A year of inflation

Private labels and discounters profit.

While commodity prices and shipping costs are stabilizing, food inflation continues to rise and real wages have been plunging, leading to social unrest. Global growth prospects are stunted, and recession risks remain. Chief economists expect stagflation, especially in Europe.

At the same time, global FMCG value grew as much in the past three years as it did in the previous eight. All regions saw further acceleration of growth in 2022, except for Asia, where food inflation levels are lower than 8%.

Source: Omnichannel report. Worldpanel Division, Kantar, Numerator & CPS GfK (50 markets for 2019 to 2022, 47 markets for 2018, 34 markets 2012 to 2017)

For shoppers, it has been a back and forth, from hoarding and premiumization during COVID-19, to downtrading and downsizing as a response to the ‘panic phase’ of the exponential rise in living costs.

Permacrisis propels global FMCG industry growth

Past three years as much as the previous eight years

Unprecedented in the past ten years, discount is now the fastest growing channel. Shoppers are buying more categories at discounters than before, and they are buying more private labels. But if we take a closer look, we can see that 54% of the private label (PL) value share growth is due to a higher-than-average price increase. Private label prices, especially at discounters, are rising faster than brands – with many price distances closing in. Yet, shoppers do absolutes rather than relatives.

If we would correct for the impact of spending, focusing on the number of trips, we still see discounters growing in relevance with 6% more trips than the year before. The fastest growing channel remains e-commerce. This channel has just not captured the value increase to the same extent as discount.

Also, inflation and private label growth do not necessarily relate as trading down is by no means a calculated choice. Looking beyond the much higher absolutes, one can see those volumes, for the first time, have dropped below 2019 levels, signaling that shoppers are taking rather drastic measures, especially in countries like Germany, the Netherlands and Spain. But again – volume losses show no straightforward relation to the level of price change in a category, as shoppers do not react in a linear way.