FMCG brands looking to premiumise dealt blow as prices fall to 5-year low
In what will come as a blow to FMCG manufacturers looking to maintain and increase price levels in line with more premium positioning , price inflation for everyday items across Europe has hit its lowest level since 2010 after falling for the fifth quarter in a row.
Although European sales of FMCG goods rose by 3.1% year-on-year in the fourth quarter of 2014, there was just a 1.6% rise in prices paid, according to the latest figures from Nielsen.
The last time prices rose less than 1.6% year-on-year was Q4 2010 (1.5%).
“Aggregate European retail growth is being held back by the region’s big five countries, which are not performing particularly well,” explained Jean-Jacques Vandenheede, Nielsen’s European director of retail insights.
Over recent years FMCG giants such as Unilever, Reckitt Benckiser and Procter & Gamble have made no secret of their intention to try and maintain price levels and margins as well as protect the brand equity under threat from constant discounting but Vandenheede believes European consumers are still not willing to up their spend.
“People aren’t yet willing or able to spend more on FMCG items. What’s more, there’s no pattern of countries or categories doing well or badly – inconsistency across Europe seems to be the rule.”
In Q4, Turkey continued to experience, by far, the highest nominal year-on-year sales growth (+18.6%) among the 21 European countries measured, while Greece (-5.2%) had the largest decline in nominal growth.
Of the big five western European markets, Germany (+1.3%) had the highest nominal growth, while here in the UK it fell by -0.3%. In the fourth quarter, each of the big four UK supermarkets invested hundreds of millions of pounds to lower prices in a bid to win customers back from Aldi and Lidl.
“The final quarter of 2014 wasn’t too bad for retailers, and historically low prices mean there should be some light at the end of the tunnel for Q1 sales volumes, at least,” added Vandenheede.
“But it’s too early to talk about any recovery. France and Germany are the engine of European growth and their performance, together with that of the UK, will determine whether we’ll see any sort of decent growth across Europe.”
