A new study by Kantar Worldpanel has found that grocery consumption is forecast to drop by 1.2% in Argentina this year, as salary declines hit home with consumers.
According to the FMCG projection model, developed by Kantar alongside Ecolatina, the performance of the market in the first and second quarters of the year indicate that consumption is likely to decline overall in 2018.
Salary Decline
“The year’s forecast has been affected mostly by decreases in the actual salary, which has increased below inflation, and the strong impact that brings to the base of the pyramid,” said Federico Filipponi of Kantar Worldpanel.
“Over the past five years in Argentina, whenever the salary has lost purchasing power, mass consumption has been immediately affected,” added Filipponi.
As Filipponi noted, in a lower-tier household, some 57% of income goes towards FMCG purchases.
“If their income increases below inflation, the only alternative is to consume fewer essential products,” he said.
Purchasing Power
Recent hikes in foreign-exchange and interest rates have led to a deterioration in the macroeconomic landscape, with a recession that is likely to run until next year now under way.
“In terms of purchasing power, the reopening of salary negotiations prevents a setting of strong decline in the actual salaries for private-sector employees, but not in the national public sector,” said Lorenzo Sigaut Gravina of Ecolatina.
“Lastly, the job creation perspectives are slim, and have worsened, and there is risk of losses, although limited, of job posts in some activities,” Sigaut Gravina added.
Kantar Worldpanel noted that it expects the FMCG sector to return to positive indicators in the second half of 2019, however, this will depend on two factors: ‘that the economy resumes its growth – in the first instance driven by the countryside, if crops are good – and that the inflation subsides and allows for some recovery in actual salaries.’
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
