Despite global economic uncertainty and slowing GDP growth, annual packaged grocery sales in Asia Pacific increased 13 percent in the past year while volume sales increased by six percent, according to a report released today by Nielsen, a leading global provider of information and insights into what consumers watch and buy.
Nielsen’s annual Retail and Shopper Trends Report, which identifies key trends and market shifts in the grocery sector in Asia Pacific, reveals that grocery prices remain a pain point for consumers across Asia Pacific, ranking in their top five concerns. In response to rising grocery prices, many consumers are adopting a cautious approach to spending, which has led to smaller but more frequent trips to the grocery store.
“Although Asia Pacific economies have been relatively insulated from the wider global economic situation, shoppers across the region are looking to economize in order to reduce their grocery bill,” observes Peter Gale, Nielsen’s Managing Director of Retailer Services in the APMEA Region and Greater China. “In developed countries, this is primarily evidenced through heavier reliance on promotional offers, while in developing nations shoppers are focusing on buying only essential items.”
Shoppers continue to steadily shift their grocery shopping to modern trade channels (up approximately 1% per annum for the past decade), as they embrace the wider range, better shopping environment and lower prices. Modern trade store numbers increased by 11 percent in the past year to over 270,000, with investment in new modern trade stores strongest in Vietnam, the Philippines and Thailand. Convenience store numbers also experienced strong growth in the past year, up 10,000 to over 81,000, with fastest expansion in convenience stores seen in South Korea. Consequently, the convenience channel saw the fastest growth of any store format in the region, up 15 percent. (See Chart 1).
“Growth of convenience and smaller store formats has shown no signs of slowing down and looks set to continue in the year ahead,” notes Gale. “The frequent interaction these chains have with their regular shoppers provides substantial opportunities to introduce new services which help to make shoppers’ lives even more convenient.”
The Nielsen report found that private label brands remain relatively undeveloped in Asia and contribute less than eight percent of sales in modern trade outlets. Growth of private label brands was highest in Taiwan, Korea and Indonesia with sales increasing by over 20 percent (see Chart 2).
“Sales of private label products are beginning to gain traction in basic grocery categories such as paper products, plastic wraps, water and staples like rice and cooking products where low price is more important to shoppers,” states Gale. “Private label growth in Asia is hindered by low levels of consumer trust in categories where there is strong brand loyalty, and retailers need to invest in improving product quality and packaging, as well as marketing.”
Despite strong growth in internet penetration and usage across Asia Pacific, online sales of grocery products continues to lag behind other categories and less than 10 percent of urban shoppers in most Asian markets (with the exception of South Korea) visit grocery retailers’ websites regularly (see Chart 3).Of those who do visit grocery websites, online purchasing is low, with obtaining information, viewing promotional leaflets and checking store locations being the primary motivators for visiting grocery websites.
“Markets where online retailing has gained traction, such as South Korea, provide valuable insight into the likely direction other Asia Pacific nations will take in the coming years as retailers invest in online infrastructure and develop models for profitable delivery of products,” observes Gale. “Retailers’ online presence will become increasingly important as a means of driving product sales as well as engaging and communicating with shoppers.”