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Follow the shopper: the changing channel landscape

Sonia Bueno

Kantar President – Brazil

Kantar Worldpanel Latam CEO

 

Shoppers in Latin America are more willing than ever to try new retail formats in their quest to get the most from their grocery budgets. As a result, the channel structure in the region is changing rapidly. Understanding the emerging channels, and having a clear strategy for being where shoppers are, is a critical part of brand building.

Fast-moving consumer goods (FMCG) volume growth in the region dropped to 2 percent by the end of 2017, according to Kantar Worldpanel data. Despite consuming less, households are spending 10 percent more on their basic shopping basket. Price inflation and lower incomes put shoppers under greater pressure to manage their expenditure. They buy less frequently, and make more considered and rational purchases. They have become skilled omnishoppers who, for example, visit the cash and carry to stock up on home and personal care items, and use convenience stores for perishable goods.

This has led to a shift in the retail landscape, with a proliferation of new formats and channels.

 

This is a brand’s world

In contrast to many markets in Europe, where private label goods can account for 30 percent of FMCG sales, only 1 percent of FMCG goods sold in Latin America are retailers’ own brands. Shoppers regard “A brands” as aspirational, and improving their premium brands portfolio will be the key to long-term success for many retailers.

 

This means there are huge opportunities for brands owned by manufacturers – but the channel structure in the region also creates a challenging environment.

 

The modern trade accounts for 46 percent of FMCG sales, which means that most shopping is still done in traditional formats such as mini markets, kiosks and street fairs. Almost three quarters (70 percent) of the modern trade channels are owned by local Latin American retailers, rather than global names.

 

The modern channels that are growing most strongly are the “limited range” retailers – including discounters, cash and carries, and wholesalers – which offer low prices and convenience.

 

Discounters reach over 60 million families across Latin America, and this will increase: in the last year alone, discounters grew their footprint by 20 percent, and Kantar Worldpanel data indicates that the growth opportunity is worth $700 million. The presence of wholesalers, meanwhile, is on the rise in half of the region’s countries, and these account for almost 10 percent of FMCG sales in Brazil, Argentina and Ecuador. Drugstores, e-commerce and convenience stores are also increasing in importance.

 

Be present, be available

Brands must have a clear strategy for ensuring they are selected by retailers and by shoppers.

 

Help retailers meet their objectives. A priority for discounters, for example, is to maintain differentiation by offering unique promotions and offers. By understanding and supporting this, brands can win themselves a place in limited assortments.

 

Find ways to get into shoppers’ baskets. More than half (58 percent) of households want to spend less money, so they buy cheaper or own-brand products. Brands can help them continue to buy the items they most desire, for example by offering alternative pack sizes.

 

Take full advantage of e-commerce. There is a significant opportunity for brands to gain market share in countries including Argentina, where e-commerce will account for 10 percent of the FMCG market by 2025.

 

See every country as unique. In Mexico, more than 1,000 convenience stores open each year, with more than half of households buying items there to consume in the home and 80 percent to consume outside the home. In Colombia, where eight in every 10 households shop in discounters, “hiperbodegas” are also growing.

 

Consider out-of-home opportunities. Each year, consumers in Mexico eat or drink outside the home an average of 108 times and in Brazil 68 times – representing close to half of all food and beverage purchases. Moving out of home requires a different strategy: pack sizes have to be practical for on-the-go consumption, for example.

 

Above all, it is vital that brands do not make assumptions about the channel landscape in Latin America – expecting that trends will reflect those in other regions, or even be the same from one country to another.

 

This is a market that has become more fragmented, in order to become more convenient and practical for consumers. Ultimately, it is the shoppers who are the winners – but the brands that know how to build on the trends will also succeed.