Philippines: Consumer spending to boost mass market retailers

Strong consumer spending will benefit the mass grocery retail market but value-added services such as online shopping are not expected to gain much ground given logistics and infrastructure hurdles, a research firm said.

“Growing consumer spending on food and non-alcoholic drinks, an urbanizing population and the majority of households falling in the low-income bracket will benefit the development of the formal mass grocery retail (MGR) market … notably price-competitive hypermarkets and supermarkets,” Fitch-owned BMI Research said.

By 2021, food and non-alcoholic drinks are expected to account for 37 percent of household spending, followed by housing necessities and utilities.

Food and non-alcoholic consumption is not only the largest household spending segment, “but is also the segment offering the strongest growth at 8.8 percent annually between 2017 to 2021 with a forecast worth at P6.2 trillion in 2021, up from P4.4 trillion in 2017,” it said.

“The growing spending on food and non-alcoholic drinks provides greatest opportunities in MGR,” BMI added, noting that overall low household income levels mean that Filipino consumers will continue to use most of their incomes on essential spending.

Growing urbanization will increase the number of consumers for formal grocery outlets, it said, but majority of the population is expected to remain within the low-income bracket.

“As the majority of households have not entered the middle-income bracket yet, growth opportunities for higher quality or premium food are limited, with consumers shopping instead at discount-orientated formats such as hypermarkets and supermarkets.”

“[W]hile online grocery services will emerge in the medium term (2017-2021), we believe it will be restricted to Metro Manila and wealthy urban neighborhoods due to the lack of e-commerce penetration and poor logistics network nationally,” it added.

Source: http://www.manilatimes.net/consumer-spending-boost-mass-market-retailers/359970/