Vicky Santos, Managing Director, Nielsen Philippines
After a year of solid economic growth, Filipino consumers entered 2011 on a high note: GDP in 2010 grew at the fastest rate in 34 years, unemployment declined and inflation rates were under control. But that optimism was dampened by higher prices for fuel and food during the first quarter of the year. While consumer sentiment has started looking up again, consumers in the country are likely to take a closer look at how they spend their money.
With 85 percent of the Philippines’ households falling into the lower income bracket, rising costs for life’s basic necessities have hit hard. Meanwhile, external shocks such as the natural disasters in Japan also dented consumer confidence at the beginning of the year. Despite these concerns, Filipino consumers continued to spend, with sales of fast-moving consumer goods (FMCGs) posting a nine percent increase during the first two months of 2011 compared to the same period last year. While this growth is tempered compared to 2010, these figures are good news for the country as private consumption accounts for 70-80 percent of GDP.
Three Trends Driving Purchasing Behavior
Three emerging trends are playing a role in driving category growth:
With consumers increasingly focused on value, some FMCG makers have taken to packaging their products in low unit packs and sachets that require a lower cash outlay. The success of powdered beverages and fabric conditioners packaged in such sizes are testament to the popularity of products in sachet-sizes. Innovations in sachets such as multi-chamber sachets and upsized versions are likely to continue to drive the market as these enable cash-strapped consumers to continue enjoying their favorite brands at lower price points. Manufacturers should take caution, though, as offering sachets and low unit packs may result in a “downsize” in the value of the transactions. Manufacturers must also remember that consumers still expect the product to deliver on its brand promise, even at lower price points.
The Philippines continues to be a solid market for growth, although the path to success in 2011 may be slightly rockier as consumers take a closer look at where and how they spend their Pesos. Increasingly, marketers with a keen pulse on the evolving needs and innovations that deliver relevant benefits will increase their chances of success.