Thailand market snapshot: Mourning, urbanising, ageing

Nielsen provides insights into Thailand’s economic outlook and retail backdrop.

Thailand’s GDP grew 3.2 percent overall in 2016, with Q4 being the slowest quarter of the year at 3 percent. Government investment continued to support growth despite slowing in Q3 and longer term plans such as the Eastern economic corridor plan (EEC) displays a willingness to attract foreign investment and a roadmap for development. Thailand’s economy is forecast to grow to 4 percent in 2017 due to expected improvements in exports and the price of key commodities as well as acceleration of public investments in infrastructure.  While tourism continues to be one of the key drivers of economic growth, government crackdowns on illegal inbound tourists, mainly from China, has slowed overall visitors towards the end of the year.

Consumer confidence recovered during the last two quarters following a new draft constitution being approved by a public referendum and the rebounding price of key commodities such as rubber, oil and gas, and various agricultural products.  Consumers have confidence in job prospects and personal finances in the coming 12 months and whilst lower than the same time last year, almost one in two consumers believe it is a good time to buy the things they want and need.

Thailand is expected to have the third largest aged population in the region in 2025.  The population aged 65 years and over will increase by 50 percent in the next 10 years to account for 15 percent of the population.  According to the National Statistics office of Thailand, nearly 90 percent of elders who aged between 60 and79 years are self-sufficient and two thirds of older consumers claim to be the main grocery shopper for their own households. This opens a door of opportunity for manufacturers and retailers to ensure their service and product offering is tailored to this growing demographic.

In Q4 2016, FMCG recorded -1 percent growth, its weakest quarter of the year, with annual growth down to 2.2 percent. This result was largely due to the mourning mood of the nation following the death of King Bhumibol in October 2016. The Beverage and Cigarette categories were particularly hard hit as many end-of-year festivals and events were postponed or cancelled.

Modern trade enjoyed high growth as convenience stores continued to expand. In contrast, traditional trade struggled during the year due to a reduced spend from low and middle income consumers and a growing preference for convenience stores. Convenience stores are likely to continue to take a greater market share as concept stores expand into a variety of new geographic locations. The adaptability of the convenience store channel is shifting and evolving traditional grocery boundaries as more Thai consumers urbanize and adopt lifestyles where convenience is increasingly valued. This consumer need is expected to accelerate as the proportion of urban population moves from 50 percent in 2015 to 60 percent in 2025.

While the mourning period of the King’s death is expected to last until Q3 2017, it is likely that younger consumers will recover faster than older generations. This offers opportunities for companies that can resume marketing campaigns and product launches that focus on this segment of the population.

Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.