NielsenIQ: In-Home Consumption Will Drive FMCG Sales This Lunar New Year

In many key Asian markets, the Lunar New Year is the biggest festive event for the FMCG industry by sales value, driven by higher demand for food, beverages, alcohol, personal care and household products. Boosted by festive spending, markets such as Chinese Mainland (up 33%), Hong Kong (up 27%), Malaysia (up 32%) and Vietnam (up 15%) all experienced double-digit sales value growth in previous years.

This year, Lunar New Year celebrations will continue to bring families and friends together, but in smaller groups, given the challenges of COVID-19 such as social distancing measures, restricted commercial operations and border closures.

According to Didem Sekerel Erdogan, Senior Vice President, Intelligent Analytics, Asia Pacific and Eastern Europe, Middle East and Africa (APAC & EEMEA), NielsenIQ, despite toned-down celebrations, the Lunar New Year will still boost FMCG sales, and manufacturers and retailers have a unique opportunity to help consumers continue their beloved festive traditions during the pandemic by anticipating and adapting to changing consumer needs.

Traditionally, the Lunar New Year is a time when family and friends gather over food and drinks to usher in the new year. In the lead up to the festival, households and businesses invest a lot of time and effort into cleaning their spaces as they remove the negative energy from the previous year to make way for promising new beginnings.

“We believe that these time-tested Lunar New Year traditions will continue during the pandemic, but they will take different forms and be smaller in scale. We expect a rise in home-cooking, for example, as families avoid crowded restaurants for the reunion dinner. Smaller-sized social gatherings may also impact the sale of alcoholic beverages – with consumers choosing quality over quantity, thereby favouring premium brands,” she explained.

She added that spending habits will differ between constrained consumers (consumers who have been financially impacted by the pandemic) and insulated consumers (those who have been shielded from financial impact).

“Constrained consumers will gravitate towards economic pack sizes, attractive promotions and deals, while insulated consumers may choose to indulge even more in anticipation of a more positive Year of the Ox, thus seeking more premium items. This presents a unique opportunity for manufacturers and retailers to cater to shoppers on both ends of the spectrum,” she said.

Impact on FMCG sales will depend on scale of pandemic-related restrictions

The impact of COVID-19 on Lunar New Year FMCG sales will differ from one market to another, based on the level of restrictions in each market and the impact of the pandemic on the economy and jobs. In markets like Chinese Mainland, save for a few smaller outbreaks, the pandemic is under control with very few restrictions in place, the FMCG industry looks set to enjoy greater festive sales compared to last year.

Conversely, in markets that are experiencing third or fourth waves of the pandemic such as Malaysia, celebrations will be more muted due to government restrictions to curb further spread of the virus.

Capturing consumers’ share of wallet through impactful promotions

Retailers and manufacturers invest heavily on promotions and price reductions during banner festive events such as Lunar New Year. These promotions, which are among the most effective ways to drive sales, can sometimes result in “promotional wastage” – where brands lose money because of ineffective promotions.

According to Sekerel Erdogan, not all promotions are created equal. “There is no one-size-fits-all approach when it comes to promotions, as consumers respond differently to deals across different categories. In Chinese Mainland, for example, personal care categories such as facial cleansers and toothpaste see more sales uplift when they’re promoted in a bundle pack; the same isn’t true for crispy snacks, which tend to do better when sold at a discount.^[1]“

Therefore, in order to capitalise on festive sales, brands and retailers must rethink their promotional strategies and ensure they are promoting the right products using the right mechanics and at the right price to better meet the needs of Lunar New Year shoppers.

Typically deal-seeking consumers may be ready to splurge this Lunar New Year

Though a portion of consumers may be shopping on constrained budgets due to the economic impact of the pandemic, insulated consumers will be taking the opportunity to treat themselves during the festive season by splurging on premium products.

“Some indulgent categories such as beer and chocolates are highly promotion sensitive, presenting an opportunity for manufacturers and retailers to capture incremental sales during the festive period,” says Sekerel Erdogan. “In Malaysia, for example,  beer and shandy are among the categories that see an uplift in sales when promoted during Lunar New Year. Chocolate brands should also benefit from price promotions. However, our data shows that the chocolate category in Malaysia is typically underpromoted during the festive season, and is therefore not experiencing the sales boost that it would if promoted optimally.^[2]“

In addition, manufacturers and retailers should also offer special promotions on premium gifting categories such as abalone, chicken essence, birds nest and liquor as insulated spenders may have additional budgets to spend due to scaled down parties, open houses and celebrations.

China: E-Commerce and Home Delivery To Support In-Home Festivities

Lunar New Year is the biggest festive event for China’s FMCG industry, both in terms of sales as well as promotion investment. During this period, FMCG sales value is typically 33% higher than during non-festive periods, while promotions increase by 17%^[3].

Sales growth is driven by food categories such as chocolates and biscuits, which are popular for gifting, as well as salty snacks which are served at gatherings and open houses. We expect festive FMCG sales in China to rebound, following the dip seen last year given that the height of the pandemic occurred during the 2020 Lunar New Year celebrations.

“We expect that consumers will spend more time at home this Chinese New Year, and we anticipate a surge in home cooking, home food delivery as well as e-commerce. Retailers and manufacturers should therefore cater to consumers who want to have fun at home by offering value-for-money promotions through bundles or gift packs,” says Eva Liu, Senior Director, Big Data, China, NielsenIQ.

Hong Kong: In-home consumption and cooking to drive sale of consumables, but fewer tourists may impact overall FMCG growth

Hong Kong’s FMCG market sees its highest sales peak during the Lunar New Year period. In years past, Nielsen data shows that FMCG sales increased by up to 27% compared to non-festive periods^[4]. In the weeks leading up to the festival, there is typically a rise in sales of household cleaning products, food categories, hair colourants and sharing/gifting confectionery.

In previous years, FMCG sales during this time was also boosted by visitors from Chinese mainland and other parts of Asia. This year, however, due to the mandatory quarantine period for visitors, FMCG sales will likely be impacted and will be largely driven by local consumption.

“Although there has been no need for a city-wide lockdown in Hong Kong because of COVID-19, consumers still practice caution when it comes to gatherings. In addition, physical distancing measures are also in place at restaurants and other public places. As such, we anticipate that Lunar New Year celebrations this year will centre around the home, with an increase in in-home consumption and home-cooking occasions,” says Andrea Borelli, Commercial Leader Retail Intelligence, Hong Kong and Macau, NielsenIQ.

“As such, retailers and manufacturers should realign their sales planning for the Lunar New Year festive season and beyond by adapting to consumer behaviour in the new normal, focusing their sales strategies on local consumables by specific store clusters, and ensuring that popular ingredients, food items and beverages are optimally promoted during this period in order to capture shoppers’ share of wallet.”

Malaysia: Health-protective, personal care and household categories should thrive as country sees spike in daily cases; sale of gifting categories may move online

Chinese New Year is the biggest festive event by sales value in Malaysia, as pantry stocking  begins up to two months before the celebration in anticipation of spring cleaning, family visits and open houses. Over the past three years, Nielsen data shows an average 32.2% increase in sales value during the festive period, compared to non festive seasons.^[5]

Sales growth during this time is driven by beer (up 28%), soft drinks (up 18%) and asian drinks (up 18%)^[6], items that are served widely during family gatherings and open houses. Other popular categories include personal care items such as personal wash and moisturizer, as well as confectionery such as chocolates and biscuits.

This year, however, gatherings are expected to be smaller in size due to inter-state and inter-district travel restrictions and limits on in-home gatherings. Consumer priorities have also changed, and we expect certain budgets to be relocated to health-protective categories such as hand sanitizers. 

“While we anticipate that categories such as beer, chocolates and biscuits may not experience the uplift seen in previous Lunar New Year periods, household cleaning products, hand sanitizer and personal care items should continue to perform well as people are extra cautious on health and cleanliness right now,” says Luca De Nard, Managing Director, Intelligent Analytics, South East Asia, NielsenIQ.

He added that the sale of gifting categories such as abalone, mushroom, birds nest, chicken essence and liquor will likely move online, and therefore manufacturers and retailers should ensure that they have the right online promotional strategies to capture Malaysia’s rising online shoppers.

Singapore: Cautious shoppers seek to stretch their dollar this Lunar New Year

Lunar New Year is one of the biggest festive periods in Singapore thanks to its majority ethnic Chinese population. During this festive period, FMCG is boosted by a surge in sales of canned abalone (+1927%), chocolate (92.5%), beer & lager (+31.5%) and ready-to-drink beverages (+14.9%)^[7].

Due to Government restrictions on the number of visitors per household and on group sizes during the upcoming holiday, celebrations this year are expected to be smaller in size. Therefore, FMCG purchases would be driven by those that offer better value and support of variety packs. With around 50-60% of SKUs contributing to less than 2% of the category sales^[8] from Chocolates, Biscuits, Cheese, Beverages and Beer – retailers and manufacturers should  choose the best SKU combinations that will get them a higher share of the consumer wallet.

Singaporeans are also watching their wallets this Lunar New Year, as more than 40% of consumers have been financially impacted by the pandemic^[9]. Even prior to the pandemic, consumers would switch to brands that provide better value (40%) and deals (32%)^[10], and we expect the value-for-money behavior of Singaporeans to be more deeply entrenched particularly among constrained spenders.

Still, retailers and manufacturers should reassess their promotion strategies to understand the right promo mechanics to drive incremental sales. For example, the chocolate category drives significant promotion efficiency during Chinese New Year, however other heavily-promoted categories such as Coffee, Health Supplements and Laundry Detergent are less efficient despite being heavily promoted^[11].

“Even amid the challenges of the COVID-19 pandemic, there are many ways that FMCG manufacturers and retailers can cater to consumers and capitalize on the excitement of the Lunar New Year. It is important for industry players to go to the right stores with the right portfolio and adapt their promotion strategies to cater to consumers in the new normal and drive incremental growth. It would be a shame for manufacturers and retailers to miss out on incremental sales during the biggest festive shopping event of the year due to inefficient promotions,” says Luca De Nard, Managing Director, Intelligent Analytics, South East Asia, NielsenIQ. 

Thailand: Government actions could support FMCG sales this Lunar New Year

In Thailand, the impact of the Lunar New Year on FMCG sales varies by region, with growth driven by regions with large ethnic Chinese populations such as Bangkok, Hatyai and Phuket. Retailers and manufacturers take the opportunity to launch specialised campaigns to promote festive products such as preserved vegetables, boiled poultry, red envelopes, tangerines and prayer candles.

Sales growth during this festive period has been steadily increasing, with 6% year-on-year growth in 2019, and 13% year-on-year growth in 2020^[12]. Growth is driven by food & beverage categories such as birds nest, spirits, whiskey, seasoned seaweed and chicken essence, as well as household products such as paper wipes.

“We expect the effects of the COVID-19 pandemic on the economy and jobs to impact FMCG sales compared to last year,” says Chinta Srichintangul, Executive Director, Retail Intelligence, Thailand, NielsenIQ. “However, the Thai government has proactively enacted measures to spur consumption and travel during this festive season. For example, the government has declared the Lunar New Year this year a new official public holiday for the first time, as well as introduced a “Cost of Living Subsidy” for financially disadvantaged Thai citizens.”

To meet the needs of constrained consumers (58% of Thai consumers)^[13], retailers and manufacturers should proactively offer appealing promotions that provide value for money. Thai consumers generally favour promotions that include price discounts or volume-based promotions (such as Buy 2 Get 1 Free).

Chinta says that before retailers and manufacturers implement promotions, they should first ensure that they are promoting the right categories in the right way in order to avoid wastage.

“Last year, popular Lunar New Year categories such as Bird’s Nest, Fish Sauce, Facial Tissue and confectionery were over-promoted and resulted in wastage of THB 653 million^[14]. In the current economic climate, FMCG companies cannot afford to implement ineffective promotions at the expense of profitability. Proper analysis and planning is crucial in order to create win-win promotions that meet the needs of consumers, while driving incremental sales for brands and retailers.”

Vietnam: Pandemic’s impact on jobs mean consumers seek value for money

In Vietnam, Lunar New Year is known as the Tet Festival and is the biggest festive event in Vietnam. It is the time of year when migrant workers return to their home towns to spend time with family and friends. It is a banner event in Vietnam’s FMCG calendar, as FMCG sales are 12%-15% higher than non-festive periods and close to 20% of total FMCG sales occur during the Tet period^[15].

There are currently no COVID-19 restrictions in place, as Vietnam has managed to successfully manage the pandemic. However, given that the country’s economy is dependent on exports and tourism, the adverse impact on these key sectors have resulted in job losses and a rise in constrained consumers in the country.

“Even though there are no restrictions in place, we believe that the pandemic’s impact on employment will lead to consumers optimising spends and looking for better bargains,” says Richard Thomas, Director, Intelligent Analytics, Vietnam, NielsenIQ. “A study we did in Vietnam showed that the most sought-after promotions are free gifts and direct discounts, therefore retailers and manufacturers should keep this in mind when planning their promotional strategies.”