SymphonyIRI Group FMCG Trends Report Highlights Decrease in Volume Sales as

 8 March 2012

Highest Price Increase in FMCG in Q4 2011 is Coffee

Bracknell, 8 March 2012 – The latest quarterly analysis of FMCG (Fast Moving consumer Goods) market trends across Europe by SymphonyIRI Group highlights the pressure that the increasing price of the shopping basket – reaching as high as 5.1% in the UK during October toDecember (Q4) 2011– is having on the purchasing power of shoppers, and reveals that the highest price increase occurred in ground and instant coffee.

The research report shows that during December 2011, the price of the average shopping basket increased by 4.8% compared to December 2010, with food items alone growing by 5.3% for the same period.

Although prices are increasing, shoppers are becoming both frugal and smart, resulting in less food and non-food items being purchased. The price rises caused volume decline in Q4 2011 for non-food items (-1.6%).  In 2011, volume declined continuously until the end of the year, when it would have continued to decline, if it was not for the final week of 2011 having one extra shopping day. Therefore, volume sales remained static on food items compared to last year (0.3%).

Economic pressure and an unemployment level rate up from 9.5% in January 2011 to 9.9% in December 2011 across Europe is affecting confidence levels in the UK.  This, in turn, is impacting the volume of sales in the UK, resulting in a 0.2% decrease in the second half of 2011compared to the same period the previous year. SymphonyIRI Group also expects this to be the result of a high level of price increase (up 4.0%) as well as an increase in VAT and the high level of inflation which is still above the Government’s

target.

“With prices rising faster than earnings, we are deeply into a consumer recession,” said Tim Eales, director of Strategic Insight at SymphonyIRI Group.  “Despite recent reports that the Consumer Price Index (CPI), which measures changes in price levels and inflation, went down last month, it is still proportionally high compared to previous years.  According to the Office for National Statistics (ONS), it’s at 3.6%, but the Government target is 2%, so it’s a long way off.  The truth is that we may be buying less, but the average cost of a shopping basket is still going up.”

Tim Eales continued, “People have to change how they spend and save and even those that are immune because they can afford the extra are caught up in the reaction. A new type of frugal but smart shopper has emerged. They are buying less and buying more wisely, leveraging from the multiple sources of information and multiple channels that exist - including online and mobile - to make savings and find value.”

Other key highlights from the research include:

•           Top Ten highest price increases in Q4 2011 – Ground Coffee increased by 18%, whilst instant coffee follows shortly behind at 16.3%.  Frozen chips increased by 13%; Spices by 12%; stock cubes by 11.2%; Butter and Margarine by 10.6%; Salt by 10.1%; Baby milk and drinks by 10.1%; Cooking Fat by 10% and Biscuits by 9.5%.

•           Promotional activity increases again – after a short lull in the first half of 2011, the second half of the year shows that manufacturers have returned to promotional activity in an attempt to boost flagging volume sales. The rate of promotion remains high in the UK at 55% on food items.

•           Retailer Own Label continues to gain share – own label brands continue to challenge national brands with multi-tiered premium and value offers. The sales value and volume share of own label continues to increase across Europe in all countries except France where the value of own label products sold reduced from 37% to 30.6% between 2010 and 2011. This compares to 16% value share of all products sold in FMCG in Italy, 40.7% in Spain, 37.8% in Germany and 23.1% in Greece and 49.2% in the UK.

•           The value of grocery sales increased – despite the reduction in volume sales, rising food prices is keeping the sales value of grocery sales higher than the previous year. The value increase was 4% in the last half of 2011 compared to the same period the previous year.

Tim Eales concluded, “Retailers and FMCG brands need to adapt their strategies to respond to the changing shopper principles that have been forgotten during a time of rapid expansion and waste.  They need to build strong loyalty with direct access to customers, develop promotion strategy goals and monitor success, innovate to stimulate interest and curiosity in the category and understand what erodes key brand positions.”

The full report can be downloaded from http://www.symphonyiri.eu/.