MALAYSIA: NIELSEN MARKET SNAPSHOT
Southeast Asia's third-largest economy, Malaysia, is expected to sustain its growth momentum, expanding from 4.3% to 4.8% in 2019 amidst rising economic challenges and regional trade tensions. The Malaysian government is focusing on keeping a check on inflation, reallocating funds and diverting investments in favour of pushing consumption within the economy by keeping the purchasing power in the hands of consumers.
Meanwhile, consumer confidence remains quite high at 110 points in Q2 2019, marking the sixth consecutive quarter of consumer optimism after 17 quarters of continuous pessimism since Q4 2013. The confidence index hit an all-time high in Q3 2018 following a historic general election that saw a new party form the government for the first time since the country’s independence in 1957. Since then, confidence levels have tapered as consumers get used to a new normal under the current administration.
Whereas Malaysians are generally positive about their personal finances and job prospects, and 59% feel that they are better off financially compared to five years ago, consumers remain very cautious about spending and conservative in their purchasing habits, remaining loyal to their favorite brand.
In light of the new sugar tax, one in two Malaysian consumers plan to reduce their consumption of soda drinks
Close to half (47%) sometimes try a new product, spurred by better value for money or promo in-store and food market, especially fresh, have better chances — for almost a third of consumers, brand is not important in the meat, fish, fruit and vegetables categories and consumers are ready to look for less pricey options. Similar to the non-food market, less brand loyal categories are staples like rice, flour and pasta — for 15% of consumers these brands are not important.
Still, the FMCG market had a healthy 4.9% volume growth, largely driven by dry groceries and beverages. How the newly-introduced Sugar Tax will affect the industry remains to be seen. Despite the drive to be healthier, carbonated beverages are the most-consumed type of beverage in Malaysia, accounting for 21% of the beverage market. Recent studies show that the majority of consumers intend to change their purchase behaviour in light of the new sugar tax and one in two Malaysian consumers plan to reduce their consumption of soda drinks. In order to prevent a decline in their overall sales, manufacturers should focus their marketing efforts on low-sugar variants, so that consumers’ mindset and preferences shift towards them and even healthier beverage options like bottled water.
The retail landscape in Malaysia is evolving rapidly as well, both online and offline. The need for convenience has driven growth in smaller formats – provision shops, convenience and personal care stores – all enjoying double digit growth. Consumers are giving their preference to convenience lead shopping, making frequent trips for top-ups and easy-to-grab food options, instead of flocking distances to hypermarkets and supermarkets, causing some shrinking in FMCG growth in large format retail stores.
While rapid urbanization, the rise in connectivity and consumers’ increasing demand for convenience gives all the advantage to e-commerce development, Malaysians are already beating the path to the e-commerce boom and are accustomed to online payments when it comes to their regular expenses, like phone and internet bills (53%), utility bills (47%), car loan installments (38%) and rent (37% ). However, for their everyday expenses there is still room for growth — 93% prefer paying cash for dining out, 90% for groceries, 89% for public transport, 81% for petrol and for taxis.
But a true opportunity for the e-commerce industry lies in the young generation, not only Baby Boomers and Millennials, but Generation Z, who are now between 18-24 and make up 26% of Malaysia's population. This consumer segment has its own unique characteristics that set them apart from other consumers.
An increasing number of 18-24 year olds have turned to online shopping in recent years (up 9% between 2016 and 2018). The majority of the information they get is from the social networks and they are highly price conscious when it comes to online shopping, with many reporting to compare prices in stores and also comparing shipping fees. This is a generation that has a distinct ability to process and cut through large amounts of information, and seamlessly navigate between the online and offline worlds. The need to understand the changing behaviour among all consumers is vital for brands looking to succeed in such a complex and promising market.