The changing FMCG market in China

Photo from: Pixabay

By: Jason Yu, Kantar Worldpanel

The eighth annual China shopper report from Kantar Worldpanel China and Bain & Company reveals that FMCG growth remains robust, growing at a rate of 5.2%, slightly faster than the previous year’s 4.7%. The report entitled Premium Products, Small Brands and Now New Retail explains that premiumization again plays a significant role in the sector’s recovery – average selling prices (ASP) rose by 4.6% as consumers continued to demonstrate a willingness to trade up.

“Amid the FMCG market’s recovery, we continue to see premiumization playing an important role, as Chinese consumers favor goods that promise to improve their health and lifestyle,” said Bruno Lannes, partner in Bain’s Greater China Consumer Products Practice and co-author of the report.

“While penetration and purchase frequency may be reaching their limits in some categories, there appears to be ample room for average selling prices to rise. Data on shopper behavior over the past two years shows that brands can still encourage trading up, giving a much-needed boost to categories in which volume is either flat or slumping.”

The report gives the first indication that there is a growth limit for e-commerce. Overall, the channel’s growth slowed slightly to 30.6% between 2017 and 2018 (compared with 35.1% annual growth between 2014 and 2018). Growth for Tier 1 cities has plateaued but is expected to continue for at least three or four more years in the lower-tier cities.

This year’s report revealed renewed hope for offline retailers to regain their momentum, in many cases with smaller and more flexible formats. This is due to the increase in out-of-home consumption which has risen by 14% per year since 2016. For convenience stores it represents 88% of their total sales, having grown 17% per year in last two years.

Two developments considered in the report this year are the dramatic impact of fast-growing small brands on larger brands, and the emergence of the uniquely Chinese phenomenon of New Retail — futuristic supermarkets devoted in equal measure to in-store dining, online ordering and delivery.

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