Five reasons FMCG businesses should be investing in Asia
Asia remains a major growth opportunity for FMCG businesses, particularly in the short term, consultancy IGD concludes in a new report.
IGD have recently published a new report looking at the growth prospects for major grocery markets across Asia over the next two years.
Asia remains a major growth opportunity for FMCG businesses, particularly in the short term, writes Nick Miles, Head of Insight - Asia Pacific, in IGD, a consultancy specialized in the groceries and FMCG.
Asian markets are expected to recovery rapidly post-pandemic
Most Asian grocery markets experienced accelerated growth during 2020 as consumer spending on food shifted from out-of-home to at-home channels.
Despite this, the volatility in sales across Asia have not been as strong as in other regions, albeit the impact has varied significantly by market. As we have seen across Europe, North America and Australasia, some markets have seen large spikes in sales (e.g., Singapore), while others have recovered rapidly (e.g., China), and some have even seen sales heavily impacted (e.g., Thailand). The general lack of volatility means that our model suggests that we expect many grocery markets to have a more stable recovery out of the pandemic and return to growth rapidly.
Asia will be the second fastest growing region globally between 2020-22
Regionally we expect growth to remain strong over the coming years. We expect Asia’s regional grocery market to grow at 5,5% a year from 2020 to 2022.
Although this will be at a subdued level to that previously expected pre-pandemic, Asia will see the second fastest growth (after Africa) of any region globally over the next two years. However, do remember that each market will recover at its own pace, Nick Miles stress.
Asia is already the world’s largest region for grocery sales
By 2022, Asia will account for over 37% of the world’s grocery sales. This is almost the same as North America and Europe combined.
With 56% of the world’s population in Asia, as affluence levels increase, the region will increasingly assert more control over the global grocery market in the coming decades. Successfully tapping into Asia's growing middle class and the latest trends provides some exciting long term growth prospects for both retailers and brands.
Asia will account for over half of additional global grocery sales between 2020-22
In the short term, Asia will contribute more additional sales to the global grocery market than all other regions combined.
The region will account for 58% of all additional grocery sales generated between 2020 and 2022. In contrast to other regions, Asia also provides businesses with real growth opportunities (as opposed to growth simply driven by inflation). Although inflation will still account for almost 50% of growth in Asia, this is far lower than comparable levels seen across other regions, with population and spend growth remaining far stronger in Asia. In basic terms, this means Asia will drive significantly more volume growth than any other region.
It is not all about China and India
China and India do dominate the landscape, with 63% of all grocery sales in Asia generated by these two markets by 2022. They will also account for 70% of total regional growth over the next two years.
On paper a no brainer, but trading in both these markets can be a daunting prospect given their scale, the need to understand cultural variations, shopper preferences and navigating legislation, not to mention how to service huge traditional trade sectors and distribute products. Across the region, although they might not have the huge scale of China and India, other markets provide some highly attractive growth prospects, with Pakistan, Bangladesh, Vietnam, and the Philippines all expected to see some of the fastest growth between 2020-22.