How inflation affects the regional and country FMCG markets

This week we continue to look at the effect of inflation on the total FMCG market – this week homing in on regional and country differences.

1. In the bigger countries in W.Europe food price inflation is usually reflected in FMCG values
   Taking the period prior to the pandemic, monthly average Food price inflation was 1.9% and FMCG value growth was 1.5% – highly correlated even over the high inflation period in 2008 although less so in the subsequent economic downturn.
2. The close correlation between inflation and FMCG value in the bigger W. Europe countries was less marked in the 2010-2013 economic downturn
   Periods of price rises lead to additional volume growth for FMCG alongside more down-trading to cheaper options. But the 2010-2013 downturn also coincided with low confidence and higher unemployment. Brand investment is so critical at these times.
3. The degree to which inflation and FMCG value match by country depends on the balance between volume growth and downtrading
   This balance varies significantly by country as these two examples show – one where volume and downtrading are balanced and another where volume has suffered but is not compensated by up-trading.