Analysis

Home for the holidays: In-home consumption will drive FMCG sales this Lunar New Year

Analysis

Home for the holidays: In-home consumption will drive FMCG sales this Lunar New Year



Retailers and manufacturers can help consumers continue their beloved festive traditions—even amidst scaled-down celebrations—through impactful and attractive promotions

In many key Asian markets, the Lunar New Year is the biggest sales and promotional event for the FMCG industry, driven by higher demand for food, beverages, alcohol, personal care and household products.

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 last year, boosted by festive spending.

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 negative energy from the previous year to make way for promising new beginnings.

This year, time-tested Lunar New Year traditions and 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. Just as consumers are altering their habits, retailers and manufacturers will also need to adjust to meet these shifting demands.


Less is more: Smaller social gatherings could benefit premium brands

As families avoid crowded restaurants for the reunion dinner and subsequent gatherings, there will be a rise in in-home consumption and home-cooking occasions. Limits on crowd size will also impact the sale of party favourites such as alcoholic beverages, chocolates and biscuits. In these cases, consumers with freed up budgets will choose quality over quantity, thereby favouring premium brands. 

Spending habits will also differ between constrained consumers (consumers who have been financially impacted by the pandemic) and insulated consumers (those middle to higher income, with minimal or no employment impact as a result of COVID-19).

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. As such, this year presents a unique opportunity for manufacturers and retailers to cater to shoppers on both ends of the spectrum.


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. In Chinese Mainland, for example, promotions increase by 17% during this festive period. 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. 

Last year, measured FMCG categories in Thailand experienced promo wastage of THB 653 million as popular Lunar New Year categories such as Bird’s Nest, Fish Sauce, Facial Tissues and Confectionery were over-promoted. Similarly in Malaysia, the top 10 festive categories lost RM 17 million due to inefficient promotions. 

The truth is, not all promotions are created equal and there is no one-size-fits-all approach when it comes to promotions, as consumers respond differently to deals across different categories. In China, 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.

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

While 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. 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 is typically underpromoted in Malaysia, with less than 50% of chocolates sold on promotion during the festive season. However, chocolates are one of the most price sensitive categories during the Lunar New Year, so imagine the incremental sales that retailers and manufacturers can enjoy if chocolates are promoted optimally?  

Price cuts are not the only promotional mechanism that works. Bundle packs, volume-based promotions such as two-for-one promotions and free gifts are also popular among festive shoppers. Manufacturers and retailers can explore such promotions when it comes to 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.


Share of wallet moves online as consumers use e-commerce

Online shops have become an addition to the store repertoire as Asian shoppers turned to e-commerce when store closures in the early stages of the pandemic made online shopping the safer choice. In fact, 78% of shoppers in Asia-Pacific said they shop both online and offline since the pandemic, while only 20% said they shop exclusively in brick and mortar stores. In Asia, online basket spends are 28% higher than offline baskets.

As logistics have improved to cater to the omnichannel shopper and trust in e-commerce has improved, retailers and manufacturers should capture online festive shoppers by ensuring the availability of popular Lunar New Year categories, and offering them at attractive price points and promotions.

In the gift-giving spirit of the season, online retailers should also consider promoting gift baskets containing popular gifting items such as Bird’s Nest, Essence of Chicken, Chocolates, Abalone, Mushrooms and Liquor – providing shoppers with the convenience of door-to-door delivery.

There are many ways that FMCG manufacturers and retailers can cater to consumers and capitalize on the excitement of the Lunar New Year. Promotions can certainly boost festive sales only if executed accurately ensuring that the right products are promoted at the right prices, using the right promotional mechanics and in the right channels. Manufacturers and retailers who get these factors right this festive season will gain incremental sales, creating much needed return on investment.

Methodology:

Insights in this article are derived from:

  • Nielsen Retail Measurement Services
  • Nielsen Global Survey “The New Shopper Normal” May 2020
  • Nielsen Every Day Pricing Analytics 2020