Out of the fires and into the pandemic: Australia's tumultuous year

NIELSEN MARKET SNAPSHOT: AUSTRALIA

The year 2020 began with Australia continuing to face the heavy toll of bushfires which devastated many regions in the final quarter of 2019. This coupled with the ongoing drought and then the turmoil related to COVID-19 has pushed the economy to shrink into negative territory with a GDP decline of 0.3%[1] in Q1 2020, from 0.5% growth in the previous quarter. As the Australian Government spending grows in response to supporting communities affected by bushfires and income losses due to covid-19 pandemic - there is marked lift in gross disposable income with a rise in household savings by 5.5%

Specific to COVID-19, the Australian Government announced restrictions towards the end of March 2020. Consumers responded by stocking their pantry by making trips to local stores and across multiple retailers to get their desired essential items. In the month of March, Nielsen Homescan research revealed that all of this cross-shopping activity resulted in an increase in 30 million shopping trips. This equates to the average Australian household buying a week’s worth of additional groceries.

As a result, the FMCG market in Australia grew by 14.2% in Q1 2020 (versus 5.6% in Q4 2019). Aside from regular staples such as long-life meals, bread mix, rice, flour and pasta, consumer demand increased for health and hygiene related products, much like in other markets across the globe. Top three fastest growing food categories were canned fruit (up 101% Vs. year ago), dried fruit (up 96% Vs. YA) and wet soup (up 53% Vs. YA). Whereas, in the non-food category significant rise in sales of immune sport vitamins (up 59% Vs. year ago), disinfectants (up 44% Vs. year ago) and cold and cough treatments (up 38% Vs. year ago)[2].

Further, as consumers are working from home and restaurants shut to avoid crowding, at-home food consumption has led the grocery market in Australia to record double digit growth from pre-covid levels of 5% value growth during the week ending 22 February, 2020 to nearly 15% value growth for 4 week period ending 13 June. Consumers are purchasing from local stores for convenience and proximity for their grocery needs and also exploring online options. The COVID-19 pandemic has been a strong catalyst for online which now represents 8% of total grocery sales in Australia for the 4 week period ending 13 June, up from 5% this time a year ago.

Initially online grocery sales surged causing pressure for online networks to service deliveries. While at the same time, brands faced the challenge to meet the surge in demand. Australian online grocery sales increased significantly by nearly +70% during the week ending 13 June 2020 (compared to annual online growth of +34% during Q4 2019) as many consumers continue to limit their exposure to large crowds in-store[3].

The media consumption habits of Australians displayed interesting trends on consumers’ online viewing behaviour, given the closure of clubs, pubs, restaurants and cafes and recommending families to stay at home. According to data from Nielsen Media, in the last weekend of March, Australians spent 71% more time[4] consuming food and cooking content online when compared to the last weekend of February 4. Australians aged 13-24 increased their time spent online with food and cooking content by 144%[5].

Amid the pandemic and the recessionary sentiments playing across consumers’ mind across the globe, the consumer confidence level in Australia has dropped by 10 points in Q2 2020, CCI[6] at 83 (versus 93 in Q4 2019), in the backdrop of CCI index for Asia-Pacific at 101 in Q2 2020 (vs 116 in Q4 2019). Consumers’ are increasingly concerned about the economy, job security, health and rising utility bills as efforts are being made to steadfast the economic engine into a new normal. Survey findings reveal that most of the budget allocation for Australian consumers in the second quarter of 2020 continue to remain on food and beverages at home, housing expenses and savings or investments.  

With a significant proportion of consumers (44%) being constrained to spend due to decline in income levels caused by the pandemic economic crisis, they will be actively looking for value from private labels or promotions while purchasing FMCG essentials. Retailers and manufacturers need to identify the categories wherein promotions will play a significant role in consumer uptake of products, given the new constrained shopper budget.