Jul 15, 2019

Fast growth fuels trials of new brands in the Philippines

Higher consumption and spread of mobile Internet means Filipino consumers are interacting with brand names like never before.

Fast growth fuels trials of new brands in the Philippines


The Philippines is among the fastest developing economies in Asia, growing at 6.4% in 2019 according to the World Bank. Compared to its regional peers, the Philippines is one of the few Southeast Asian countries countries expected to achieve higher GDP growth in 2019 compared to 2018. And while overall consumption declined from 5.9% in 2017 to 5.6% in 2018 due to high inflation, it is estimated to rebound to 5.9% in 2019 and 6% in 2020 due to declining inflation and the continuing labor market growth.

Election spending is also anticipated to fuel growth. Foreign worker remittances, which account for a significant proportion of GDP, are expected to remain steady as new employment opportunities for Filipinos become available in such countries like Japan and Germany. Meanwhile, the business process outsourcing (BPO) industry continues to open up and expand in various cities in the country, employing over 1.2 million young workers .

Remittances to families of overseas Filipino workers and an increase to the average income of BPO workers empower these consumers with higher spending power and spur aspirational lifestyles. Positive economic forecasts are reflected in one of the highest consumer confidence indices across the world at 133 points in Q1 2019 vs. 117 in Asia Pacific region and 106 points globally.

A recent Nielsen study found Filipino consumers believe that they are financially better off than they were five years ago and 60% of consumers say that now is a good time to buy things they want and need. Moreover, the timing for trying new brands is perceived even better than five years ago - 44% Filippino consumers agreed with that. While FMCG volume sales growth has slowed to 2.8% (vs 3.9% in 2018), an untapped opportunity lies here in understanding where consumers are ready to trade up, and their retail channel preferences.

When it comes to brand loyalty, more than half of Filipino consumers (55%) are open to trying new brands and products. While value proposition and price reduction are the top triggers for purchase, 43% of Filipino consumers are ready to buy a new product if it’s from a well-known reliable brand. Moreover, for one in two Filipino consumers, brand name plays the strongest role in purchase decisions for hair care, body care, sanitary protection, dairy, coffee and tea, and baby care categories.

With the trend toward urbanisation spreading across the country, Filipinos are more strapped for time than ever before and it is stimulating a demand for more convenient shopping. Meanwhile consumers are becoming increasingly comfortable purchasing products online and increasing internet penetration will stimulate development of e-commerce.

Along with the upsurge in spending power and on-the-go lifestyle, the Philippines shows great promise as new internet users are smartphone users who have started their digital immersion via a gadget that is literally attached to them throughout the day. In urban Philippines, around three quarters of the population (73%) are already internet users and this number is over 90% among Generation Z and millennial Fillipinos. This presents a highly engaged audience which can be tapped by manufacturers and retailers who understand behaviours, attitudes and important touch points.

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