NIELSEN MARKET SNAPSHOT: NEW ZEALAND
In the face of the pandemic, New Zealand imposed one of the toughest lockdowns in March in an effort to eliminate the covid-19 virus. Kiwis felt the economic impact of these restrictions with GDP contracting by 1.6% in Q1 2020 compared to a 0.5% increase in Q4 2019. This was to be expected, with approximately 15% of New Zealand’s GDP contribution coming from the tourism and hospitality industry.
While travel restrictions, suspended operations of hospitality businesses and strict measures to contain the virus led to a significant achievement of 102 days of being covid-free until the second week of August, consumers sentiment (CCI number) dropped to 86 in Q2 2020 versus 104 in Q1 2020.
Businesses and consumers in New Zealand are adversely affected due to the domino effect in job losses and shrinkage in income, with 68% of consumers in the Q2 2020 CCI survey saying that they are intending to cut their household expenses as compared to the previous year. As consumers prefer to stay home, survey results revealed that 23% of respondents said they would allocate monthly budgets to food and beverage at home, over 2% more than last year.
During the initial stages of the virus outbreak, consumers reacted to news cycles and ventured into pantry stocking for essentials, sanitisation necessities, health and safety related products and immunity boosters. New shopping behaviour in the FMCG sector at the onset of covid-19 saw an increase in cross-shopping—37% of households shopping at more than two retailers in the week before lockdown (+9.4 pts), FMCG ecommerce penetration—an additional 64,000 households purchasing online, and visits to non-major stores along with additional shopping trips were recorded. Category resets were observed early in the first quarter this year with preferences for DIY products such as cafe substitutes, home-made beverages, home baking and grooming products.
Nielsen’s recent study - ‘Future Consequences of COVID-19’ points out that consumers are no longer indulging in a purchasing frenzy as a direct impact of increased transmission of the virus. Instead, structural changes and socio-economic factors are playing a larger role in consumers’ FMCG purchasing decisions.
In New Zealand, 41% of consumers said that their income was impacted as a result of the covid-19 pandemic, while 59% have had no impact to their income. As a result of income loss and unemployment, many consumers who are constrained to spend will continue to watch their wallets. For example, meal ingredients are driven by constrained spenders who are buying more bottled and canned sauces, soups, herbs and spices, frozen fish, cooking oils and canned fruits. Meanwhile, insulated consumers are spending more in FMCG as a result of the homebody reset, purchasing small luxuries such as wine, chilled convenience food, snack foods & confectionery, fresh meals and vegetarian foods.
Nielsen anticipates that with a prolonged timeline for recovery, consumers will reset FMCG purchasing based on ‘basket’, ‘homebody’, ‘rationale’ and ‘affordability’ resets closely linked to what, where, why and how much consumers will buy in the immediate future. ‘Basket reset’ will reflect on the choice of FMCG products given that consumers will evaluate what they buy and also they will need to account for emerging basket essentials for health and safety. ‘Homebody reset’ is expected to push consumers towards self-care habits and using online platforms or stores in close proximity to adjust their homestay routines. ‘Rational reset’ in consumer behaviour is expected to direct the erstwhile discretionary spends on travel, entertainment and luxuries towards new products and solutions that fulfil small luxuries and rewards from spare cash spending. ‘Affordability reset’ plays a role in consumers seeking value from their purchasing and goven recent lack of ‘normal’ promotional activity in FMCG, consumers are likely to switch stores for pricing benefits and trade-off on brand choices.
’Retailers and manufacturers will need to re-adjust their strategies to meet the demands from this change and also look at promotional and pricing mechanisms to appeal to value-conscious consumers.
 World Travel and Tourism Council. Global Data. Travel & Tourism GDP contribution
 CCI - Consumer Confidence Index by The Conference Board Global Consumer Confidence Survey conducted in collaboration with Nielsen
 Nielsen New Zealand Homescan & Panel Survey | T. New Zealand