David Mackinson, Research Manager, Euromonitor, Latin America
One of the most immediate effects of the pandemic was the collapse of purchases that are associated with status, such as restaurants, tourism, or apparel. These have been replaced by goods and services related to living conditions inside one’s home. This includes everything from cooking appliances to home office to cleaning supplies. I would also highlight the ability of households to adapt to a sharp drop in purchasing power. Latin Americans have been forced to reconsider their primary needs and overall priorities in order to survive an exceptionally challenging year. Consumers in Latin America are more carefully examining the cost-value relationship or products which means brand loyalty will be highly affected. Private labels in tissue have been especially successful at winning market share this year. Finally, it is absolutely imperative to highlight the boom in e-commerce and how retailers have adapted to this new normal.
Hoarding or panic buying of tissue products was not as common as in the United States or Europe, and since the AfH channel is far less developed here, it means that the channel shift from institutional to retail was much less dramatic. Euromonitor projections for the AfH segment in Latin America do not include a fully recovery until at least 2023; this is based on the consumer foods service segment, and the thousands of permanent closures during 2020, as well as the collapse of the travel and tourism industry, and finally the very slow return to corporate offices.
E-commerce has been steadily growing over the last decade but Covid has been instrumental in accelerating that growth. I would highlight the role of last-mile players in e-commerce in Latin America, specifically Cornershop and Rappi as key players in 2020. Some manufacturers are bypassing retailers entirely and attempting to reach consumers directly, mainly through social media. This applies to different industries and while tissue is not the exception, it is much more common to see in small/local companies. The most important conclusion here is that digital reliance will become the norm.
Another innovation is that department stores such as Ripley in Peru and Chile are selling all kind of items through their online platform, including toilet paper. This versatility is interesting and will be fundamental for positive growth now and in the future.
Income from wages in Latin America has fallen by 19% in 2020, compared with a global average of 11%. The most affected consumers will be among the region’s lower-middle classes. Therefore, we expect some changes in their behaviour. For example, we expect continued growth in private labels, a trend that we are already seeing across the region in 2020.
On the bottom of the economic spectrum, we might also see a resurgence in daily purchases, instead of weekly or monthly ones. Within tissue, that means small grocery retailers like neighbourhood almacenes (warehouses) or bodegas, selling individual or single format items, such as a single role of tissue paper.
Paper towels saw their best year ever, growing at rates of over 20 and 30% in various Latin America countries. Increased time at home coupled with hygienic awareness are the two factors behind our forecast that this positive inertia will continue during the forecast period.