Economic pressures force Latam shoppers to prioritize

FMCG price rises dash expectations of a return to ‘normal’ pre-COVID-19 consumption rates.
28 June 2022
latam 28 June
Cecilia Alva

Client & New Business Director, Worldpanel Division, Latam

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Many households in Latin America are already being forced to make difficult decisions about what to keep in their shopping baskets, in order to balance the books at the end of the month. Consumer goods prices are on the rise around the world, but this inflation is especially marked in the Latam region – reaching 9.6% in 2021. As a result, a return to normality in terms of FMCG consumption is an increasingly distant desire.

Having maintained some of the habits acquired in the pandemic, consumers are prioritizing the most essential items, and have stopped spending on the most superfluous categories. This has benefited the food and beverages sectors – which represented 54% of all FMCG expenditure and more than 65% of FMCG growth last year – while having a negative impact on categories such as beauty, which is suffering the most.

Consumers make compromises – but invest in quality

Taking Brazil as a case in point, where economic pressures are particularly strong, we can see this trend in action. Non-essential categories are already suffering a loss of frequency and, consequently, lower penetration. Shoppers are starting to demonstrate even more radical behavior, either downtrading or removing these categories from their shopping cart altogether.

However, they are making an effort to keep buying the most relevant categories, and as a result these are suffering minimal loss of penetration. In fact, shoppers are keen to invest in premium brands within these categories, and their share of spend has grown 2% among the high priority products. This could be seen as a contradiction, but buyers clearly want the best of what seems most important.

An attempt at normality

In the Latam region, out-of-home (OOH) FMCG consumption recovered in the first half of 2021 as lockdown restrictions ended. However, it is still 20% below pre-pandemic levels.

The only global market where OOH has already recovered is China – although this seems unlikely to last, as a new outbreak of COVID-19 has brought the toughest restrictions in history.

The indications are that no FMCG brand or retailer can afford to relax: the pandemic may continue to create instability in FMCG consumption levels.

For strategies on how to grow your brand when shoppers are prioritizing their spend, check out our Learnings from Consumer Insights video, and get in touch with our expert team.

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