The FMCG sector in Egypt has been through numerous fluctuations ever since the Egyptian pound’s floatation in 2016. The impact of which affected the vast majority of household items, leading to a decline in sales.
The market witnessed in 2017 an inflation rate of 35% – 40%, and some categories even reached more than 50%, leading to a noticeable shift in consumer behaviour, who started seeking valuable offers through the growing discount outlets. As the Egyptian consumer began to adapt to the new reality, the pandemic outbreak disrupted the whole scene once again.
So what happened?
Emerging New Trends
Consumers suffered from a significant rise in prices since 2016, across all sectors like consumer goods, utilities, education, etc. This situation has led to the emergence of new trends such as Semi-wholesalers selling their goods at wholesale prices, while Wholesalers themselves started selling directly to consumers.
With the COVID-19, a new layer of challenges were added to the consumer’s daily lives. Although Q1 of 2020 witnessed growth in consumption, it was driven by non-food items for the first time in a long period. Consumer habits changed; food categories declined, while health and hygiene products, in addition to medicine, continued to rise in consumption and price, driven by fear of the pandemic, or ‘panic-buying,’ that usually drives the growth of these products.
Nevertheless, a surge in modern trade; supermarket and hypermarket activity, took place as opposed to traditional trade. Though chances of physical contact is higher in modern trade, it seemed to come out as the preferred outlet, while online grocery shopping demonstrated a spike in performance.
Similarly, the digital transformation has presented itself as a key preference for the post COVID era. Digital now is not only for shopping, it is work and education and our expectations for the local market is that this form of retail will continue to evolve in Egypt, despite the fact that the market relies more on home deliveries through phones.
But as the situation continues to evolve, and as restrictions are gradually lifted, with dormant fears of a second wave during winter, Manufacturers and Retailers will have to fathom the new consumer reality to innovate products and offers that fulfill the needs of a unique lifestyle where us and COVID-19 co-exist.
How to Win?
Manufacturers and retailers will have to be very swift, agile, and focused with product offerings. A lot of people are still impacted by unemployment or disruption to their regular income, which entails that the market dynamics are not going to be back to what we are expecting soon enough.
The most recent Nielsen Intelligence study predicts consumer behaviors in the upcoming period, identifying four global patterns that we believe can help us forecast how consumers are going to shop.
According to the study, the market is likely to experience: a basket reset (consumers will try to keep a large stock of essentials), a homebody reset (more consumers will want to do their own self-care or cook for themselves), a rationale reset (those consumers who will seek luxury through FMCG to substitute lack of travel or expanded outdoor entertainment), and an affordability reset (consumers will be very selective allowing prices to drive their purchase decisions).
Effective promotions and product innovation can accommodate consumers with lesser wallet flexibility. Companies will need to review consumers’ perceptions regularly to ensure they stay on track with their strategies. By understanding how we arrived at the current landscape, and applying research and data to empower the process of decision making, there is a path forward. Brands who ignore the current situation as temporary, and fail to adapt to the new wallets and concerns around pricing are likely to become at risk in the long term.