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7 Forces Driving the Future of Ireland’s FMCG and Retail Market
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7 Forces Driving the Future of Ireland’s FMCG and Retail Market

Nicole Farren

This will be a year unlike any other. 2020 will kick off a decade that will witness evolutionary changes in tech-powered consumer engagement, increased wealth fragmentation, leaps in retail personalisation and remarkable shifts in innovation strategies—all to accommodate a new age of conscious, connected and unconventional consumption.

This is the backdrop that’s making way for seven forces that will shape the future of Ireland’s fast-moving consumer goods (FMCG) market.

THE GLOBAL ROLL OUT OF 5G

With 5G, the internet of things will finally become a mainstream reality, giving consumers access to more data directly at their fingertips with virtually no response delay. Ireland saw the launch of 5G platforms last year to key urban cities, and we expect market and consumer adoption to drive developments that enhance consumer experiences.

The global rollout of 5G will present challenges and opportunities for retailers and manufacturers. Our data shows that 37% of Irish consumers are open to using augmented reality or virtual reality for product engagement in the future, and this will undoubtedly change the way consumers assess and interact with brands and products. The rollout of 5G also brings high speed connectivity, but not for all. It will take years—possibly even a decade—before everyone has access to 5G and adopts it. That will mean that different consumer groups will have different levels of connectivity (3G, 4G and 5G). This is something that brands and retailers will have to account for and address.

EUROPE’S GROWING INCOME DIVIDE

Wealth fragmentation across Europe is growing, and Ireland is not immune. Our data shows that 44% of Irish people feel better off about their finances than they did five years ago, while 32% feel they are about the same, and 24% feel they are worse off than they were. Thirty-six percent of Irish shoppers claim that they are spending more on groceries than they did five years ago, while 27% claim they are spending less. These sentiments run parallel to the growing consumer need for tiered options within the FMCG space. And this growing wealth fragmentation will drive both the premium and value ends of the FMCG market.

E-COMMERCE WILL BRING A SECOND WIND FOR PRIVATE LABEL

As the e-commerce landscape matures in Europe, we foresee private-label gaining a second wind of growth. In Ireland, private-label accounts for a 43% share of household products, a 54% share of frozen food and a 49% share of pet care products.

While over one-third of Irish shoppers claim to be buying more private-label products than they did last year, and over half of Irish shoppers believe that private label is just as good as branded products, store brands only achieved 1% growth in 2019.

Gleaning insights from the  U.S. market, online retailers are starting to prioritise their own labels over branded items. In fact, Nielsen e-commerce data for the year ended Jan. 31, 2019, powered by Rakuten Intelligence, shows that dollar share of U.S. CPG e-commerce sales doubled for private labels over the prior two years. And although overall private-label sales remain under-developed compared with brick-and-mortar penetration in the U.S., private labels account for 18% of baby care products and 13% of grocery items within the U.S.

CONSUMERS WILL SHIFT FROM PASSIVE CONSUMPTION TO INTERACTIVE PARTICIPATION

The next decade of consumption in Europe will be increasingly focused on socially responsible activity and purchases, where consumers’ desires for social and environmental change will turn to action. In fact, 64% of Irish consumers say they are willing to change their consumption habits to support sustainability, and more than one-third of Irish shoppers say they would switch brands and try new products that come from brands that they perceive as being socially responsible.

HEALTH AND WELLNESS WILL BE A STRONG SOURCE OF GROWTH

According to the Ireland Central Statistics Office, 16.3% of the Irish population will be aged 65 or over by 2025, and health and wellness sales will soar as consumers focus on issues like weight and air pollution. They will also grow increasingly sensitive to processed products and more savvy about ingredients. Over the next decade, Irish consumers will demand “better for you” products, pushing companies to innovate in fresh, new ways by tapping into new ingredients and new sources of wellness. We’re already seeing this, as consumers in Ireland increased their spend last year by €3.5 million on speciality drinks, while volume sales of traditional milk category products declined by 0.5%. Additionally, the volume sales of other health and functional drinks increased by 11% in 2019.

CONSUMERS WILL EXPECT PERSONALIZED RETAIL EXPERIENCES

Personalisation will continue to be one of the most important drivers in retail through this decade. Brands and retailers on the leading edge will get it right by delivering better and more relevant offers, in the right channel at the appropriate moment. This is only possible with a complete understanding of their individual consumer needs, with a deep understanding of the total market and complete shopper performance. In order to do this, companies will need to continue to invest in analytics and artificial intelligence tools to unlock new ways to reach and stimulate shopper purchases, to grow profitability, and to increase their customer loyalty so they can better serve the rapidly changing tastes and needs.

TIME WILL BE THE NEW CURRENCY OF CHOICE

Increasingly frictionless commerce in both a click and brick world will change the game for retail. From pop-up shops without cashiers to automated warehouses in urban centers, the overall consumer experience will be fused with smarter, intuitive technology. Consumers will seamlessly discover, assess, shop, pay and fulfill. Speed and convenience will drive behaviour, as 29% of Irish shoppers claim that “anything that saves me time is worth paying extra for”—and every millisecond reduced is a battle won. Understanding these big megatrends that will impact your future growth in the coming decade is imperative to your ability to win in this competitive FMCG market.

Methodology

The insights in this article were derived from the following sources:

  • Nielsen Shopper Trends Report 2019
  • Ireland Central Statistics Office
  • Nielsen Total Scantrack + Discounters MAT
  • Nielsen e-commerce data, powered by Rakuten Intelligence