The latest NIQ Retail Spend Barometer shows shoppers in the UK spent a total of £53.7bn on FMCG in the third quarter of this year – a 3.7% uplift on the same period last year and an acceleration from the 1.2% rise in Q2. The data also reveals an improving picture for the Tech & Durables (T&D) market, with the rate of decline slowing to 1.7%, down from a 2.8% fall recorded in Q3 2023.
Value growth in the FMCG sector was driven by an uptick in the personal care (+10.7%), homecare (+8.7%), fresh food (+5.8%), and snacking (+5.1%) categories. Beverages returned to growth (+2.1%), from a decline of 0.9% in Q2. Meanwhile, the biggest declines were experienced in tobacco (-7.9%) and paper products (-4.1%).
NIQ attributed the rebound largely to the sales boost from the Euros and Olympics, which took place in July and August, and slightly sunnier weather compared to last year. Despite improved consumer confidence in Q2, this stalled in Q3 as economic and financial uncertainty continued to impact consumers. However, within FMCG, lower inflation is now leading to better volume growth.
The NIQ data also reveals a narrowing gap between own-label and branded products as the growth rates indicate shoppers are now starting to treat themselves to small indulgences again. In Q1 of this year, FMCG branded unit growth was recorded at 0.7% compared to 3.1% for own-label. However, in Q3 branded unit growth sits at 1.1% versus 1.7% for own-label.
Despite another challenging year so far for the Tech & Durables market, there are signs of positivity with the slower decline in Q3, compared with an overall fall of 3.5% for the rolling year to date. This paints a less bleak picture from the 4.5% decline reported in the previous quarter. The biggest drag in the category was home appliances (-6.2%), which declined further from -6.1% in Q2.
An uptick in house sales resulted in a more stable performance for the DIY & home improvement (+1.0%) category. Technical consumer goods (-1.4%) also fared better than the last quarter (-5.2%), driven by a demand for high-end smartphones and computing (+1%), which has seen a resurgence this quarter for the first time since lockdown.
Ben Morrison, Retail Services Director UK & IRE at NIQ, said: “The first eight months of the year so far have been more optimistic compared to 2023, but shoppers remain cautious. We are seeing more considered purchasing, particularly within T&D as consumers opt to replace products when they must rather than upgrade a working one. This also plays to the desire for more sustainable living – beyond just energy efficiency – which is adding to the decision process. When it comes to upgrades, credit schemes offer immediate gratification and are used more often by those on higher incomes to enable upgrades for non-essential big-ticket items”.
Morrison concluded: “As for FMCG, retailers will be pleased to see a slight increase in the rate of growth in the sector in Q3, largely boosted by the big sporting events over the summer. With the gap closing between branded and own-label items, shoppers are open to spending on certain items. However, building financial resilience remains a challenge for consumers. According to GfK’s Consumer Confidence Barometer, a quarter of consumers reported they were ‘just managing’ at the end of Q3 and 1 in 3 said they were unlikely to be able to save in the year ahead. Shoppers, therefore, remain cautious, so as we enter the golden quarter, promotions across retailers are going to be key in persuading savvy shoppers to trade up.”
NAM Implications:
- Overall, this report appears to spell continuing caution by consumers…
- …especially as the big-picture impact of the US general election kicks in globally.
- i.e. impact of US Import tariffs of 20% on global economies.
- Meanwhile, sales of Tech & Durables pose a continuing problem for suppliers.
- Best to fall back on the basics of delivering more than it says on the tin…
- …and better than available alternatives.
