Thailand market snapshot: slowing GDP but strong FMCG growth

NIELSEN MARKET SNAPSHOT

Thailand is one of the world’s newly industrialised economies with over two thirds of the GDP supported by exports. However, the economic momentum that picked up after 2015 has slowed down considerably. 

The second largest economy in Southeast Asia, Thailand's GDP was at 2.8% p.a. in the first quarter of 2019, as compared to 5% p.a. in Q1 2018. Inflation was subdued at 0.7% in Q1 2019, keeping consumption levels at par. However, the sharp appreciation in the local currency is positively impacting Thailand’s tourism industry, which is a significant contributor to the economy.

Thai consumers remain optimistic, with 60% feeling positive about their financial situation in the next twelve months and the overall consumer confidence level recorded at 105 in the second quarter of 2019. Despite the positive sentiment, the top three concerns for consumers remain the same: the economy, political stability and job security.

After covering essential living expenses, 62% of Thai consumers prefer to put their spare cash into savings, followed by 41% who prefer to spend on holidays and 27% of consumers who channel it into investments and mutual funds. The top three items to which consumers allocate their monthly budgets are food and beverages at home (17%), communication services such as mobile phones and the internet (10%) and savings (10%).   

According to data from EIU, Thailand is shifting towards an ageing population, with a 40% share of the total population expected to be over the age of 50 by 2025. Presently, the population over 50 almost constitutes 35% of the total population (69.2 million people in 2018). To maintain spending by this ageing segment of the population and by consumers in lower income brackets, especially those residing in up-country or rural areas, a welfare scheme—‘Thongfah (Blue Flag) Pracharat’—has been launched by the government. This has boosted FMCG sales in up-country areas, led by purchases made through pre-loaded welfare cards distributed to consumers registered under the scheme.

Thailand’s FMCG industry has recorded 5.1% nominal growth in Q1 2019 as compared to 3.7% growth levels in the previous quarter. Convenience stores have been growing at steadfast 6.8% growth levels in the first quarter of 2019 and are becoming increasingly popular amongst young and elderly consumers. Thailand convenience stores commanded a 55.6% share of trade in 2018 (up 7.4% since 2017). Over a quarter of Thai consumers (29%) are saying they visit a convenience store between two to three times a week. Notably, nearly one third (29.9%) of Thailand’s FMCG sales are considered premium and are growing at the expense of mainstream and value offerings. In particular, it is the higher price bands within the premium segment that are driving the expansion.

When it comes to FMCG categories, the 'impulse' category, which constitutes 9% of the total share of FMCG, has recorded the highest growth at 5.3% in Q1 2019. Also, there is a significant growth in categories such as 'household care' (up 4.2% to make up a 6% share of FMCG), 'personal care' (up 3.8% to make up a 14% share of FMCG) and beverages (up 3.1% to make up a 25.8% share of FMCG) far outstripping the average 2.5% FMCG growth seen in the first quarter of 2019.

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