Interview: Jonathan C Ng
How can fast-moving consumer goods (FMCG) companies align their products to match the changing nature of the Philippine market?
JONATHAN C NG: Although the local FMCG market has been predominantly sachet-based due to low purchasing power and the consequent price sensitivity of the average Filipino consumer, there is also an emerging middle-income sector that is shifting the attention of the industry towards mass premiumisation trends. The accelerating growth of the middle-income market is generating new opportunities for FMCG players to craft their product portfolio to take advantage of the growing consumer confidence and demand for higher-value offerings. Small sachet products continue to be the biggest sellers, but slowly we are witnessing higher-value products – whether in size or in pricing – come into the market. This trend has shifted the presentation of many products from traditional smaller packs to larger sizes or bulk sale.
Are Filipino consumers adopting global trends promoting nutrition and health consciousness?
NG: With regard to health and wellness, increased access to information driven by internet usage, coupled with a larger share of millennials in the overall market, has led to higher visibility of healthy products. However, higher awareness and information on the benefits of healthy offerings have not changed consumer patterns significantly in the Philippines, with the majority of consumers still opting for conventional products. Many players continue to introduce and push for low-calorie or low-sugar products; however, the expected take-up of the market has not yet materialised. Additionally, ingredient substitution can compromise the taste and size of products, both of which can have a direct impact on the product’s attractiveness or the consumer’s perception of the product. If one removes sugar for instance, it generates a direct impact on a product’s taste.
How do distribution models for modern retail differ from those of sari sari stores?
NG: In the provincial market, a big source of strength for FMCG players has been the ability to effectively cater to the general trade or sari sari stores. Despite these stores’ dominance in rural areas, modern trade, whether supermarkets or convenience stores, has steadily been growing in size and reach and have begun to increase in competitiveness and take away sales volume from sari sari stores. The expansion of modern trade opens up greater availability to consumers and new channels for FMCG players. This is especially true for those who have found it expensive or difficult to cater to the general trade segment and now have opportunities to tap into a segment other than the traditional Metro Manila market. Given the growing consumer preference for malls, this trend is projected to rise.
To reach out to the general trade market, investments must be made in the distribution structure by establishing relationships with large key accounts and partnering with distributors to penetrate provincial areas. For example, we engage with distributors that cover different territories across the country by providing them support, assets and guidance. However, their sales performance is driven by their entrepreneurial spirit and knowledge of their respective areas.
In what ways are FMCG companies seeking to diversify their product offerings?
NG: Two factors are driving the diversification of FMCG players’ product portfolios. One is generated by influences from abroad, much of it driven by overseas Filipino workers’ exposure to products outside the Philippines, which has created demand for new and more sophisticated flavours. The other is that some players have found opportunities in popularising regional Philippine tastes or traditional ingredients as flavours for snack foods. To ensure success, an FMCG player must cater to the whole spectrum.