Hong Kong has been battling multiple challenges during the past few quarters due to economic instability, decline in exports, lack of much needed business investments and then the onset of the coronavirus pandemic at the beginning of 2020. The GDP of Hong Kong fell into negative territory—worst since 1974, contracting by almost 9% in the first quarter of 2020, in comparison to + 0.6% in Q1 2019. The festive season of Chinese New Year was unable to offset the market loss given the limited tourist arrivals due to COVID-19 outbreak and the lack of momentum in demand within the market.
On the FMCG front, the first quarter continued to show decline in sales by -7% in Q1 2020, compared to -8.3% in Q4 2019, whereas the last positive growth in the FMCG sales uptake was recorded in Q1 2019 at a meagre 1%. The impact of the pandemic was felt in the first quarter sales for household products and packaged products which increased by 10.9% and 8.0% respectively; while tourist-reliant categories like baby products and non-prescription medication / health products declined at -28.4% and -19.7% respectively. Consumers preferred to shop at one place such as supermarket chains which recorded higher uptake of petcare (62% in Q1 2020 Vs year ago), household products (61% in Q1 2020 Vs year ago) and frozen foods (53% in Q1 2020 Vs year ago), as consumers resorted to pantry stocking in a bid to avoid multiple store trips and thereby exposure to the virus. Online channels as well became popular for FMCG categories with +73% online value growth in Q1 2020 versus 18% in Q1 2019.
According to the Nielsen survey, which tracked consumers’ sentiment toward the coronavirus outbreak, changes in lifestyle and spends on FMCG categories, 77% of consumers from Hong Kong said they would eat at home more often than before the outbreak and nearly four-fifth (80%) of surveyed Hong Kong consumers reduced their dining-out frequency. Home cooking and eating led to a rise in sales value of categories like sauces, frozen dim sum and non instant pasta by 61%, 53% and 47% respectively in Q1 2020 vs same period last year. Also, the majority of respondents said they had reduced visiting malls (82%) and entertainment activities (82%) as well as shopping for clothes (63%) and electronics (54%).
As consumers battle the global impact of the recessionary cycle, the overall sentiments of consumers are muted due to instability and rising concerns on the economy, health and job security according to the CCI survey results for Q2 2020. In terms of monthly budget allocation, survey results indicate preference for spending on food and beverage at home, housing (rent, mortgage, utilities, etc.), savings/investments and dining out. Majority of consumers would invest spare cash directly into savings for the future.
Consumers' are concerned for their safety and the safety of their families which has triggered a series of changes in the daily habits and in turn has generated a surge in demand for categories like disinfectants, antibacterials, cleaners along with home eating essentials like packaged food. FMCG retailers have an opportunity if they can quickly adapt themselves to increase the space for the categories in high demand at the expense of other categories. Manufacturers can use this phase to re-assess their assortment and invest in the SKUs which are proven to be most incremental to the category.
 Census and Statistics Department, Hong Kong
 Nominal Value Growth
 Nielsen Homescan
 Nielsen "COVID-19 Where consumers are heading?" Study March 2020
 CCI : Consumer Confidence Index | Source: The Conference Board® Global Consumer Confidence Survey conducted in collaboration with Nielsen | A CCI index value of 100 corresponds to an average halfway between positive and negative sentiment.