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ANALYSIS

data to develop a deep understanding of
consumers to shape decision-making could
set leaders apart.

How have consumption patterns
changed across markets?
Our analysis identified five notable
consumption trends across the region,
but understanding the nuances in each
market will be critical for grocery retailers
and FMCG leaders. In this section, we
dive into consumer preferences across
categories and price points as well as for-
mats and channels.
Five critical consumption trends shaping
Asian markets include: 1) The quest for
value deepens, but the actual purchase
PHOTO: VIET TUAN volumes response varies; 2) Non-food dis-
cretionary categories shine; 3) The transi-
tion to modern brick and mortar is slowing
down everywhere but Malaysia and Thai-
land; 4) Small format offers hope for mod-
ern grocers in some markets; 5) Online
Seeking value
continues to gain share across markets,
but its growth has slowed.

propositions The quest for value deepens,
but the actual purchase volumes
FMCG shopping habits are wildly different throughout Asia given response varies
Since 2022, persistent inflation has led
the countries’ uniquely changing circumstances in recent times.
Asian consumers to hunt for cheaper alter-
natives. We see a dichotomy at play when it
| By MCKINSEY & COMPANY
comes to quantity: consumers in fast-growing
markets such as Indonesia, the Philippines,
and Vietnam maintained their purchasing
sian grocers and fast-moving con- at upwards of 6 per cent in five of the eight
sumer goods (FMCG) companies markets. The good news is that, across the volume, whereas consumers in markets
A are dealing with the impact of infla- region, consumers have largely been resilient such as Malaysia and Thailand pulled back
tion and changing consumer preferences. and maintained their spending levels on on the volume of goods they purchased.
Non-food discretionary categories shine
McKinsey’s analysis highlights five trends, FMCG. Since inflation peaked in most In difficult times, the higher-end discre-
but the devil is in the detail for each market. markets in June and July, consumer con-
fidence has started to improve. tionary categories (such as electronics)
Each market has its own momentum suffer most, but consumers will shift part
Asia is an amalgamation of markets with Basket size and frequency show of their discretionary spending to smaller
different spending power (GDP per capita diverse patterns across markets rewards, with beauty usually being the top
varies from $2,000 to $33,000), levels of The drivers of growth differ across mar- category. This “lipstick effect” has been
urbanization (ranging from 37 to 85 per kets, which can be grouped into three documented during recessions and is evident
cent), and digital penetration. An exami- archetypes. In South Korea and Taiwan across Asia. As one indicator, sunblock and
nation of these markets indicates most have (China), the average basket size (also referred hair color purchases were among the top
grown but at different rates. While Indonesia, to as spending per trip) was four to five- three fastest-growing in most markets.
In markets where eating outside of the
Malaysia, South Korea, and Taiwan (China) times larger than in other markets. These
saw slowing growth in consumer spending markets, along with Indonesia and Malaysia, home is preferred and is now returning to
on FMCG, India, the Philippines, and Viet- saw an increase in average basket size, but pre-pandemic levels, such as Malaysia,
nam are experiencing robust growth. Thai- the frequency of visits dropped considerably. South Korea, Taiwan (China), Thailand,
land experienced a decline in spending, In the Philippines and Vietnam, the fre- and urban Vietnam, consumers have
with consumers shifting to value, potentially quency of trips and basket size both reduced spending on food categories (food,
due to inflation and the increased penetration increased. By contrast, consumers in India beverages, and dairy). On the other hand,
of modern grocery. and Thailand favored more frequent visits in markets with a greater share of low-
but had declining basket size. income households - India, Indonesia, the
Inflation fuels rising consumer The traditional question of right assort- Philippines, and rural Vietnam - shoppers
spending on FMCG ment mix, format planning, and location continued to spend more on food and bev-
Total spending on FMCG increased 6.1 selection still remains relevant. For example, erages for in-home consumption.
per cent in 2023 against 2022; a faster rate in selected markets, retailers and FMCG
compared to the past two years. The bad companies could look to expand their The transition to modern brick and
news is that most of the growth was the assortment with an eye toward capturing mortar is slowing down everywhere
but Malaysia and Thailand
result of rising prices caused by inflation, more spending from fewer visits. Using
The adoption of modern grocery (includ-

34 | VIETNAM ECONOMIC TIMES | JANUARY 2024 en.vneconomy.vn