Aug 10, 2020

Tourism-dependant Thailand turns to local needs

ASIA'S TOP 1000 BRANDS: As Thailand's travel and hospitality industry is rocked by COVID-19, the economy and FMCG industry is realigning to focus on home, health and safety.

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Thailand is one of the leading tourism markets in Southeast Asia with nearly 15% of its GDP coming from the tourism industry. The onset of the global COVID-19 pandemic forced closure of borders and curfews in Thailand, leading to economic challenges for the country. In the first quarter of 20’20, Thailand’s GDP growth took a negative turn with a decline of -1.8% as opposed to the expansion of +2.4% in 2019.[1]

The tourism industry took a big hit as the number of tourists plummeted by -76% in March 2020, partially driving down sectors like Recreation & Culture (-3.7%), Hotel & Restaurant (-22.6%), and Transport (-10.9%). On the other hand, the FMCG market in value terms at +1.8%, largely driven by panic buying in March 2020 as consumers began to fear a total lockdown due to the COVID-19 pandemic. Consumers spent 4% more per trip at supermarkets in the first quarter of 2020[2].

According to Nielsen survey[3], Thai consumers said they would be altering their food habits as compared to pre-covid times, with heightened preference for food delivery (42%) and nearly 40% of consumers opting for takeaway food as opposed to dining out. Given this backdrop at home consumption of categories such as dry foods, cooking ingredients, and cleaning products increased. Whereas, in terms of information and updates about covid-19, the majority of consumers (86%) reply on social media and news on TV (79%). Social distancing behavior has accelerated the migration to online as consumers opted for online shopping and online food delivery as part of the lifestyle shift caused by COVID-19.

The FMCG retail landscape in Thailand recorded store expansion across all physical store formats (except personal care), with supermarkets growing by 12% versus a year ago and convenience stores (CVS) at 5.6%[4] in May 2020, despite different stages of COVID-19 situation and protocols on limited store operating hours. Further, the shift to premium categories such as household cleaners is driving growth in FMCG with 37% value contribution in week 20 April (up 11 points versus last year).[5]

Nielsen Media in Thailand reports, the top five industries with a positive shift in January-April advertising spending this year are Education (+75%), Building Material & Machinery (+35%), Electrical Products (+17%), Pharmaceuticals (+13%) and Household Products (+9%). Among the industries that gain a positive shift, Pharmaceuticals and Household Products are the biggest sectors by spending size.[6]

Thailand’s CCI[7] for Q2 2020 is at 92 as compared to 94 in Q4 2019, as the majority of consumers (62%) expressed concerns over the impact of COVID-19 on the economy and job security (32%) and 60% of consumers said that they would be putting spare cash into savings after monthly expenditures on food and beverages at home, communication services like mobile phone, landline, Internet, cable TV, etc. and further allocating monies on monthly investments.

In recent times, Thailand has been able to report 40 days straight without any COVID-19 positive cases which is a remarkable feat for the country. However as the country begins to open tourism and borders for economic revival and reboot the economy into the new reality, FMCG players need to ensure that the product portfolio strategy aligns with consumers’ need for safety/hygiene. COVID-19 has fast-forwarded consumer adoption of digital and online shopping, proximity shopping and homebody behaviors in Thailand, which is why online-to-offline integration in terms of communication, offering, and supply chain along with hygienic and social distancing friendly innovations as part of the strategy is crucial to winning in the new reality.

[1] Bank of Thailand

[2] Nielsen Thailand Consumer Panel Services Data

[3] Nielsen Thailand COVID-19 Report | Nielsen "COVID-19 Where consumers are heading?" Study March 2020

[4] Nielsen Census for May 2020

[5] Nielsen ScanTrack MT (Modern Trade) Weekly

[6] Nielsen Media Thailand | Nielsen Advertising Information Service

[7] 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.

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