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China's FMCG market recovered steadily in Q3

14/11/2024

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China's FMCG market recovered steadily in Q3

China's FMCG market recovered steadily in Q3and the competition in O2O escalated further

The latest report released by Kantar Worldpanel shows that the fast-moving consumer goods (FMCG) market in urban China maintained a steady development trend in the third quarter, with a year-on-year sales growth of 0.5%.

The latest data released by the National Bureau of Statistics also indicates that the retail sales of consumer goods in urban areas increased by 3.3% in the first three quarters, and the contribution of final consumption expenditure to China's economic growth was 49.9%. However, insufficient domestic demand is also affecting the full recovery of the FMCG market.

In the first three quarters, the overall FMCG market sales grew by 1.8%.

At the region and city levels, the East and West regions showed impressive sales performance, with increases of 5.0% and 2.9%, while county-level cities and town-level cities demonstrated relatively steady performance.

The beverage and household cleaning categories continued to maintain a good momentum in the third quarter, growing by 5.5% and 5.1% respectively. While dairy and personal care products are facing more serious growth challenges.

click here to access the report

Modern trade: the performance of different formats continues to diverge, while retailers are actively seeking change

Modern trade continued to show a trend of fragmentation with small supermarkets and convenience stores maintaining their excellent performance. Increased consumption in the lower-tier market also contributed significantly to the overall growth of modern trade. In the first three quarters, sales in the modern trade increased by 3.6%, and Chinese consumers maintained their proximity shopping habits.

The fierce competition in offline channels and the integration of multiple formats drove further fragmentation of the retail market. Compared to the same period last year, the market share of the top ten retailers in modern trade collectively declined by 1.3 percentage points, indicating further fragmentation of the Chinese retail market.

Major retailers are actively facing challenges and are exploring new development strategies including premiumization, digitalization, and multi-format operations. For example, some retailers are transforming and innovating themselves by accepting adjustments from Pangdonglai or through self-improvement.

Yonghui Group adjusted and upgraded its stores nationwide with the assistance of Pangdonglai and its successful experience. Other regional retails, such as Bubugao Group and several stores under the Zhongbai Group, took Pangdonglai as a model, aiming for high quality and reasonable prices, and promoting a comprehensive transformation of the supply chain and shopping experience.

Walmart Group’s sales in modern trade steadily increased, with the strong performance of Sam's Club. According to Kantar Worldpanel. Sam's Club's sales growth in lower-tier cities is significantly higher than in upper-tier cities, indicating an increasing demand for the membership store model in the lower-tier markets.

Jiajiayue, within the SPAR group, achieved a 0.2 percentage point market share gain in the first three quarters as a result of the expansion of new formats, such as discount stores and snack stores.

In the third quarter Hema not only increased the number of stores in major cities, such as Beijing, Shanghai, Guangzhou, and Shenzhen, but also actively expanded into new cities. Hema NB Outlets, which focus on hard discount, opened several new stores in September. By strengthening its multi-format and multi-regional offerings, Hema's market share increased by 0.2 percentage points compared to the same period in the first three quarters of last year.

As a representative of regional retailers, Biyoute operates over 70 directly managed stores in Northeast China. By providing good shopping experiences, streamlining SKUs, and controlling operating costs, it maintains a price advantage. In the first three quarters, its penetration increased by 0.2 percentage points.

The market transformation of snack stores accelerates, and brand competition further intensifies

The snack store industry is changing rapidly, with emerging brands constantly appearing and traditional brands actively transforming.

Among the single-brand snack stores Three Squirrels achieved supply chain integration, from raw materials to production through self-built factories, and direct sourcing of raw materials, enhancing the market competitiveness of its products. In addition, Three Squirrels also actively explored the original and cloud warehouse models to reduce costs and increase efficiency, whilst leveraging its online presence to continuously strengthen its brand influence.

Data from the Kantar Worldpanel indicates that the penetration of snack discount stores significantly increased this year compared to the same period last year, particularly in lower-tier cities.

In the search for new growth opportunities, MMHM Group, a leading player in the snack store industry, announced a comprehensive entry into the hard discount, all-category wholesale supermarket format, and opened 189 new stores during the National Day holiday. This model not only covers snack products but also expands the range into more categories to meet the consumer demands, aiming to achieve growth across all categories through the hard discount model.

E-commerce platforms increase efforts for the Double 11 promotion, and the competition in O2O escalates further

Compared to the same period in the third quarter of last year, the penetration of E-commerce increased by 1 percentage point in 2024. Taotian Group, JD Group, Pinduoduo, and interest EC platforms Douyin and Kuaishou all saw improvements.

The penetration of Douyin grew both in upper-tier cities and lower-tier cities. In the first third quarter, more than 42% of Chinese urban household purchased fast-moving consumer goods on Douyin. And its penetration in county-level cities grew significantly, increasing by 9.2 percentage points compared to the same period last year.

In terms of categories, non-food categories still had a higher penetration on Douyin than food and beverages, but the dairy categories experienced faster growth.

In the fiercely competitive E-commerce industry, the Double 11 shopping festival has become a touchstone for the comprehensive strength of major platforms, including product pricing power, logistics, and customer experience. To attract consumers, E-commerce platforms have increased subsidies and launched their shopping festival activities in advance.

JD Group fully leveraged its advantages in self-operated business and logistics, launching special activities for the Double 11 shopping festival.

TaoTian Group attracted consumers by issuing category coupons, red packets, and billions in subsidies. Through nearly a year of upgrades and adjustments, TaoTian Group has launched a new scoring system that guaranteed merchants higher discretion to deal with malicious "refund only" behaviors during the promotion period, to protect the rights and interests of merchants and to avoid endless low-price competition. Taotian Group provided more growth opportunities for merchants while at the same time enhancing the consumer shopping experience.

O2O has become a key focus for major platforms in 2024. Data from Kantar Worldpanel shows that in the first three quarters, the sales of the warehouse model grew by more than 23% year on year. Major brands and platforms have increased efforts in O2O.

Ahead of National Day, Douyin opened its hourly delivery service to merchants nationwide, covering all major cities and districts, and more recently Kuaishou also launched its own hourly delivery service as they enter the O2O arena. To succeed in this market, platforms need to make more refined allocations and logistics delivery, product variety, and the integration of online and offline operations to meet consumers' needs for an efficient shopping and delivery experience.

If you would like to learn more, please get in touch with our experts or access our data visualisation tool to explore current and historical grocery market data for your region.

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Rachel Lee
General Manager of Kantar Worldpanel in China

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