Shoppers in the UK spent a total of £51.4bn on FMCG in the second quarter of 2024, an uplift of just 1.3% compared with the same period last year.
The data from the latest NIQ Retail Spend Barometer also shows that the Tech & Durables (T&D) market continued to struggle, with an overall decline of 4.5%.
Value growth for the FMCG sector dropped from 6.1% in Q1 to 1.3% in Q2, despite a boost in consumer confidence and falling inflation. NIQ attributed the slowdown in growth largely to the timing of events such as Easter, the weather and promotional activity, which had a bigger impact on sales in the short term. This is reflected in the decline of certain categories, such as beverages, which dropped from a 5.4% uplift in Q1 to a 1.5% decline in Q2. The same can be said for snacking, which dropped from a 13.2% growth in Q1 to just a 1.2% growth in Q2.
However, the fall in inflation is expected to gradually boost consumer spending as available disposable income slowly improves for many households. According to recent NIQ Homescan data, although sales for own-label items remain slightly ahead of branded items, the gap in growth levels is starting to narrow as brands use promotions more to drive volume recovery.
Meanwhile, NIQ noted that there are some areas of optimism in the T&D market, but not enough to counteract the overall decline. The plummet in the DIY & Home Improvement sector – which fell from -0.2% in Q1 to -4.1% in Q2 2024 – was largely attributed to the poor weather during Spring and early Summer. In particular, gardening suffered as consumers weren’t inspired to buy outdoor furniture, gardening tools and equipment and outdoor items. Decorating also struggled after a period of growth, with areas such as paint declining despite a positive Q1.
However, within DIY & Home Improvement, there were pockets of growth. Sales for items such as bedding, storage and cushions performed well in the last three months, suggesting consumers invested in lower-priced items rather than spending on big ticket products.
Meanwhile, there were signs of growth for traditional tech categories, with the 2024 Euro football tournament helping to boost sales of TVs in May, especially those with larger screen sizes.
Ben Morrison, Retail Services Director UK & IRE at NIQ, commented: “While growth in FMCG was flat in Q2, there are positive signs for the quarters ahead with inflation figures starting to fall. Retailers are now under pressure to compete for shopper spend and we’re already seeing levels of promotion being maintained at 25% of sales compared to 22% for Q2 last year.
“Moving into Q3, we do expect to see growth levels improve with FMCG value growths in the range of +2% to +3%, helped by warmer weather. In addition, the uplift from Euro 2024 and potentially the Paris Olympics should help to provide the feel-good factor missing in Q2 and give a boost to industry sales.
Morrison continued: “In terms of Tech & Durables, it remains a challenging market. Gone are the days of longer-term, more considered purchases. Consumers today are choosing to make purchases based on what they need in the moment – such as new luggage for holidays or new TVs for the Euro 2024 matches.
“Moreover, they are buying less but buying better. This is not just in terms of more premium products for those that can afford it, but investing in products where benefits meet needs, and consumers perceive the value is justified. An example of this is that the demand continues to rise for products such as Full Auto Coffee Machines, indicating consumers are still prepared to pay a premium for the right experience.”
NAM Implications:
- With some slight exceptions in anticipated categories…
- …it will take a significant improvement in economic conditions to convince uncertain consumers that is safe/ok to spend a little more on essentials…
- …and eventually on discretionary items.
- Until then, suppliers need to become accustomed to optimising flat demand…
- …with any real growth coming at the expense of rivals.
