Impact of the Coronavirus on Snacking in Southeast Asia and India

As consumers prioritized their spending and stocked up their kitchens with staples, some snacking product sales suffered. However, this is a short-term development which will change once social distancing and mobility restrictions are eased. Having stocked up on staples, consumers will shift to spending on discretionary purchases including snacks. Furthermore, as people are cocooned at home and with schools closed, eating throughout the day is likely to become more commonplace and the lines between fixed meal occasions and snacking further blurred.

Consumers to Trade Down Their Snacking Choices

The main concern for Southeast Asia and India is the economic fallout from the coronavirus. A number of Southeast Asian economies are set for negative economic growth in 2020, with a recovery predicted in 2021. In India, the World Bank expects 1.5% to 2.8% GDP growth in 2020 – the lowest since liberalization of the Indian economy in 1991. As the economy underperforms, consumers are expected to switch to cheaper snacking products and brands. For example, in India, more consumers are expected to purchase plain biscuits instead of the more expensive cookies and chocolate biscuits. Smaller packs and magic price points will also become more important.

Festive Snack Sales in Indonesia to Decline

A key fall-out of the current situation will be a decline in Ramadan-linked festive sales and corporate gifting of food products in Indonesia, including snacks such as biscuits and chocolates. The impact will be more significant in Indonesia than a more religiously diverse Malaysia, although both have a population that is over 50% Muslim. The Indonesian government has also banned mudik – the exodus of people from the main cities – and postponed the annual four-day Idul Fitri national holiday, during which people visit their hometowns, and families gather. With fewer family gatherings, festive snack sales are expected to be lower than 2019 levels.

Redefining the 'Healthy' Snack

Prior to the coronavirus, ‘less-sugar’ and ‘less-salt’ snacks were considered as the ‘healthier’ snack by consumers. However, with the current developments, and the resulting change in consumer behavior, attributes such as ‘immunity building’ or improving one’s overall ‘wellbeing’ will come to the fore. Emphasizing antioxidants in dark chocolates, the immunity building benefits of nuts and seeds, and fortification with micronutrients are some examples of claims that will gain acceptance in an environment where consumers are worried of falling sick.

White Spaces in the Competitive Landscape

The competitive landscape for snacking will change as the coronavirus causes business closures and affects the overall economy. Food has been classified as an ‘essential good’ in all countries, and most mid- to-large-sized snack manufacturers are expected to weather the storm, albeit operating at reduced capacity. However, especially in countries and cities where lockdowns were in place, we expect some small and medium snack producers and retail bakeries to be unable to recover from closures and business slowdown. Start-ups are similarly expected to face hiccups as liquidity tightens, R&D is delayed, and they are unable to display or sample their products to trade or to consumers. As consumers turn cautious, they are more likely to choose tried and trusted snack brands.

As the Shift to E-commerce Accelerates, Impulse Needs a Plan

The pace of the shift to e-commerce for food purchases will be accelerated as more consumers are forced to go online and the barriers to e-commerce are lowered in the region. As food ecommerce grows, snacking will need to develop strategies to ride the growth with this channel.

Short-Term Pain, but Long-Term Prospects Intact

In summary, snack food companies have to alter their short-term growth plans to cater to consumers shifting towards value for money products. However, the long-term fundamentals of snacking growth for India and Southeast Asia remain intact, and the two regions will be among the fastest growing snacking markets globally (See: Tracking Snacking: The Future of Snacking in Southeast Asia and India). Economic growth for India and Southeast Asia is expected to improve in 2021, consumer habits of eating throughout the day will become more ingrained, and time-poor consumers will view snacks as a convenient solution to satiate hunger.