Best-value offer top of consumers’ choice

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DUE to inflationary issues, more Filipinos are turning to brands and retailers that offer value for money, convenience and product assortment when it comes to their fast moving consumer good (FMCG) needs, a top executive of Kantar said on Tuesday.

“Shoppers don’t really have much of a choice but to absorb inflation because these basic pantry staples—sugar, cooking oil, LPG [or liquefied petroleum gas, etc.—they] actually buy them because they comprise their basic [necessities],” Laurice Obana, shopper insight director at the Worldpanel Division of Kantar in the Philippines, told reporters in a webinar.

Based on their data as of September 11, 2022 versus a year ago, the average inflation rate on FMCG in the country is 9.8 percent. Among the product categories, the price of sugar has increased at 44.3 percent; cooking oil, 39.6 percent; LPG, 29.7 percent; meal flavorings, 17.3 percent; chicken, 16.3 percent; catsup, 15.4 percent; growing-up

milk, 13.5 percent; infant formula, 12.2 percent; chicken eggs, 11.6 percent; and body care, 10.3 percent.

With this in mind, she said local consumers “put a premium on value” of things they need “as straightforward as cheaper goods or paying less for the same quantity.”

The executive added that other factors like the oil price hike, traffic and inconvenient transport modes have also redefined value when they buy things they require on a daily basis.

“What we have seen is that, in general for packaged goods, shoppers are coping with rising prices by being more open to value brands. To some extent, however, they also take into consideration where to shop,” Obana explained.

“Nowadays, with multiple retailers and channel options within reach, shoppers can easily adapt to what would best fit their budgets and lifestyle that will address their needs at the moment,” she added.

Go-to store formats

“Nearness” has become the top priority of consumers for their daily needs during the pandemic, with nearby smaller store formats being their “go-to” places.

“The growth of proximity channels, which have gained mostly during the lockdown, was more because of the lack of mobility and fear of going far out from the homes because of the virus. Today, it can be said that while reasons and motivations are no longer about mobility, shoppers continue to patronize small format stores as they manage cashflow, become more cognizant of higher fare [and] gas [price], and the difficulty in the modes of transport,” the shopper insight director noted, adding that the basic necessities are always available there.

In fact, 41 percent of FMCG purchases during the period in review are made in sari-sari stores typically found in the neighborhoods. This is 1 percent and 6 percent higher than a year or two ago, respectively.

Market stalls and groceries saw a slight growth of 1 percent since last year, from 6 percent in 2020 to 7 percent in 2021 and 2022. Drug store this year is at 4 percent, the same level as 2020, up 1 percent from last year’s 3 percent.

“We’re seeing that for groceries, sari-sari stores, market stalls and drug stores, even direct selling, these are your proximity stores that there is an increased spend naturally,” Obana noted.

For gifting outlets, it’s stable at 3 percent since last year, yet 2 percent lower than 5 percent two years ago. Shares of FMCG purchases remain flat in convenient stores (1 percent) and other store formats (9 percent) over the last three years.

Meanwhile, value shares of hypermarkets and supermarkets in the last couple of years dropped by 6 percent and 3 percent, accordingly, from 34 percent in 2020 and 31 percent in 2021 to 28 percent in 2022.

“Online remains to be a small channel for the Philippines in terms of size, but we are seeing that it’s actually gaining traction. Growth is definitely there,” she pointed out.

In terms of socioeconomic classes (SECs), Kantar found out that those with less financial means opt for smaller and nearby stores, as the moneyed can still buy in high-end formats.

“The middle C2 and DE—the middle and the lower SECs, which comprise the majority of our population—spend more in the proximity channels. However, for the upper SEC, we’re seeing that they also spent most [and] they increased their spend in hypermarkets and supermarkets, but relatively increased also in other channels,” she said.

Because of this, hypermarkets and supermarkets are a bit pressured since most Filipinos feeling the economic strain continue to patronize smaller proximity stores for their basic FMCG needs.

Top 10 retailers

Different store formats from both local and national players have made it to the 1st Most Chosen Retailers in the Philippines report launched this year by Kantar.

As of September this year, six retail operators with presence across the country comprised the list. Puregold lorded over the roster as the most preferred retailer among shoppers nationwide, followed by SM Supermarket, Mercury Drug and Robinsons Supermarket. Convenience stores Alfamart and 7 Eleven, likewise, completed the top choices at 7th and 10th places, respectively.

Regionally-based retail stores have placed significantly in the national ranking, with CSI Supermarket in Northern Luzon (5th), Cebu’s Prince Hypermart (6th), Gaisano Grand in the Visayas and Mindanao (8th) and LCC Supermarket in Southern Luzon (9th).

All were rated based on the Consumer Reach Points (CRP) method, which measures the number of shoppers and the number of times they have made a purchase in a particular retailer within 12 months. CRP is accounted for in-home, direct to consumer purchase within 132 FMCG categories tracked by Kantar. 

Image credits: Junpinzon | Dreamstime.com