NDC Dairy: Food for Life Conference - Clarion Hotel, Dublin - 23 June 2009
The Irish Market for Milk & Dairy Products in 2009
Alan Purcell, Head of Marketing, Nielsen Ireland
Whilst vast sums have been wiped off the value of Irish people’s assets, in a global context, we are still wealthy, however, unhappy with our lot. This contrasts sharply with India where the country remains relatively poor in comparison, however, happy fuelled by the many job prospects created due to outsourcing. Norway enjoy the best of both worlds due to their vast quantities of natural resources they remain both wealthy and happy.
Recession has lead to declines in FMCG globally; however, the rate of decline for Ireland is the steepest in Europe.
Whilst spending power continues to shrink, it is quite clear that the Irish consumer is justifiably concerned about the future. One of the reactions coming out of this is dramatic changes with Grocery shopping habits. Shopping around for value is now the norm with 55% of consumers doing their shopping in four different Supermarket chains.
72% of shoppers have indicated that they have switched to cheaper grocery products.
The addition of Hard Discounters to many shoppers’ portfolio has fuelled this to such an extent that they now account for nearly 7% of all Grocery sales and are growing much faster than the rest of the trade. Their share varies between 16% in areas like Frozen foods to 5% in Alcohol sales, the lack of major brands preventing addition growth here.
Cross border shopping for some has also become the norm. Shoppers continue to travel in big numbers to avail of deals on Alcohol, Baby care and Pet food. Overall sales in NI were 16% up vs. last year, well ahead of the flagging market in the Republic of Ireland.
This in turn has lead to strong action from the Republic of Ireland based retailers. Tesco continues to roll out its ‘change for good’ program. As well has offering lower prices to the consumer, they have been the catalyst for many changes within the trade as local distributors are now cut out of the equation.
Dunnes Stores have launched its war on prices across all its Island of Ireland, with the rest also under pressure to keep up.
As part of this Private Label has now grown to represent 18.7% of all grocery purchases reaching 37% for fixed weight cheese. 2/3s of Irish consumers have purchased Private Label dairy products with over half claiming that they would do so again. 58% stating that the quality is just as good as branded.
Ireland is also now in the top 10 most promotionally sensitive countries fuelled by the consumer’s thirst for deals. The dairy industry is less affected on average with only 27% of consumers swayed by their planned purchase due to a promotion which is low in comparison to Household products where it is 40%.
Within Dairy, Milk remains ahead in value however volumes remain stagnant. The biggest trends are the decline in premium dairy products like sliced cheese, cheese snacks and yogurt/ yogurt drinks. The latter struggling with poor sales in both the convenience and multiple trades. Space on shelf continues to get squeezed here.
Irish consumers continue to claim strong support for Irish made products, which for the time being is being backed up by actual purchases. The pressure will continue in this area part fuelled by Tesco’s new strategy.
Kids are also affected in all of this, as well as disposable income being reduced in the form of pocket money, parents are moving away from products aimed solely at children.
There is a “rainbow”. Consumers have cut back on all aspects of their spending, but the big savings are on big ticket items – like cars or holidays. The Food sector is not recession proof, but is more recession resistant than other sectors.
Producers should resist the temptation to cut prices or product quality.
Recession is a time to build competitive advantage with innovation and with selective, conservative and strong allocation of marketing spend. Brands with strong equity, will survive and will thrive on the other side.