
18 16.9
24.4
13.9
18.8
30.2
33.8
2008 2009
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11.6
France Germany Italy NL Spain UK USA
FMCG – Average number of top retailers visited per quarterGeneral increase in ‘shopping around’ and hence less loyalty to retailers
France SpainNL
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200820072006 2009
Big 6 TotalUKGermany
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Inflation has also
impacted usage500 million extra meals
€5 billion less out of home
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Back to basics – more
cooking at home, less
going out
extra meals at home
Around 0.6% of FMCG
Anti-cyclical behaviourExamples from Germany
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Winners in both crises
19.020.218.8
2001 2003 2008 2009
Recession Recession
Winner and loser brands across economic cycles
Germany
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both crises
Losers in both crises
13.5
15.7
17.3
19.017.8
18.8
17.0
30
Market shares
Ad spend
winners
140145
186
Winners act in an anti-cyclical way
Significant increase in advertising
2001 2003 2008 2009
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Market shares
winners
Market shares
losers
Ad spend
losers
Source: Nielsen Media Research for ad vertising data
100
116
88
128
93
140
84
115
66 7367
31
140Market shares winners
2001 2003 2008 2009
% of winners with launches
Winners act in an anti-cyclical way
Much more innovation
48 41 53
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Source: 20.000er GfK Household Panel ConsumerScan, market shares base value * 2007/2008
100
116
88
128
93
140
84
winners
Market shares losers
% of losers with launches22 38 25
32
Adspend vs Price elasticity - Germany
€8.3m
per brand€12.6m
per brand
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40 brandswith highest price
elasticity
40 brandswith lowest price
elasticity
33
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