Page last updated at 11:33 CST6CDT, Monday, 11 January 2021 PH
As mentioned above, Filipino consumers make up the strongest engine of growth of Philippine GDP since consumption expenditures account for more than 70 percent of GDP. How will consumption patterns change as a result of the pandemic? We may develop some plausible hypotheses from an article that appeared in the Financial Times (November 2, 2020). Entitled “Serving the Post-COVID consumer”, the article reported that pandemic-related lifestyle changes in the developed world have led to huge swings in demand for consumer goods companies accustomed to only incremental shifts. For example, a top executive of the Anglo-Dutch multinational Unilever reported that most of the categories in which the group operate normally see growth rates of 2 to 5 percent. During the pandemic, it experienced growth rates that range from minus 40 to plus 25 percent. Pandemic trends have favored the big consumer brands that had been struggling against the onslaught of nimbler start-ups. Consumers tended to return to brands they had known for decades—from Kraft Heinz macaroni cheese to Dettol disinfectant—and retailers opted to work with multinationals that could offer safe and sophisticated supply chain management in the crisis. Because of these trends, there were large jumps in sales for companies such as Reckitt Benckiser (producer of such pharmaceutical brands as Strepsills, Gavison antacid, Mead Johnson milk), Unilever and Procter & Gamble which are reporting their highest growth numbers in years and in the case of Reckitt, in its entire history.
As in the Philippines and all over the world, sales of hand sanitizers rose at least fivefold in Germany, France, the UK, the US and China in the year to August 2020, compared with a year earlier, according to data provided by Nielsen. Consumers couldn’t get enough of detergents. In the US, sales of aerosol disinfectants more than doubled. With workplaces and malls out of bounds for many, online shopping accelerated and a homespun lifestyle began to emerge. Flour sales rose by between 20 and 50 percent as numerous homebound amateur bakers started to come out with their favorite cakes and pastries. Consumers loaded their freezers with prepared meals and cupboards with processed and packaged foods. A Philippine favorite from the war days, Spam, sold literally like hot cakes. A curious phenomenon is that deodorant sales dropped. Cosmetics sales plunged by a fifth in the UK and US and 18 percent in Italy, hitting hard such companies as Estee Lauder and Coty. Because of much more time spent at home by both young and old, there was a rising appetite for snacks: sales of popcorn and crisps jumped, benefiting companies such as Mondelez. Because pubs and bars were closed, consumers did their own cocktail-making and premium label beverages. For example, in the US retail sales of tequila were up more than 80 percent.
Would these consumer trends be replicated in the Philippines? My own take is that with more time spent at home, even after the pandemic is put under reasonable control, there will be increased demand for processed food products. Unlike the situation described above in the developed countries where consumer goods marketed by multinationals have enjoyed bigger sales because of the pandemic, in the Philippines the smaller companies and startups will continue to take market shares from the large companies as they come out with more products and brands that cater to the large variety of tastes that characterize the various regions and cultures of Philippine society. There will be opportunities for MSMEs in the food processing sector to compete with the large food enterprises, whether domestic or foreign, in coming out with a wide variety of snack foods (chicharron, pastillas, fish balls, etc.) and spices that can differ from one region to another. The smaller companies are nimble enough to adapt to these variety of tastes and traditions. There will be many more cases similar to the manner banana catsup produced by local startups stole a big share of the market from the traditional tomato catsup produced by multinationals. The greater amount of time spent at home by food aficionados who have been experimenting with new recipes can increase the variety of processed food products that can be launched by the nimbler startups.
Next to the food industry, the health and wellness sector will see its products and services enjoying large increases after the pandemic. There is already a proliferation of small and medium-scale companies owned by domestic investors producing alcohol and other sanitizing products that are successfully competing with imported brands. I am glad to observe that brands of sanitizers like Green Cross and Doctor J produced by domestic enterprises are giving multinationals a real run for their money. The same can be said of the pharmaceutical industry in which local corporations like United Laboratories and Pascual Laboratories have a large share of the market, competing effectively with the foreign drug companies. With an expanded market for health-oriented products that has resulted from the pandemic, I foresee even a bigger role of local companies, big and small, in the pharmaceutical industry.
Another big boost to health-oriented enterprises has been given by the approval by the President of the 2020 Investment Priorities Plan (IPP) of the Board of Investments. Under the PPP, there will be tax benefits that will be given to companies that are repurposing their production towards addressing the pandemic, such as manufacturers of Personal Protective Equipment (PPE), medicines, sanitizers and other disposable cleaning materials, provision of laboratory and other related equipment, crematoriums, health waste treatment, laboratories, test facilities, face shields and masks, hospitals and clinics, facilities for quarantine and others. The health and wellness sector will consist of both manufacturing enterprises and service establishments that will cater to the battling of the pandemic. Since it is highly likely that there will be other bouts with one virus or another in the future, these enterprises will be already permanent contributors to both income and employment.
Another very positive impact of the pandemic on the health and wellness of Filipinos is the heightened awareness of the need for hygienic practices like washing hands, wearing masks and social distancing. Already there are anecdotical observations that there have been significant decreases in the spread of other infectious diseases like the common flu and dengue. Indeed, during this last rainy season I have noticed that among my relatives and closest friends that there were less cases of the common cold or the flu that in previous years would ordinarily spike during the wet months. I am conjecturing (of course subject to future data analysis) that the COVID-19 pandemic has resulted in permanent behavior changes that will benefit the overall health of our population. These behavioral changes especially refer to preventive rather than curative measures to attain health and wellness. It would be more common within families to require anyone of their member with a common cold or flu to wear a mask and for everyone to be more conscious of washing hands and keeping distance from those infected. I also foresee a lot more consumption of products that strengthen immunity against infectious diseases such as Vitamin D (even just exposing oneself more often to the sun); Ascorbic Acid or Vitamin C; Virgin Coconut Oil; Garlic and other spices that bolster immunity, etc. We should encourage the so-called Plantitos and Plantitas to continue cultivating in their home gardens many of these high-value products that can help prevent diseases. For comments, my email address is email@example.com