‘A turning point for FMCG’ in LATAM: new report shows shrinking volume consumption in Q2

08-Oct-2018 - Last updated on 08-Oct-2018 at 14:35 GMT

For the first time in 10 years, FMCG volume consumption across Latin America shrank by -0.1% in the second quarter of 2018, according to a new report from Kantar Worldpanel.

Despite uncertainty around its political future, Brazil continues to be the growth engine for the region, but even there volume growth was only 1.6% in Q2 2018. The greatest growth was in Colombia, with 3.5%, and Chile with 3.8%.

Spend on FMCG also declined across the region, increasing by just 1.6% in Q1. The development could be ‘a turning point for FMCG’, according to a new report.

“The erosion of the value of FMCG baskets is due to shoppers switching to different brands in order to control their budgets, choosing private labels and low-priced economy brands over premium brands,” stated Virginia Garavaglia, Kantar Worldpanel’s Marketing Director Latam in the report.

“Many households are buying the same categories in the same volumes, but spending less. This has hit premium brands hardest: they have lost 2% of their market share in the last three years.”

Necessities first, private labels on the increase

The report goes on to explain that Latin American shoppers are visiting retail stores less and less, thereby limiting the touchpoints and opportunities for brands to interact with consumers.

“In terms of the FMCG basket, beverage volumes are declining in most countries, while food is performing slightly better, as people prioritize the essentials,” explained the report. Kantar has also observed a shift towards economy ranges and private label brands, and away from premium brands, which have seen their market share drop from 25% to 22.7% since 2015.

Private labels in particular have enjoyed slow but steady growth, and now account for 3.6% share of the FMCG market in the region. This obviously differs by country, with Colombia leading the way with private label market share doubling since 2015 to now account for 15% of the market. This is followed by Central America, where private label brands account for 8% of the market, and Chile, where it’s 6%.

An evolving retail landscape

The Kantar report also explained: “Latam’s retail structure is uniquely local, and changing at great speed. The landscape is very fragmented, with no major global players, and the channels and formats that prevail formats – and the way in which they are executed – are highly specific to each market. Emerging channels vary from country to country, according to cultural preferences.”

Wholesalers, discounters, regional chains and pharmacies in particular have had a big impact on the retail segment across the region.