Over the past five years, the fmcg industry has been in a period of ‘survive, revive, thrive’. We’ve navigated the disruptions of Covid lockdowns and, most recently, inflation and the pressure of price increases, which led consumers to purchase less.
As such, 2024 kicked off with renewed hope that slowing inflation might revive performance, especially as brands sought the opportunity to counter the growing popularity in private-label products and reclaim much-needed volume growth.
What unfolded, however, has been mixed. Inflation did indeed ease mid-year, yet consumers remained cautious, leaving brands with a tough challenge ahead. However, as we look to the end of the year, nominal growth in Q4 at the grocery multiples is projected to be close to 3%, with volume growth at just under 1% – much better than a year ago, when fmcg volumes were in decline.
Read more: The Big Book of Grocery: Top Products Survey 2024
It’s also been yet another year where consumer behaviour and sentiment has been unpredictable. GfK consumer confidence numbers have ranged from –13 in the summer to –21 in the latest months. Fifty per cent of consumers say they are still adversely affected by the cost of living, and budget tightening remains prominent for half of the population. However, we have seen some green shoots of revival.
By mid-year, 51% of subcategories were in unit growth compared to 33% at the end of 2023. Branded unit sales began to show signs of recovery, and since April, they have been growing faster than private label despite the retailer brands still maintaining a dominant share. The revival is evident yet remains fragile.
There has also been a reliance on promotions to drive branded sales. Whilst 25% of total volume has been consistently promoted, brands have seen up to 39% of volume sold on deal – with the peak coinciding with the Euro 2024 football tournament.
Yet again, events underscore the ongoing ‘debit-credit’ trend amongst our polarised consumers, who indulge during certain moments and tighten their budgets during others. This is highlighted in this year’s Top Products data, where sales have been driven by both indulgence and necessity. Chocolate (+£532.6m), crisps and snacks (+£247.6m), and sweet biscuits (+£238.9m) are seeing strong value sales boosted by the desire to treat oneself, but also influenced by pricing and the ability to source ingredients.
Over 70% of households cook from scratch more than three times a week, and as consumers return to shopping little and often to balance budgets, more fresh produce is going through the tills. Fresh meat (+£481.3m), fresh fruit (+£463.5m), fresh vegetables (+£374m), fresh salad (+£285.3m), and fresh poultry (+£247.6m) all feature in the top 10 fastest-growing categories.
In order to ensure this revival continues, the industry will need to stay agile. We already know there will be cost challenges on the horizon. Combined with continued consumer uncertainty, the need to differentiate and remain relevant is ever more important.
Keeping the consumer front and centre of strategy, using data-driven insight to understand what is important to them and what will drive them to choose your brand, will be the key to ensuring volumes are not only revived but thrive in 2025.
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