Q&A Nielsen Executive Director John Patrick Cua on The Filipino Consumers

John Patrick Cua is Executive Director of Nielsen Philippines and looks after the Consumer Packaged Goods Industry Group. He joined Nielsen in 2013 after 16 years with Procter & Gamble with 7 years based in the US and Singapore where he held regional and global roles related to Governance, Project Management and more recently leading and starting-up Business Intelligence solutions and Analytics teams. He shares his insights about the Filipino Consumers.

Q1: Research showed how Filipinos were saving money and buying fewer clothes in 2016, which seemed surprising. Why was this so? Will this continue in 2017?

A: Filipinos along with their Southeast Asian neighbors have been consistent in being avid savers. It is a positive indicator of financial health when you see consumers who are conscientiously planning their financial future. As disposable income becomes more readily available than before, consumers have the capacity to boost their savings and to invest their spare cash.

While establishing financial security takes center stage for consumers in the Philippines, consumers are spending to a degree. After saving, Filipinos plan to spend their spare cash on new gadgets, eating out and on travel. This reflects an aspirational lifestyle focused on trying new experiences. The Nielsen Consumer Confidence survey consistently shows that when Filipinos need to cut back on household expenses, they will first delay purchase of new clothes which ties into government data on household spending.

Q2: We are the world’s no. 1 consumers of brandy and gin and also no. 2 in rhum next to India. Brandy has also taken over rhum and gin in market growth rate the last few years. What could be causing this shift and preference?

A: The Philippines has a young population with a median age of 24 and comprised by more than 30% of millennials. Consumer behaviors are constantly evolving and the younger generation is looking for a brand they can call their own. Emperador Light is a good example of a demand driven innovation. Through research, they realized that younger consumers were looking for an alcoholic beverage product that would “go down more easily” and invested in refining the blend to meet this taste profile. The brand message was also about success, the aspirational lifestyle and “how everything is lighter and more fun” which matches the young, growing middle class. Brands can stay relevant by being in tune with the shifting consumer needs.

Q3: Shampoos innovated with packaging via the twin chambers sachet. This was replicated in another industry, the 3-in-1 coffee sachets. What lessons can 3-in-1 coffee learn from shampoo beyond the packaging innovation?

A: Shampoo and 3-in-1 coffee mix categories sell more sachet packs and are high household penetration categories at 99% and 97%, respectively. When the 3-in-1 coffee mix was introduced, brands grew the category by switching pure soluble coffee drinkers behind the convenience of a mix and adding new category users with “white” or “creamy” variants. As category penetration matures, brands must look for growth by increasing consumption or providing products that gives consumers the experience or option to move up, a trend which we call in Nielsen as “premiumization”. Recently, the “twin-pack” innovation was introduced which allowed brands to retain the consumer for two drinking occasions, at a discount. This is a factor behind the slower category value growth for coffee mix in 2016. Brands should look to innovate with affordable premium offering via new flavors or move consumers to the ready to drink coffee category.

Q4: Housewives seem to be trading down on diapers or going for economy rather than quality. Given the aspirations of mothers for their children, why do you think this is happening?

A: The universal insight of mothers wanting the best for their child still holds true. The diapers category challenge is that manufacturers need to recruit new moms every 3-4 years. However, in past few years, the lower priced diaper segment grew faster than the higher priced variants. It is possible that consumers already find the lower priced brands to offer acceptable quality with a narrowing perceived value gap between variants. In order to address this, brands must bring relevant innovation to the category and invest in the communication to the shopper.

Q5: Small format stores like convenience stores and neighborhood supermarts have been growing rapidly the last few years. Yet, it did not affect the growth of sari-sari stores from 660,000 stores in 2008 to close to 1.2 million in 2016. Why are both growing rapidly?

A: In the recent Nielsen Shopper Trends Study, three out of 10 Filipinos patronize a convenience store compared to less than 10%, five years ago. In 2016, more than 30,500 Filipinos share a CVS compared to South Korea with 1,643 people per CVS or Thailand which is at 5,000 people per CVS. This means that there is still room for CVS to grow in the Philippines as the middle class continue to expand and urbanization further rises. Convenience stores fulfill many other roles particularly answering time-strapped consumers’ immediate or urgent needs so they are not seen to replace the role of the sari-sari store. CVS also draw a big portion of their revenue from ready-to-eat meals.

On traditional trade, nine out of 10 Filipinos continue to patronize sari-sari stores. Developing markets like the Philippines continue see shoppers visit traditional trade 28 times a month. The sari-sari store is informal than our Southeast Asian neighbors where Filipinos can open a window, sell a few categories such as softdrinks and cigarettes and start calling themselves sari-sari stores. It is still very much a part of the Filipino community where the stores act as a pantry extension, credit or “pa-lista” is given and “tingi” sales are common, between the bigger bi-weekly supermarket shopping. Sari-sari stores also continue to thrive with the support of semi-retailers such as Puregold and other regional players that provide support in the form of credit, store delivery and special promotions.

This is an exciting time for the Philippine retail trade where brands need to re-assess their route to market and upskill their sales teams in this continuous shift to modern trade. At the same time, retailers must evolve from buying income to shopper-centric category management.


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