FMCG in China down by 6.7% in Q1
Kantar Worldpanel, the global market leader in consumer panels, reports that the total spend of fast moving consumer goods (FMCG) recorded a drop of 6.7% in the latest 12 weeks, compared to the same period in 2019. According to the latest official statistics, China's retail sales of consumer goods declined 19% year on year in the first quarter of this year. The Food category dropped 7.7% year on year in the reporting time, as the confectionary and beverage sectors suffered substantial losses during Chinese New Year and the subsequent lockdown period. Against the backdrop of a declining FMCG market, the household products sector bucked the trend with a value increase of 7.4%. It’s worth noting that, total FMCG market began recovering 7 weeks (in the week of 13th March) after new infection cases eased. Younger consumers, who were leading the market growth in the past years, as well as West region consumers were more resilient during this period. Further recovery is anticipated though the pattern of this recovery varies by sector.
Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by 3.7% in the last 12 weeks compared with last year, among which supermarkets were least affected by the COIVD-19 outbreak, reported a slight decrease of 0.5%. Small/Mini Super saw robust growth of 13.5% as they are closer in proximity to consumers needing to make a top-up of daily necessities. Hypermarkets struggled during Q1 experiencing a drop in penetration of 3.7ppts versus the same period last year, as cautious shoppers tried to stay away from shopping malls and crowds.
E-commerce on the other hand reported a stellar performance with a growth rate of 22.0%, despite challenges in logistics as a result of road shutdown and staff and supply shortages amid the coronavirus outbreak. E-commerce now accounts for 19% of total FMCG spend and is expected to continue to grow in 2020.
Mixed performance in Q1 amongst top players
Challenged by the unprecedented loss of physical shopper traffic during the past months, modern trade retailers strived to utilize delivery services to supply fresh foods and groceries to meet rising demand of self-isolation. Those who withstood the disruption of the coronavirus outbreak and even grow their shoppers were those who were able to offer fast and efficient delivery services.
Amongst the top players, Sun Art maintained a steady position thanks to its strong integration with the Taoxianda platform under Alibaba. Over 2019, the Sun Art group accelerated its transformation of the traditional hypermarket format to make the stores smaller and digitally strong to meet shopper needs. RT-mart also actively leveraged community group buy apps as well as its own delivery platform “Youxian’ to maintain its service during Q1.
In contrast to the lukewarm performance of its peers, Yonghui maintained a staggering growth of 9.8% in the first quarter, driven by its equity in fresh foods supplies and recent expansion to smaller ‘mini’ formats to build advantage in proximity. At the same time, local giants such as Wumart and Bubugao continue to grow faster than total market, thanks to their well-managed supply capabilities and membership building as a result of regional focus. Regional retailers are also rapidly adopting livestream-based platforms to attract shoppers while consumers desire to shop in an interactive way.
E-commerce and O2O
In the last 12 weeks ending 20th March 2020, 62.6% of Chinese urban household bought FMCG online, up by 8.2ppt versus the same period last year. The consumption potential of lower tier cities drove the growth of e-commerce, recording a 23.3% value growth with increasing purchase frequency.
In 2020 Q1, both Alibaba and JD demonstrated staggering momentum. Alibaba reached a significant uplift on penetration of 7.4ppts, accounting for 38.6%. JD followed the growing trend with a penetration increase of 4.8ppts.
Despite the pandemic, e-commerce players continued launching grand shopping events, such as “Queen’s Day” (a transformation of international women’s day) this year, likely the largest one in the last 4 years. This year brands continued to establish a theme of empowering women, whilst further stimulating consumption by meeting the pampering moments of women, especially after this difficult time. For personal care manufacturers it becomes more crucial to understand how to embrace the new growth in the post COVID-19 era.
Meanwhile, as the demand for convenience and instant gratification surged, O2O players (including retailers’ own delivery platform, JD Daojia, Hema App, Ele.me, etc.) managed to boom rapidly in first quarter. 35% of urban families in China purchased at least once food sector via O2O platforms in the past 12 weeks.
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