Understanding trends in FMCG consumption – and where they’re likely to lead in the future – can often be enhanced by combining data from more than one measure. Integrating two insights from Worldpanel’s latest Latin America Consumer Insights report provides us with a multi-dimensional view of performance in a region that is significantly impacted by socioeconomic issues.
First, we take a look at food – the most essential sector for all Latam households, representing more than 30% of their total expenditure. Inflation always has more of an impact on essential categories than on others, and price rises are heavily impacting shoppers’ baskets at a global and regional level. These increases are affecting how, what and where consumers buy.
Analyzing food consumption by socio-economic level (SEL) gives an added dimension into the current dynamics of the market, and how it is likely to evolve as we move through 2022.
The way the lower classes shop is key to growth in Latam, as they represent the largest group of households, and contribute the most to value growth – with 27% of the share of spend in the third quarter of 2021. Shoppers in lower SELs have also been hit harder and earlier by price rises, while a drop in income, alongside higher unemployment, have also made things more difficult in the last 12 months. Opportunities to streamline expenditure on food are limited for everyone, but particularly lower-class consumers.
Across all SELs in the Latam region, food makes up the largest slice of households’ baskets and budgets, especially in the lower classes. Unsurprisingly, as inflation started to bite, spend on food grew more than in any other FMCG sectors, but this trend can be seen to a lesser extent in the lower SEL.
Consumers in the highest SEL raised their spending by 28% in the third quarter of 2021 compared with the previous year, indicating that they were buying the same items and simply absorbing the extra cost. Lower income consumers, on the other hand, could not stretch their budget so far, and spent only 17% more. Inflation during that period was at 19%, suggesting that these shoppers were tightening their belts in anticipation of harder times ahead.
This can be clearly seen in the relationship between shopping frequency and volume purchased per trip. Higher classes increased their basket size on average 11.6%, without decreasing the number of trips. At the other end of the scale, lower classes increased their basket size by 7.4%, while also reducing frequency by 2.1%.
Thus far, shoppers in Latam have more or less sustained their typical food baskets – but economic pressures are already leading to changes in consumption. It may take longer for a deflation in FMCG value to reach the food basket, but it will, and the trend can already be seen in Argentina and Colombia.
Within this context, manufacturers and brands in Latin America should consider adapting their product portfolios in order to improve affordability, and discourage downtrading.
Watch this video to explore these trends in more detail. Our local Latam team can guide you through the new and challenging reality, helping you to understand future consumption and find opportunities to grow. Get in touch.