THE fast-moving consumer goods (FMCG) industry is expected to keep growing as the population of the world increases. As long as there are more consumers, there will be greater need for consumer-packaged goods.
As Malaysia’s FMCG industry continues to grow, we seek to answer the question of where consumers’ preferences of FMCG brands are gravitating towards. This Malaysia Day, we are looking into the question of “Is Malaysia heading towards a globalised or localised branded FMCG?”
In this study, the manufacturer’s origin is defined by the manufacturer’s headquarters location and therefore includes its right to manufacture and distribute multinational brands locally.
The Consumer Landscape of Malaysia
According to Nielsen Consumer Loyalty Survey, 2019., Malaysians often express their love towards local production with 60% claiming that local ingredients/manufacturing/staff influence them to try a new product. Sixteen per cent of Malaysians also claimed that they only purchase products which were produced locally and 53% mainly purchase local products but are open to products from other countries as well.
The FMCG Landscape of Malaysia
Local brands currently occupy at least 30% of the FMCG landscape with 51% being global brands and 19% being regional brands. To put it into perspective, 1% is roughly equivalent to RM260 million. As the years go by, local brands are slowly growing and increasing their market share and competing with global and regional brands.
In the past one year, total FMCG is decreasing by -3.4% across Peninsular Malaysia with global and regional brands falling at -4.0% and -4.8% respectively. While local brands are declining as well, they are not declining as fast, with -1.6%.
Comparing January-July 2020 (YTD) with January-July 2019 (YTD), however, total FMCG is decreasing by -4.4% at a much higher rate due to the country’s Covid situation. Global and regional brands are declining at -4.6% and -7.6% respectively and local brands at -2.0%.
Which channels do we observe local brands increasing?
With the MCO & RMCO in 2020, traditional stores declined at a rate of -15.8% in YTD ending July’20. Modern trade stores instead recorded a growth of 4.1% (mainly contributed by local snacks & confectionery at 10.4% and personal care at 6.8%) while global and regional recorded a growth of 1.0% and 0.5% respectively.
The reasons for the local brand growth we see:
1. Value for Money
We Malaysians are price-sensitive creatures. Forty-nine per cent of Malaysians claim that better value for money always influences them to try a new product while 47% will switch because of price reductions or promotions.
Local manufacturers can be more empowered with being more flexible and having a lesser hierarchy of decision-making processes which more than often lead them to be able to provide products that are in the ‘value for money’ price range. Coupled with their lower overhead cost and their specific targeting of many of the bottom-middle income groups.
2. Government and people’s support for home-grown brands
Besides our love for a great discount for an already value-for-money product, we as Malaysians are patriotic consumers. The government has long been supporting and encouraging consumers to buy local brands and this taps into the patriotism of local consumers.
3. Seizing on emerging trends of local consumers
Local manufacturers tend to be able to better seize local trends and respond to them faster with product innovation since they are based locally and have a better gauge of the local consumers’ preferences.
Over the years, we have seen innovations such as curry and sweet potato flavoured chips, durian ice-cream, cendol ice-cream, nasi lemak burger/pizza and even recently nasi lemak ice-cream that testifies to Malaysians’ ever innovating self to local consumers’ tastes.
4. Consumers’ increased desire to support local brands
With the MCO and RMCO as well, there is an increased desire to support local brands across Malaysia.
Hashtags like KitaJagaKita KitaSapotKita and even KitaMestiMenang have brought Malaysians together to go through and overcome this tough time for everyone with the Covid-19 situation.
This article was contributed by Nielsen Malaysia.