FMCG Demand Signals®:
How Consumer Demand Flowed into Category Value.

Here are some of the key findings from the latest Demand Signals report for Europe, which covers the period from January to August 2021.

• FMCG value sales grew 3.1% year-on-year in the prior 52-week period covering two significant stay-at-home lockdowns across key European markets. Whilst the structure of food-vs-non food contribution did not change significantly in these markets (food makes up on average 80 to 85% of category value); the channel split reflected how we bought more food at supermarkets, hypermarkets and discounters; whilst 8% of both non-food and food sales was now online. These trends continue to be reflected in the second quarter of this year.
• Now that mobility restrictions have eased in the second quarter of this year, online sales have declined marginally from highs just above 8% to c7.5% of overall category value – somewhat more resilient than analysts had predicted as hybrid purchase behaviour seeking ‘deals’ and convenience continue. It remains to be seen whether the meteoric rise of grocery-delivery services & apps will continue as food prices rise, already wafer-thin retailer margins are eroded, more delivery services become chargeable and online promotions continue to be withdrawn in the third quarter of this year.
• The opening of leisure venues such as restaurants and cafés coinciding with the beginning of the spring and summer holidays, predictably saw alcohol value sales rise 8% YoY (€69.4 Bn) well over the total FMCG category (3.1% YoY), no doubt to the relief of the category brewers and manufacturers who were particularly hit hard during the pandemic. A big winner was Beer, including speciality and craft beers, across France (+€279 Mn), Italy (+€203 Mn) Spain (€186 Mn) and Wines in the United Kingdom (+€803 Mn) and Germany (+€139 Mn) on an absolute value basis. Alcohol-free beers proved to be one of the fastest growing sectors (up 28% in France) and pre-mixed spirits (up 93% in the UK, 37% in Germany and 33% in Italy). Hard Seltzers such as alcoholic lemonade were up 24% in the Netherlands; whilst traditional segments such as cider, sherry, rioja wines and sherry declined the most.

Demand signals is the first step in understanding how consumer demand flowed into value, across 230 categories.

A big winner was Beer, including speciality and craft beers, across France, Italy, Spain and Wines in the United Kingdom and Germany on an absolute value basis.

• Chilled and fresh foods witnessed strong demand (3.4%) largely through the demand for Cheese (Germany, €426 Mn and Spain, €67 Mn), Fresh Packaged Fish (UK, €214 Mn) & Smoked Fish (France, €198 Mn up 25%) and chilled meats (Italy, €218 Mn). But with consumers still working at home, chilled Sandwiches (UK, down €217 Mn) and Soft Pasta (France, down €50 Mn) and Margarines witnessed continuing declines and only a soft recovery predicted in Q3.
• Any suggestion that ambient foods were dead as we all moved to fresh foods was over-blown. The soft recovery of ambient foods (+2%) has begun in the last quarter suggesting that consumers are gradually returning to the convenience, range and deals on offer. The indulgent experience of cooking and eating at home continued in Q2 ’21 with the fast-growing ambient food categories being condiments/pastes (+19% in Germany), Sauces (+20% in France) and Dried Fruits (+15% in UK) growing. Interestingly, absolute value sales drivers were flavoured milks & yoghurt drinks (+€72 Mn) driven by NPD & gut health; and in most forms of snacking (extruded, salty and nuts) as consumers used snacks to break the tedium of working at home and possibly, longer periods of time in front of the television. The big losers were canned tuna (c45 Mn both in France & Spain) and stews and wet soups (Germany down c60 Mn).

• Interestingly frozen foods have grown above the total category. In fact, it was the joint-second fastest growing category in FMCG at 4.4% along with Drinks. Across the European countries that IRI studied, this was driven by Frozen Fish & Meat and Ice-cream (From €45 Mn in France, €44 Mn in Spain, €17 Mn in Italy at the start of seasonal highs in late spring & an unseasonably hot early summer.). The casualty was frozen pizzas, vegetables & herbs across markets.
• Functional food and drinks are a new trend that continues to grow – in particular, we are seeking ‘better for me’ sports and energy drinks, that help us focus mentally, improve day-long energy & resilience, and provide supplementary nutrients such as protein and vitamins to maintain good health.
  The growth of sports & energy drinks was led by Italy (+34%) and +25% in France & Germany. The category already commands €155 Mn in the Uk which grew 9%. Coffee in all its forms, (beans, pods, single-serve cups, specialty drinks & coffee) delivered the highest category value c€500 Mn.
  Pre-mixed protein powders and shakes, did not however witness the same growth. The declining trend in carbonated drinks, juices and packaged mineral water continued, reinforcing growing health-consciousness & minimising waste.
• Non-food consumption was a mixed picture. The meteoric rise of gardening tools, supplements and home-improvement items did not offset the significant decline across personal and household care categories; notwithstanding panic buying of toilet paper, face tissues and anti-bacterial wipes. The consumption of health and hygiene related household cares continues across the market in this study - all forms of cleaning making up €150 Mn across the UK, France & Spain experiencing the highest growth for floor & carpet cleaners (+25% in UK & France) and disinfectants (+45% in Spain). Facial tissues were down c€120 Mn in the UK, France and Italy on the ongoing use of face masks and the seasonal effect. A significant decline in the use of laundry detergent in Germany (down €114 Mn) was perhaps down to pandemic behaviours and high stock levels in the home.

Interestingly frozen foods have grown above the total category.

The demand for personal hygiene products has continued to decline.

• Personal care threw up an interesting surprise – the demand for personal hygiene products has continued to decline. Cosmetics & lip makeup in France (down €65 Mn); Deodorants and bodysprays in Germany & the Netherlands (down c€45 Mn) and hair spray and colourants (Italy -€13 Mn) as we worked from home and an air of ‘informality’ influenced consumer choices.
  The extensive use of face masks, hand sanitisers and cleaners meant we had fewer coughs, colds and allergies wiping out €165 Mn in the UK alone from the purchase of de-congestants and anti-allergens.
  Growth was almost entirely focussed on pharmacy categories (vitamins, nutraceuticals, adult & pediatric analgesics, digestive health and immunity-boosting supplements) as staying healthy remained a foremost consideration; pharmacy & healthcare accessories (for example, devices for use in aromatherapy, aromatic oils and candles – such as those to facilitate low-stress, better sleep) in UK, Italy and France delivered €200 Mn individually.
• Throughout the pandemic, and particularly in the last two quarters, Private Labels failed to capitalise on value sales despite widening the price gap with the national brands and positioning their substitutes and promotions on prominent header positions on grocery apps and websites. It appears that in times of uncertainty, consumers preferred the reassurance and comfort of the big national brands who largely maintained their availability on shelves and met sudden spikes in demand more effectively than the private labels who are often supplied by small manufacturers whose own supply-chains were disrupted. However, as the prices of national brands, particularly in food, rise in response to the inflationary trend, it remains to be seen if private labels can gain greater share of value sales especially as retailers may decide strategically to pass on cost increases in certain categories and eat into their margins in strategically important categories to their private label portfolio.