What factors will shape the Polish FMCG market in 2023?
Retailers and suppliers have to work on the price of the product. There will be fewer promotions, but work on the assortment and optimization of the offer will be important.
As in 2022, Polish retail market will be dealing with a decrease in volume, but the value of sales due to the increase in prices will increase.
According to GfK Polonia data on household spending last year (adjusted for the influence of the Ukrainian population on the Polish market), Poles spent 11.4% more than a year earlier, but bought 2.4% less products.
Polarization among consumers
Households with the lowest income - up to PLN 5,500 net - have double-digit decreases in the size of the basket, around 12-13%. The volume of purchases decreased, because clients tried to keep expenses at the previous level, i.e. a fixed budget was maintained and fewer products were purchased with these funds. This group is responsible for half of purchases in Poland.
Groups of households with an income of PLN 7,500 and above could afford to increase consumption. They make up the other half of the market.
So far, Polish consumers have consumed their savings to maintain their standard of living. They will have less money in the coming months, so the expectation is that the market will weaken even more.
Pizza effect
In Poland, all possible costs are rising (from food to rent and transport), and according to the Polish Central Statistical Office, 26% of Poles' expenses are food and drinks. Therefore, in the first place, Poles will save on eating out, then clothes, and gifts and seasonal products. Likewise, travel will be eliminated from expenses.
The drop in demand led to a contraction of the catering market in Poland by 7%. On the other hand,
some food categories are growing and among them there are those that are a kind of substitute for going to a restaurant: chilled and frozen dishes.
For example, frozen pizza producers do not complain about demand. Instead of paying PLN 20-40 for a pizza in a restaurant, consumers can buy four pieces of pizza for PLN 12 in a well-known retail chain.
Situation of sustainable and eco products
Price has again become the most important purchasing criterion in Poland. In second place are health issues. So, are there product categories resistant to change?
This trend is partly supported by the popularity of plant-based milk substitutes, sales are still growing in double digits, but not at the same pace as 2-3 years ago. However, it cannot be forgotten that the offer on the market has become richer. At the same time, the increase in sales of plant-based meat substitutes almost stopped in terms of value. This may be related to a certain barrier: those who were supposed to try these products have already done so, and there are no new people interested. Additionally, these products are not the cheapest.
The situation of ecological products, produced in a sustainable way, with respect for the natural environment and fair trade, is interesting. Since last year, consumers in Poland want to buy only such products, but they do not want to pay a premium price for them, because they cannot afford it. This is a big challenge for producers, because they can no longer turn back from this path. Pro-ecological activities or supporting local communities have already become too important for consumers - 42% declare that these issues are important to them when making shopping choices. If customers have a choice of two products at a similar price and with similar value in use, then the processor that will be closer to the idea of sustainable development will win.
Downsizing
Some stigmatize producers for reducing the amount of product in the package. However, it may be a reasonable approach. The manufacturer has a choice - either to increase the price or to reduce the size of the package, without significantly increasing the price. This is a healthy solution, provided that the manufacturer ensures that consumers are properly informed about it.
Changes are also expected at the retail and production level. In terms of rationalization of the assortment, we may be dealing with the convergence of expectations of retailers and manufacturers. The retailer wants to ensure sales efficiency, so it will remove the poorly selling assortment. Previously, manufacturers pushed to expand their own range, but now manufacturers will want to limit their offer to the best-selling products. Therefore, a reduction in the breadth of the assortment and a reduction in the number of brands on store shelves can be expected. Therefore, this is not the best time to introduce product innovations to the market.
Innovations are welcome
All changes and innovations will be implemented not at the product level, but in the area related to reducing packaging, logistics and transport costs. Changes invisible to the consumer, but very important from the point of view of savings and increasing efficiency in the entire supply chain. These changes should not have a negative impact on the price list of products or services available to the consumer.
Omnibus
The promotion market will be greatly affected by the Omnibus Directive, which has been in force since the beginning of 2023. The directive is currently being implemented by retailers, but several retailers have already been fined for the way they communicated prices, and the regulator found it inappropriate.
For this reason, there will be a temporary but significant reduction in promotions in some networks. Retailers will have to calculate the risk that may result from a store error when changing labels when a store manages several thousand promotional products. Employees are not able to manually handle such a number of changes. Only automation will bring the situation back to operational order.
Source: Wiadomości handlowe 1/2023