Following a strong first quarter spending growth of 2.7% year-on-year, growth moderated to 0.7% in Q2 and 0.4% in Q3. Volume remained the primary driver of growth while deflation eased from a 3.4% drop in FY 2023-24 to a 2.4% drop in YTD Q3 2025.

“The moderation of price deflation and steady volume growth indicate that China’s FMCG market is moving towards a new normal where consumers are pursuing value rather than pure price,” said Rachel Lee, General Manager of Worldpanel China. “We are seeing greater balance between affordability and quality across categories. Brands that understand these expectations and calibrate their pricing and promotion strategies accordingly will be best positioned to sustain growth.”

Lower-tier cities emerge as China’s next growth frontier

Tier 3-5 cities accounted for around 80% of total FMCG market expansion in 2025, with volumes rising 4-6% and offsetting 2-3% price declines. Growth in these cities was driven by continued urbanization, resilient local consumption and deeper penetration by retailers and FMCG brands.

Consumers in lower-tier markets benefited from lower living costs and expanding access to modern trade. Online-to-offline (O2O) channels also boosted purchase frequency and category breadth. Additionally, small-format retail such as snack stores, community supermarkets and flash-delivery O2O platforms have become a key growth engine, enabling brands to reach new consumers more efficiently.

Brands that actively expand into lower-tier markets, particularly through tailored pack-price offerings and agile retail partnerships, are capturing share gains. These regions have become the new growth engine for China’s FMCG recovery, contrasting with flat performance seen in Tier 1-2 cities.

Evolving consumer priorities reshape what China buys

Across the four major FMCG sectors, packaged food led sales value growth in the first three quarters of 2025 at 3.4%, supported by stable demand in core staples and snacking categories. Home care followed at 3.3%, underpinned by steady household hygiene habits and affordable innovations. Personal care recorded a 1.1% growth, while beverages declined by 1.1% amid intensified price competition and substitution by freshly made drinks.

The report includes a breakdown of category dynamics, which demonstrates how consumers are balancing affordability and small indulgences. Instant noodles (+5.9%) and nutrition supplements (+5.3%) have gained traction through new channels such as snack stores and O2O delivery, while juice (+19.2%) led the beverage category as shoppers traded up to healthier, functional options. By contrast, milk (–6.4%) and yogurt (–5.8%) suffered from oversupply and discounting, underscoring the ongoing polarization between value and premium segments.

Membership, snack-collection and discount store formats surge up to 92% as shoppers seek value

Beyond category trends, the way Chinese consumers shop and engage with brands is changing rapidly. Emerging channels are now at the forefront of growth as shoppers diversify where and how they buy.

Among offline channels, membership-based retailers, snack-collection chains and discount formats have expanded rapidly – growing 40%, 51% and 92% year-on-year respectively – reflecting consumers’ heightened focus on value, convenience and experience. Meanwhile, O2O spending rebounded 7.9% year-on-year in Q3 after last year’s decline, supported by faster delivery, broader product coverage and cross-platform promotions.

For online channels, social and value-driven platforms continued to gain share. Short-video and low-price commerce models now account for more than 40% of total FMCG e-commerce sales. These channels are redefining the consumer journey by merging inspiration, transaction and fulfillment in real time.

“Channels have become active demand generators rather than passive sales endpoints,” said Derek Deng, head of Bain & Company’s Consumer Products practice in Greater China. “Brands need to rethink how they partner with retailers and platforms – treating each channel as an ecosystem for innovation, engagement and value creation. Those who can effectively integrate channel insights into portfolio and go-to-market design will set the pace for China’s next phase of FMCG growth.”

Private labels climb 44% in two years as retailers evolve into brand creators

As formats evolve, many retailers are extending beyond distribution to play a more direct role in shaping demand. Private-label products accounted for 2% of FMCG sales in YTD Q3 2025, representing 44% growth over the past two years. Retailers are rapidly expanding their private-label portfolios, using first-hand shopper insights and integrated supply chains to deliver high-value alternatives.

These retailer-owned labels are capturing incremental consumer demand while intensifying competition for branded manufacturers. As this trend accelerates, retailers are evolving from traditional distribution roles into differentiated brand owners – redefining competition and expanding consumer choice.

To navigate the rapidly evolving FMCG market, Bain introduces its new C.O.R.E. framework – Circumstances, Offerings, Routes, Execution – as a playbook for brands to achieve sustainable, demand-led growth. The framework urges companies to understand the circumstances including occasions that trigger demand, design offerings that meet functional, emotional and social needs, select the right routes to reach consumers through both demand-generation and sales-conversion channels, and tailor execution – from pack sizes to pricing – to fit each purchase occasion.

“China’s shoppers are becoming more deliberate in how they balance value, convenience and experience,” said Bruno Lannes, senior partner at Bain & Company’s Consumer Products and Retail practices. “As consumption occasions diversify and channels proliferate, the brands that succeed will be those that truly understand why, when and where consumers choose to buy – and tailor their strategies accordingly.”

In today’s increasingly fragmented market, whoever captures consumers wins. A brand’s market position is tightly linked to its penetration (defined as how many households buy the brand). After Worldpanel (a CTR service in China) expanded its coverage to include towns, its latest data, during the 52 weeks ending 3 Oct 2025, show that 28 FMCG giants each reached more than 100 million urban/town households in China.

(Please click here 28家快速消费品公司坐拥过亿中国家庭，头部快速消费品公司持续吸引新客 to view the Chinese version)

Compared with last year, these 28 leaders collectively added 2.13 million urban/town buying households, with a mean increase of 0.8%. Vinda Group led the pack with rapid growth of 10.4%, while Wahaha, Nongfu Spring, Orion and Uni-President also posted strong gains.

Rachel Lee, General Manager of Worldpanel China, stated: "Chinese consumers are becoming more rational. Beyond meeting product performance and emotional value, they also seek tangible returns for every penny spent. Against this backdrop, leading companies have successfully attracted new customer groups and gained an edge in the saturated market by accurately capturing the needs of different demographics, continuously launching products tailored to new scenarios and demands, and capturing emerging channel growth and penetration into lower-tier markets. This strategy is crucial for fast-moving consumer goods companies."

Occasion-driven, convenient, healthier – the magnets for new fans

Seize emerging channels, harvest incremental shoppers

China’s retail landscape is changing with each passing day, racing toward greater diversity, intelligence and personalization. An omnichannel, differentiated strategy has thus become a make-or-break priority for every manufacturer.

While overall offline and e-commerce penetration looks flat, currents run deep. Snack-discount stores (up 7.3 pts penetration) wow shoppers with novel products.  Membership stores, with store and warehouse integration, brings a convenient shopping experience, combined with streamlined and high-end SKUs, has all resulted in an increase in the number of shoppers. Its penetration has risen by about 5 points. In e-commerce, Douyin has gone beyond livestreaming to aggressively expand its in-app mall, pushing the platform’s overall penetration rate up by more than five percentage points. In O2O, frontline warehouse (Freshfood shopping apps), which cater to office workers who want the convenience of cooking at home, have uplift penetration by 2 points.

Worldpanel shows that within the 52 weeks ending 3rd October 2025, the top-28 manufactures won 21 million new shoppers in snack-discount stores, 4.4 million in membership stores, 12.3 million via Douyin and 3.6 million through frontline warehouse O2O.

Penetrate deeper into lower-tier markets to unlock incremental consumer

With national policy tilting toward lower-tier markets, economic momentum picking up, and infrastructure rapidly improving, counties and towns have become a sturdy engine of China’s growth. Winning the consumers who live there means winning the future. In the 52 weeks ended 3 Oct 2025, nationwide urban sales (tier 1-6) rose 1.8 % year-on-year; top-tier cities edged up only 0.2 %, tiers 3-5 climbed 1.7 %, while township markets surged 4.2 %.

The five fastest-growing manufacturers in recruiting Chinese households this year all expanded their consumer base by pushing deep into lower-tier markets. In the 52 weeks ending 3 October 2025, among Vinda’s 16.51 million new households nationwide; 13.59 million of them came from tier-3–6 cities and towns, with 4.5 million from towns alone. Wahaha pulled in 10.33 million new households, 7.85 million from tier-3–6 markets and 3.02 million from town markets.

Amid intensifying competition for a saturated market, widening penetration is the only reliable growth engine. Manufactures must dig deep into evolving consumer needs, seize emerging consumption occasions and new retail touchpoints, and plant their flags in lower-tier markets to keep the momentum alive.

Notes：

1. Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing). From 2022 on, Worldpanel – household panel covers more categories. All changes may lead to some inconsistencies with previous years ‘data. 2022 newly covered categories are: yellow rice wine, vinegar, Chinese sauce, flour, seaweed, noodles, sachima, nuts, rice, dry fruit/vegetables, laundry sheet, filter cartridge

2. 1-2 tier cities / Upper tier cities: include Beijing/Shanghai/Guangzhou/Chengdu and provincial level cities.

3. 3-6 tier cities / Lower tier cities: include prefecture level cities, county-level cities, counties and towns.

4. Mengniu group includes Yashili

5. Nestle includes Nestlé, Hsu Fu Chi, Wyeth Nutrition, Totole and Haoji

6. Mars includes Mars and Wrigley

7. Colgate-Palmolive includes Colgate and Darlie

8. China Resources includes Jiangzhong group, and excludes Vanguard and Pacific Coffee

9. Ecommerce includes: 1) traditional platforms like Taobao, Tmall, JD.com, 2) Social ecommerce platform like Little red book, Weibo, WeChat store, WeChat moments 3) Short Video platforms like Douyin, Kuaishou

10. O2O includes 4 types: Offline retailer self-run, Horizontal marketplaces, Community group buy and Frontline warehouse ecommerce

The latest report released by Worldpanel（a CTR service in China）shows that urban China's fast-moving consumer goods (FMCG) market achieved a 2% year-on-year sales growth in the first three quarters of 2025, maintaining a stable trend.

Across the five major categories, beverages continued to lead sales growth, while dairy products still faced significant challenges due to declines in both purchase frequency and spend per trip. The North and East regions saw notable growth, with sales increasing by 3.1% and 2.5% year-on-year respectively in the first three quarters. At the city level, the lower-tier cities remained the key growth engines, with sales in town and county markets growing by 4.1% and 3.6% respectively in the first three quarters.

Consumer demand is the main driver of economic growth. According to the National Bureau of Statistics, in the first three quarters, final consumption expenditure contributed 53.5% to economic growth, driving GDP growth by 2.8 percentage points.

Driven by the summer holiday travel boom, the out-of-home consumption market demonstrated robust vitality. Worldpanel’s out-of- home consumption data shows a 6.9% year-on-year increase across tier 1-5 cities in the first three quarters of 2025.

Offline Channels

In the first three quarters of 2025, the overall sales of modern trade (defined as hypermarkets, supermarkets, convenience stores) remained largely unchanged compared to the same period last year. Convenience store sales decreased by 2.6% year-on-year, with penetration dropping by 1.6 percentage points, the rate of decline narrowing compared to the first half of the year. Small supermarkets maintained growth momentum, with sales up 6.0%, meanwhile, community grocery stores being closer to consumers, performed well, achieving growth in both purchase frequency and spend per trip, with sales in the West region achieving double-digit growth.

1. Performance of Major Retailers

Among the top ten retailers, Walmart Group's market share increased by 1 percentage point in the first three quarters, continuing to be driven by Sam's Club. Over the past nine months, Walmart actively piloted community store formats in Shenzhen, anchoring them within closer community living circles to meet consumers' high-frequency core shopping needs and penetrating different life scenarios. Hema's overall share increased by 0.4 percentage points, with its ChaoHesuan NB(超盒算NB) format significantly driving growth through extreme value-for-money and convenient services. Despite fierce market competition, the penetration of Freshippo formats also increased by 2.4 percentage points compared to the same period last year, further strengthening the synergy of Hema's dual-core strategy of 'large fresh produce stores+discount stores'. The latest data from Worldpanel also shows that the SPAR Group achieved significant growth in the East region in the first three quarters, with its discount store model becoming an important growth driver.

Although the convenience store sector overall faced growth pressure, leading Chinese convenience store brand Meiyijia surpassed 40,000 stores in July, marking another milestone in its national expansion. Through its accelerated store opening strategy, penetration increased notably in the East and West regions.

2. Continuous Advancement of the Discount Store Format

Worldpanel data shows that the penetration of discount snack stores exceeded 31% in the first three quarters of 2025. Regionally, as consumers in the West region are more price sensitive, the discount store format is more attractive, with its penetration increasing by 6.6 percentage points compared to the same period last year.

In the comprehensive discount stores format, which covers a wider range of categories, major players actively expanded, driving the format’s penetration up by 2.3 percentage points year on year. Metituan’s “Kuailehou(快乐猴)” attracted customers by leveraging its efficient instant delivery network and a relatively high proportion of fresh product categories. E-commerce giant JD Group advanced its large discount supermarket chain “JD discount supermarket”, utilizing its advantages in logistics, and sourcing from origins and private label development to deepen its presence in the North region. As a representative local retailer, Wumart Group accelerated its transition to hard discount format through its “Wumart Chaozhi(物美超值)” format, and saw rapid expansion based on its existing store network and local supply chain foundation.

Online Channels

In the first three quarters of 2025, online channels demonstrated steady overall performance, with sales value growing 7% year on year. Major e-commerce platforms, including Douyin, Pinduoduo and JD.com all achieved positive growth in both sales value and penetration.

Douyin maintained its strong growth momentum, with penetration increasing by 5.1 percentage points compared to the same period last year, continuing its outstanding performance. Notably, Douyin’s overall penetration is now close to 50%, with sales growth particularly significant in town-level markets. Douyin continued to optimize its ecommerce ecosystem and enhance consumer experience through both platform governance and merchant support policy. JD Group’s JingXi(京东京喜) continued to leverage its supply chain advantages, providing consumers with high cost-effective products. In the first three quarters, JingDongJingXi achieved a penetration of 4.9%.

Xiaohongshu differentiated itself from traditional e-commerce platforms with its unique content community platform and with interest as the anchor, it activated new consumption potential. The latest data from Worldpanel shows that Xiaohongshu’s penetration reached 1.7%, an increase of 0.8 percentage points from the same period last year. Earlier, Xiaohongshu signed a strategic cooperation with Taobao Tmall to create “HongmaoJiHua(红猫计划)”, facilitating a more efficient flow for brand merchants from front-link inspiration to back-link conversion.

O2O penetration exceeded 40% in the first three quarters. Different models showed different development trends. Among them, with the increase in penetration, the sales value of the warehouse model achieved steady growth. KA Self Run/ WeChat mini programs primarily relied on increase in spend per trip to drive growth. O2O is maturing, continuously enhancing consumer experience by relying on highly responsive logistics systems. For example, according to CTR Xinghan Mobile User Analysis System data, Taobao's monthly active users grew to 810 million by August, an increase of 6.4% since the launch of "Taobao Flashsale”. The development of JD Group’s delivery business further strengthened the synergy between e-commerce and O2O service.

Efficient fulfillment capability is key to supporting O2O service and even the consumer shopping experience across the entire online platform. E-commerce platforms are also continuously optimizing their logistics system to cope with diverse consumption demands. Worldpanel data shows that 38% of Douyin trips are concentrated between 9 PM to 1AM. This unique nighttime consumption habit places higher demands on building more timely fulfillment capabilities and has become an important issue for the sustained development of e-commerce platforms in the intensely competitive environment.

Private Label Penetration Accelerates

Worldpanel data shows that in the first three quarters of 2025, over 48% of Chinese urban households purchased private label products, an increase of 10 percentage points compared to the same period last year, reflecting the gradual increase in consumer acceptance of private labels. Regionally, leveraging mature supply chain systems and logistic networks, private label development was particularly strong in the East region and upper-tier cities. Meanwhile, penetration growth in prefecture-level cities exceeded 12 percentage points, indicating strong market potential in lower-tier markets as well.

Retailers enhancing control of the product supply chains, reducing consumption in intermediate links and optimizing structural costs, allows for the price advantage of private labels. In the first three quarters of 2025, private labels showed a vigorous development trend across membership stores, actively transforming traditional supermarkets and online platforms. Sam’s Club continued to strengthen the product strength of its “Member’s Mark” private brand through its product selection standards and membership mechanism. Hema created differentiated products across categories such as bakeries, snacks, and beverages through different product lines. Pangdonglai leveraged its strong local supply chain and a positive word-of-mouth effect. Furthermore, traditional supermarkets represented by CR Vanguard and Wumart Group also actively promoted private label development by optimizing their supply chains and category structures. Online platforms like Pupu and Xiaoxiangchaoshi(小象超市) formed distinctive private label ranges in high-frequency consumption categories, relying on their warehouse model and efficient O2O delivery networks to further strengthen consumer loyalty to their platforms.

Although private label has become a key focus for major retailers, long-term sustainable development still highly depends on continuous refinement of product strengths, including stable quality control, differentiated value distinct from the major national brands, and the challenge of channel coverage capability. How to strike a balance between 'low price and profitability', continuously occupy the consumer mind, and achieve synergistic symbiosis with manufacturers, supply chains, logistics systems, and other parts has become a key industry issue.

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.

Supporting these forecasts, 2025 performance to date shows resilience but also signs of weakness. Year-to-date (YTD) to September 2025, total FMCG grew 1.5%, but the latest quarterly data reveals a more subdued picture: Q3 2025 value growth slowed sharply to just 0.7% compared with the same period in 2024. This deceleration highlights the growing caution in consumer spending, which is likely to weigh on performance into 2026.

Food remains the strongest driver of growth. It is projected to expand by 3.0% in 2026, underpinned by consumer demand for convenience, nutrition, and premiumization. Actuals support this outlook, with 3.4% YTD growth in 2025 and 4.4% in Q3—a sign of stable consumer reliance on staples even as overall spending slows.

The latest report released by Worldpanel（a CTR service in China）shows that urban China's fast-moving consumer goods (FMCG) market achieved a 2.5% year-on-year sales growth in the first half of 2025, continuing its soft growth. Across the FMCG sectors (dairy, beverages, food, home care and personal care) all showed growth except for dairy. Beverages remained the key driver, with sales up 5.6% year-on-year, led by strong performances in juice and functional drinks.

The North and East regions saw significant growth, with sales increasing by 4.7% and 2.6% respectively. At the city level, the lower-tier cities, especially town and county-level markets, remained key growth engines, posting sales growth of 5.1% and 4.4% respectively in H1.

According to the National Bureau of Statistics, the retail sales of consumer goods in urban areas increased by 5.0% in H1 2025, and final consumption expenditure by more than 50% to economic growth. Expanding domestic demand and boosting consumption are key to promoting economic growth.

Although China's service consumption share continues rising, there is still room for growth compared to the countries at similar development levels. Worldpanel's out-of-home consumption data recorded an 8.7% year-on-year increase across Tier 1-5 cities in H1 2025. Consumers’ pursuit of emotional value, social needs, and entertainment experiences is accelerating the adoption of new occasions and technologies, in turn the continuous evolution of these occasions and technologies are stimulating more personalized consumption preferences. This virtuous cycle of demand and supply innovation is fueling the out-of-home consumption market's prosperity.

Offline Channels

In the first half of 2025, convenience store sales declined 3.6% year-on-year, with penetration dropping by 2.2 percentage points, notably in the North and South regions. Conversely, small supermarkets grew 7.3%, stabilizing overall modern trade (defined as hypermarkets, supermarkets, convenience stores). Community grocery stores also performed well, with sales up 4.7%.

1. Divergent performance among major retailers, Walmart Group leads in Q2, Online platforms expand offline business

Major retailers in modern trade showed different levels of performance. Worldpanel data indicates the market share of the top ten retailers in modern channels declined by 1.1 percentage points.

Driven by Sam’s Club’s robust performance, Walmart Group led Q2’s market share, gaining 0.9 percentage points in H1. Store optimization remained a key strategy: Yonghui Group’s market share dropped 0.7 percentage points due to restructuring, while Rainbow Group—emulating Pangdonglai’s model, achieved 4.2% sales growth and boosted penetration by 0.1 percentage points through store and supply chain upgrades. Bubugao Group also performed strongly by focusing on core regions and store optimization, achieving a 9.9% year-on-year increase in spend per trip.

Traditional e-commerce players are expanding into offline formats to break the limitation of the pure online shopping experience. JD Group’s JD Mall offers immersive lifestyle solutions, while JD Fresh accelerated its store model (central stores + satellite community shops) in the North region, its penetration increased 0.4 percentage points.

2. Expansion of membership stores with localization challenges

Membership stores effectively lock in consumers and enhance customer value by offering differentiated products, high-quality services, and personalized experiences. Overall penetration rose 3.6 percentage points year-on-year in H1 2025, though performance varied by retailer.

The penetration of Sam’s Club increased 5.2 percentage points in both the East and South regions with aggressive expansion and regional targeting strategies. To balance the regional gaps, Sam’s club will open Beijing’s largest store (with a 4,000㎡ cold chain warehouse) by end of 2025, targeting customers of Northern Beijing with a "shopping + mini-vacation" model. However, recent product controversies reflect the ongoing challenges in aligning between its localized product development and fast-changing consumer needs.

Hema has largely closed its X Membership stores to focus on Hema NB and Freshippo formats. Metro intensified localization to combat homogenization. Costco, concentrated in the Yangtze River Delta, struggles with limited store sizes and lacks localized services like O2O. How to effectively enhance member loyalty and adapting Chinese consumption culture is a key challenge for Costco.

3. Discount retailers explore new models while traditional retailers accelerate transformation

In H1 2025, leading discount retailers continued to capture market share through business model upgrades and supply chain optimization, while traditional retailers also accelerated their expansion into the hard discount segment.

The penetration of discount snack stores exceeded 25% in H1, with the South region as their key area. Despite a lower spend per trip in the West region, penetration reached nearly 30% with significant growth in the number of consumers. As expansion extends to lower-tier markets, these stores are growing the fastest in town-level markets.

Unlike discount snack stores, which focus on snack foods and target lower-tier markets, comprehensive discount stores tend to cover a full range of categories to meet consumer demand for high-quality, cost-effective products. HotMaxx’s "Super Warehouse" in Beijing covers many categories, from daily necessities to luxury goods, and it creates a differentiated experience.

Aldi advanced steadily through localization strategies: its Kunshan store (county-level city) set a new sales record in China. Leveraging their experience in Shanghai, regional supply chains, and a "high quality groceries and lifestyle products" strategy, Aldi’s penetration in the East region increased by 1.2 percentage points in H1.

Traditional retailers like Zhongbai Group’s "Xiaobaihui" transitioned into the hard discount sector, simplifying SKUs and focusing on high-frequency essential categories. Jiajiayue’s hard discount format also grew rapidly, while regional retailer Heli supermarket enhanced their community discount stores with O2O services.

Online Channels

In H1 2025, e-commerce sales grew 6.9% year-on-year, with penetration increasing by 0.3 percentage points. Most major platforms grew except Taotian Group and Kuaishou. Douyin’s penetration surged by 5.6 percentage points, while JD.com’s Jingxi gained 2.9 percentage points by capturing lower-tier markets through cost-effective positioning and full-linkage of digital shopping solutions.

During the 618 shopping festival (4 weeks to 2025/6/13), online penetration grew 2.9 percentage points. Among these, TaoTian Group saw 1% year-on-year volume growth by simplifying promotions (e.g. 88VIP coupons) and restructuring traffic strategies. Douyin excelled with a 4.1 percentage points penetration gain, through integrating products in lifestyle content and offline activities. JD Group leveraged its strong logistics and supply chain strengths for "quality + affordability", supported by its fast-growing food delivery network and offline formats.

O2O penetration exceeded 35% in H1, with warehouse model sales up over 25% year-on-year. Xiaoxiang Chaoshi grew its sales by 38.3% in the first half of 2025. Centered on the concept of high-efficiency and full-category instant services, major platforms are accelerating resource integration. Taobao upgraded "Hourly Delivery" to "Taobao Flashsale”, surpassing 80 million daily orders within two months of its launch on 2^nd May. The O2O sector has become a battleground for the e-commerce players.

Conclusion:

In the first half of 2025, China’s FMCG market saw moderate recovery. Price-sensitive and experience-driven consumers demand higher product quality and functionality. This pursuit drives offline and online channels to reshape the consumption landscape through both competition and complementarity.

In offline channels, Sam’s Club, Aldi, and JD Fresh precisely targeted consumer needs via membership formats, hard discount formats, and community models. Traditional supermarkets focused on optimizing product selection as part of their upgrades, while integrating with O2O services to overcome customer traffic challenges.

During the 618 shopping festival, consumers’ general stockpiling needs focused on daily necessities, while consumers diversified purchases through multiple channels. O2O services redefined "proximity”, with platform resource integration enabling the expansion of consumers’ shopping experience across all product categories.

In the context of omnichannel integration and development, the FMCG market is no longer about one way replacement between online and offline channels. Instead, it requires focusing on the core consumer demands through three dimensions: product value (quality, functionality), occasion value (experiences, personalization), and brand value (meaningful differentiation, emotional resonance), to gain a competitive edge in the face of intense market competition.

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.

Despite challenging macroeconomic conditions in 2024, the sector saw a 0.8% annual value growth, which was supported by strong volume growth of 4.4%, but dragged down by a 3.4% decline in average selling prices (ASP).

Looking at the respective quarters in 2024, China’s FMCG grew at 1.5% in Q1, 1.8% in Q2, -0.6% in Q3, and a small rebound to 0.4% in Q4. The first quarter of 2025 continued the growth momentum as value grew 2.7% compared to the previous corresponding quarter, as some macroeconomic indicators improved, and the government announced policies to support domestic consumption. Additionally, the quarter was supported by strong spending during the Chinese New Year season.

“The price deflationary trend was notable in 2024; it dropped 3.4%—the biggest ASP drop over the past four years,” said Derek Deng, head of Bain & Company’s Greater China Consumer Products practice. “Another interesting trend we saw last year, was how aging population and resident outflows from higher-tiered cities, drove material value growth in Tier 3 and 4 cities, which significantly outperformed the higher-tiered cities. This is in contrast with 2020-2023 trends, where Tier 2 cities led FMCG growth.”

Home care continues to lead growth

In 2024, home care continued to lead FMCG growth, expanding by 2.4% annually after a robust performance in 2023, driven by health and hygiene needs. Packaged food and beverage followed, with annual growth at 2.0% and 1.5%, respectively.

Personal care continued a downward trend, dropping 2.3%. Medical cosmetology has become an increasingly competitive alternative over the past few years, affecting skincare and makeup consumption, while lower birth rate caused declining diaper sales. Toothpaste was the only category that bucked the trend as consumers saw premium options that met their needs.

In Q1 2025, the home care, personal care, and packaged food categories increased value, while beverage growth stagnated. Interestingly, personal care reversed its downward trend with a significant year-on-year value growth of 4.0% due to significant volume increase. Home care maintained the top position in value growth (+6.1%), packaged food also saw robust value rise (+3.2%), while beverage grew a slight 0.5%.

E-commerce and super/mini channel mix continued to dominate

In 2024, the overall online and offline channel mix for China’s FMCG market remained stable. However, many changes took place within the offline and online channels respectively. Within offline channels, the grocery and super/mini (which includes fast growing discount store) formats outperformed the market primarily in Tier 3 and Tier 4 cities, where urbanization increased demand. In higher-tiered cities, club warehouses continued their growth trajectory.

Online, Douyin maintained rapid growth and share gain, while other players were relatively stagnant. 2024 saw a clear polarization between two major categories: non-food and food. Online penetration continued to grow in non-food categories while food products, which are more prone to safety issues, were mostly purchased offline. Online channels also featured more small brands and cheaper prices, especially in the personal care and home care categories, which may explain the larger ASP declines in these categories vs. food and beverage categories.

Online-to-offline (O2O) growth slowed significantly in 2023 and continued a clear downward trend in 2024, dropping 10.0% across all FMCG categories. Across platforms, community group buying, and horizontal marketplaces declined drastically, while vertical e-commerce platforms experienced faster growth. Community group buying has been driven by price advantages but is now facing intense competition from discount stores and other formats. Vertical grocery e-commerce was a standout performer, growing 26.0% in 2024.

“Post-Covid, consumers have embraced online grocers with reliable, on-time delivery. Leading platforms expanded while optimizing profitability through initiatives like category diversification and private-label offerings,” said Rachel Lee, General Manager of Worldpanel in China. 

“On average, Chinese consumers purchase from more than seven different channel types in a year. Virtually, all Chinese consumers can be considered omnichannel consumers. Both online and offline channels are continuously evolving into new formats to meet consumers' core needs. Value and convenience are the key drivers behind each channel choice.”

Both insurgent and domestic brands outperformed the market in 2024

Brand competition was still intense in 2024, with the top five brands losing share in more than half of FMCG categories.

In emerging categories such as juice, instant coffee, facial tissue, nutrition supplements, and ready-to-drink tea, growth was mainly driven by insurgent brands focused on healthy attributes and innovations that won market shares away from traditional brands.

Domestic brands gained share from foreign brands on an aggregate basis in nearly half of the 27 categories tracked. Since 2012 (when the report started to track this trend), domestic brands have demonstrated a strong and steady ability to gain share from foreign brands on an aggregate basis—claiming 76% of the market in 2024.

Consumers trading down while premium segments thrived in categories that innovate and cater to specific needs 

The biggest driver affecting total household spending in 2024 and in Q1 2025 was product choice as consumers were able to increase volume by seeking more affordable alternatives to products they used to purchase. Downtrading was consistent across all four major categories.

In four sub-categories - juice, instant coffee, toothpaste, and sanitary pads - the premium segment outgrew the market overall, driven by innovations and product upgrades. Juice witnessed both volume and ASP growth because of increased demand for healthy and nutritious beverages. The instant coffee category also experienced substantial growth in ASP, matching consumers’ increasing demand for more sophisticated, high-quality instant coffee. Toothpaste also had a relatively high ASP growth rate from 2023 to 2024 due to growth in the whitening segment, which has a higher ASP. Sanitary pads also saw growth in the premium segment, as brands are investing in product upgrades as young women become more educated about menstrual health.

The premium segment declined in value for facial tissue, packaged water, personal wash, makeup, shampoo, skincare, yogurt, and hair conditioner, as consumers primarily shifted to white-label and private-label brands as credible alternatives.

“The 2025 pricing environment continues to be challenging. Brands will face a strategic choice: specialize in the premium segment, even if it is declining relative to the overall market, or determine how to compete in the mass/mainstream segments, or compete in both,” said Bruno Lannes, a senior partner at Bain & Company’s Consumer Products and Retail practices.

To succeed in the current trading down environment, the report suggests using Bain’s Elements of Value® framework which measures consumers’ perceptions of 31 attributes across four categories: functional, emotional, life-changing, and global impact. Brands should assess which value they are delivering to consumers and the price segments they should compete in.

The latest report released by Kantar Worldpanel shows that the fast-moving consumer goods (FMCG) market in urban China had a positive start in the first quarter of 2025, with sales increasing by 4.2% year-on-year.

In terms of different city levels, driven by the festive holidays and the return of family visits, consumption in lower-tier cities grew by 5.9%, with the town-level market growing by over 10%. The North region experienced the most significant consumption growth, increasing by more than 7% compared to the same period last year.

The Spring Festival effect also drove growth in various categories. Affected by the homecoming and family gatherings, the sales of beverages and seasonings increased significantly in the past 12 weeks. Meanwhile, homecare categories also showed a remarkable growth trend, with sales up by 7.3%, as consumers' understanding of homecare products deepened and demand gradually increased. The dairy category remained relatively weak in the first quarter, but the decline narrowed compared to the same period last year.

In the first quarter of 2025 the sales of imported products decreased by 1.7% year-on-year, with both the average household spending and average purchase price declining. Regarding various markets, the United States, France, and Japan remained the top three markets for consumers to purchase imported products. However, compared to the same period last year, the sales growth of these markets slowed to varying degrees.

Personalized and diversified consumption occasions injected more vitality into the out-of-home consumption market. Kantar Worldpanel's out-of-home data shows that at the beginning of 2025 the out-of-home consumption market continued to flourish, with a 10% year-on-year increase in tier 1-5 cities, with notable growth in consumption occasions such as sports and amusement places.

Offline Channels: Community Grocery Stores Shine, Leading and Regional Retailers Differentiate Strategies

1. Modern trade witnessed divergent growth, with community grocery stores standing out

Data from Kantar Worldpanel shows that in the first quarter of 2025 the sales of modern trade (hypermarkets, supermarkets, convenience stores) increased by 2.4% compared to the same period last year, driven by small supermarkets. During the Spring Festival population mobility and the gifting occasion drove the growth of small supermarkets in lower-tier cities, with significant increases in both sales volume and penetration. The decline of hypermarkets narrowed, and the sales of large supermarkets decreased by 0.9% year-on-year. The purchase frequency and spend per trip of convenience stores increased, but due to a 1.6 percentage point drop in penetration, the overall trend was downward.

The community grocery stores demonstrated strong growth momentum. With high-frequency consumption occasions and proximity to residential areas, they performed exceptionally well in lower-tier markets, especially in provincial capital cities and county-level cities. Grocery stores grew 8.1% year-on-year in the first quarter, driven by core categories like food and fresh produce, which combine social interaction with essential needs. Neighborhood engagement strengthened customer loyalty and met instant household demands, driving significant growth in purchase frequency and spend per trip.

2. Leading and regional retailers pursue differentiation

Among the top 10 retailers, Walmart Group, SPAR Group, and Hema increased their market share in modern trade.

The market share of Jiajiayue increased by 0.2 percentage point in the first quarter. Among them, Jiajiayue discount stores, which actively responded to the discount trend and focused on lower-tier cities in the North region, achieved significant growth in purchase frequency and spend per trip.

According to publicly available data from Hema, during 2024 up until the Year of the Snake, Hema maintained an average pace of opening a new store every five days. Through an active store expansion strategy, Freshippo rapidly replicated its mature model, while Hema NB focused on community-based discount business. Kantar Worldpanel’s latest data indicates that Freshippo’s penetration grew 1.3 percentage points year-on-year in the first quarter. Meanwhile, Hema NB, with its extreme cost-performance advantage, demonstrated strong competitiveness in eastern China, increasing penetration by 1.6 percentage points.

Regional retailer Huangshang Group in Hubei Province achieved double-digit sales growth in the first quarter. The Huangshang Group actively formulated its sales strategy according to local consumers' demands: it strengthened festival commodity preparation, ensured stable fresh-product supply through its central kitchen, actively responded to the National Healthy Lifestyle Initiative, and attracted customers via innovative experiential services. Additionally, it upgraded stores by benchmarking against Pangdonglai, optimizing product lines and in-store layouts to enhance the shopping experience.

Facing the complex and volatile external environment, Chinese retailers actively implemented the national strategy of expanding domestic demand and promoting consumption. They explored the domestic market, integrated high-quality foreign trade resources, transformed foreign trade capacity into domestic production quality and cost advantages, and strengthened the stability of the large domestic cycle to cope with the challenges of external risks.

3. Discount Retailing Continued to Prevail and Differentiation Remained the Key Weapon

In the first quarter of 2025 discount snack stores had a penetration of 18%. Regionally, the South region remained a crucial area for discount snack store development. With the continuous increase in the number of stores in lower-tier cities, discount snack stores saw the fastest growth in town-level markets.

In the 2025 Retail Press released in February, we proposed that anchoring different competitive strategies is essential for maintaining and expanding market share. Different manufacturers have different answers on how to break down and achieve differentiation.

In quarter 1 of 2025 HotMaxx’s sales increased by over 25% year-on-year, with its penetration in upper-tier cities rising by 1 percentage point. While stabilizing its discount snack business, HotMaxx recently ventured into clothing outlets and anime merchandise sectors, further consolidating and attracting young consumer groups.

Data shows that in the first quarter of 2025, 20% of Shanghai households purchased FMCG products at Aldi, with sales growing by 56.2%. In April 2025, Aldi expanded beyond Shanghai, with two stores opening simultaneously in Suzhou and Wuxi, further expanding their territory. With years of accumulation in Shanghai, Aldi has established brand recognition and supply chain advantages in the Yangtze River Delta. The expansion includes a new warehouse in Jiangsu to improve operational efficiency by integrating with local suppliers. With rising demand for fresh products as temperatures warm, Aldi’s entry offers consumers in new markets more diverse and affordable choices. The opening day in Wuxi set a new sales record in China.

Online Channels: JD Seizes Instant Retail, and Interest-Based E-commerce Continues to Grow

In the first quarter the online channels demonstrated strong performance. According to the National Bureau of Statistics, online retail sales of physical goods increased by 5.7%. Kantar Worldpanel's data indicates that the penetration rates of major e-commerce platforms all improved, with the Douyin platform showing the most significant growth, increasing by 6.3 percentage points year-on-year.

Traditional e-commerce giant JD Group is enhancing its market share through its cost-effective Jingxi self-operated platform and a stronger focus on the O2O sector.

Relying on JD Group’s logistics network, Jingxi ensures fast delivery and shopping experience. By focusing on high-frequency consumer categories such as daily necessities and fresh produce, and closely collaborating with source suppliers, Jingxi offers a dual guarantee of "low prices + quality." In the first quarter, it achieved high-speed sales growth, with its penetration increasing by 1.5 percentage points year-on-year. In the O2O sector JD group is capturing consumer attention with its "second delivery" service. With the launch of multiple categories and brand flagship stores, it is further meeting consumers' diverse and high-quality instant needs.

In the first quarter interest EC platforms continued to grow with the model of “content recommendation+instant conversion” Xiaohongshu has enhanced its platform influence with global traffic and external cooperation, and its penetration increased by 0.5 percentage points. While accelerating its e-commerce business sector, it fully relied on content ecosystem innovation to break the traditional e-commerce model of "centralized traffic distribution" and innovated the function of attaching product links in the comment sections. This not only improved the convenience of users' shopping but also promoted product sales conversion. Through this model, Xiaohongshu achieved a closed loop of users, goods, and occasions, creating a more complete and convenient shopping environment for consumers.

Conclusion

In the first quarter of 2025, the Chinese FMCG market was off to a good start. However, the industry still faces multiple challenges, including intensified competition, insufficient demand, and a complex external environment. Brands and retailers need to start from consumer needs, fully recognize the characteristics of "fragmented consumption occasions and pursuit of cost-performance," and adopt omnichannel strategies to respond to market changes.

In offline channels, community grocery stores continue to deeply explore the lower-tier cities market; Aldi steadily expands in the Yangtze River Delta region with its cost-effective products, mature supply chain system, and precise market positioning. Hema's business model shifted from "multi-format development" to a dual-core drive of "large fresh produce stores + discount stores", focusing on mature formats.

In online channels, JD Group integrates supply chain resources, targets consumer groups precisely, and relies on its long-established efficient logistics as its core competitiveness of "speed". Xiaohongshu leverages content ecosystem innovation to break the traditional e-commerce "centralized traffic distribution" model, achieving a closed loop of users, goods, and occasions, and delivering a more complete shopping experience for consumers.

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.

The latest report released by Kantar Worldpanel shows that the fast-moving consumer goods (FMCG) market in urban China grew by 1.2% year-on-year in the fourth quarter of 2024 in terms of value sales. The overall sales for the entire year increased by 1.7%, indicating a stable development trend.

In terms of categories, the beverage category saw significant growth, with annual sales rising by over 7%. Meanwhile, the personal care category continued to decline, but the decline narrowed in the fourth quarter. The dairy category still faced considerable growth pressure.

The East, West and North regions all experienced growth in FMCG but the South region saw a decline of 1.9%. At the city levels, lower-tier cities, especially county-level cities and town-level cities, emerged as key drivers of FMCG market growth. With the increase in the urbanization, the demands of the consumer market will be accelerated further.

click here to access the report

Modern trade channels (including hypermarkets, supermarkets and convenience stores) saw a slight 0.4% decline in the fourth quarter. Large formats such as hypermarkets and supermarkets remained the main drivers of this decline.

Among small formats, convenience stores also experienced a decline in the fourth quarter. The South, a key region for the development of convenience stores, saw a significant drop in the fourth quarter. Data from the Kantar Worldpanel indicates that the penetration of convenience stores in the South region decreased by 3.7 percentage points. It was impacted by the discount formats, as discount stores attracted a large number of customers from convenience stores. On the other hand, it was also affected by the online channels. The continuous improvement of O2O platforms and the ‘hourly delivery’ services of e-commerce platforms has weakened the convenience advantage of convenience stores.

Among the top 10 retailers, Hema had a remarkable performance, driven by active store expansion and business growth. In the fourth quarter, the market share of Hema increased by 0.4 percentage points compared to the same period last year. Walmart Group and SPAR also saw an increase in market share.

Community-Oriented Hypermarkets and Supermarkets, and the Rise of Regional Retail Brands

Hypermarkets continued to face downward pressure in 2024, but the decline has significantly narrowed while supermarkets have stabilized their growth. 

For large formats, attracting consumers back to stores is a key challenge. This requires focusing on consumer needs to optimize product structures, emphasizing health, functionality and emotional attributes of products, and enhancing the emotional experience of products through scene-centric displays and marketing.

At the same time, it is also crucial to strengthen the in-store service details that are most easily perceived by consumers. Breaking away from the traditional ‘product selling space’ strategy and actively transforming into a ‘lifestyle experience centre’ to meet consumers' diverse needs during the shopping process and create a personalized shopping experience, are key to enhancing consumers' experience and loyalty to the store.

Several leading retailers, including Yonghui Group and Bubugao Group, have adjusted and upgraded their stores. By optimizing product structures, providing processed fresh products, and developing private label ranges, they aim to meet consumers' personalized shopping needs and in-store experience.

Regional retailers, especially those in Henan Province, have delivered outstanding performances in recent years. In addition to the industry benchmark brand, Pangdonglai, other players such as Dennis and Dazhang Group have also achieved strong performance. These retailers have deeply explored local consumption habits, refined consumer demand levels, and built a multi-level, multi-format retail network to cultivate the regional market. Dazhang Group, with its business philosophy of ‘low price, high quality, and freshness’, provides consumers with cost-effective products. It actively develops private labels and reduces costs by optimizing the supply chain. At the same time, its multi-format development includes premium supermarkets targeting young consumer groups and community stores focusing on the specific needs of local residents.

With the growing elderly population and the rising convenience needs of young consumer groups, the emergence of community-oriented small formats has further promoted the development of small-sized retail formats. 

In 2024, the sales of small supermarkets increased by more than 10%, and grocery stores grew by 7%. This community-oriented small format, which is close to consumers' daily living radius, will become an inevitable trend in development. 

Retailers need to dynamically adjust regional development strategies according to the population structure, economic level, and the existing development level of small formats in the regional market and select product categories according to the specific needs of community residents, offering more life-oriented products and services.

Omni-channel Integration Responds to Consumers' Instant Needs

Although consumers are increasingly rational in their shopping behavior, they are still willing to pay a premium for ‘instant gratification’. In 2024, the warehouse model performed exceptionally well, with annual sales growth increasing by over 26%.

Retailers across various formats are also expanding the instant retail market through integration and upgrades. 

Sam's Club and Hema have accelerated the development of service networks by increasing the number of pre-warehouses. Walmart Group has accessed Meituan's delivery service. According to the Kantar Worldpanel data, Pupu Mall(朴朴超市) a representative of the warehouse model, achieved a sales growth of over 7% compared to the same period last year. Xiaoxiang Chaoshi rapidly expanded to 15 cities in 2024, achieving high growth by meeting users' instant and diversified needs through instant delivery, promotional activities, and the development of private labels. Taobao revamped the homepage with the addition of an ‘hourly delivery’ entry point. The integration of Dada Group into the JD.com ecosystem and the upgrade to ‘JD Speed Delivery’ with the fastest delivery time in 9 minutes. JD Fresh, by integrating warehouse and store formats, achieved significant online sales growth supported by its strong logistics and after-sales service. The express of Easy Joy (易捷速购) also entered the instant retail market by leveraging its store network.

To meet consumers' demand for immediacy, retailers need to comprehensively upgrade their supply chains, logistics, technology, and consumer experience. By optimizing omnichannel integration, strengthening technological innovation, and formulating various category strategies based on consumer needs for necessities, personalized items, and self-indulgent products. As technology progresses and consumer demand continue to evolve, instant retail will continue to further deepen and become a significant growth engine for the retail industry.

Discounts and Differentiated Services Meet Consumers' Demand for Quality and Affordability

Discount retailing continues to thrive and is undergoing transformation. According to the Kantar Worldpanel data, the penetration of snack discount stores exceeded 30% in 2024, with significant sales growth in town-level markets. To expand their market, retailers are increasingly investing in discount formats.

The hard discount format has become a key battleground for retailers. Aldi, a representative of hard discount, has deepened its presence in the Shanghai market, with its penetration increasing by 9 percentage points in 2024 with over a quarter of Shanghai households purchasing FMCG products at Aldi. Meanwhile, Aldi is about to expand beyond Shanghai into the Yangtze River Delta region. 

Local retailers like Hema and Yonghui Group are also actively embracing the hard discount format, with Jiajiayue's Haohuixing discount stores growing significantly. The MMHM Group expanded its all-category wholesale supermarket format to enhance the shopping experience; Wanchen Group opened its first ‘Lai You Pin’ discount supermarket, entering the hard discount arena; and Hot Maxx recently launched its first 10000-square-meter warehouse style discount store in Nanjing.

In 2025, to continue moving forward in the discount wave, anchoring different competitive strategies is essential for maintaining and expanding market share. Taking Hot Maxx as an example, whether expanding business models or broadening product selections, the focus remains on providing unique shopping experiences and high-cost-performance products to surprise consumers. In 2024, Hot Maxx's penetration in upper tier cities increased by 2.3 percentage points.

On the other hand, the market share of e-commerce channels in 2024 remained similar to the previous year. Various e-commerce platforms drove sales growth through strong promotional strategies. However, this, together with intensified price competition, led to a decline in average selling prices due to intensified price competition.

Among different e-commerce platforms, Taotian Group maintained its leading position, but its market share decreased by 3 percentage points compared to last year. Leveraging its strengths in short videos and live streaming, Douyin surpassed Pinduoduo to become the second-largest e-commerce platform. In 2024, 49% of urban households in China purchased fast-moving consumer goods (FMCG) through the Douyin platform. Furthermore, by vigorously developing local services, Douyin created new consumption scenes and enhanced user stickiness through interactions with local consumers. Based on consumption data from local services, brands can gain deeper understanding of local consumer preferences, adjust their product and service marketing strategies more effectively and enhance consumers' purchasing intentions.

Xiaohongshu, a content-sharing platform covering multiple fields, with its precise content-pushing mechanism and strong community attributes, experienced significant growth in upper-tier cities, creating different competition with other comprehensive e-commerce platforms. 

Facing consumers' price sensitivity, a simple low-price strategy is insufficient to meet their demand for cost- performance. However, there are still structural development opportunities in the e-commerce market. Future e-commerce competition will no longer be a zero-sum game but a complementary multi-format model. It is essential to maintain core strengths while further integrating shelf-based and content-driven approaches, re-evaluating category advantages, experience and service differentiation to establish competitive advantages beyond price and explore new growth opportunities. Expanding local services will also become a critical strategy for e-commerce platforms to break through price wars and achieve their business scope.

The value of membership systems is playing an increasingly important role, especially for consumer groups seeking high-quality, low-price products and premium services. 

Membership stores developed strongly in 2024, with annual sales increasing by over 20% year-on-year. International brands like Sam's Club, with their mature supply chains, cost effective private labels, and strong member loyalty, have rapidly expanded in the Chinese market, creating a leading market presence. According to the Kantar Worldpanel data, Sam's Club's penetration exceeded 7% in 2024, a 2 percentage point increase from the previous year. This year, it will continue to focus on penetrating lower-tier markets. Local brands are also actively expanding their territory. For example, Mclub, under Sun Art Retail Group, had 9 stores nationwide in 2024 and plans to deepen its market in Jiangsu in 2025. Kantar Worldpanel data indicates that Mclub 's sales growth was particularly notable in 2024, becoming the most significant growth segment within the Sun Art Retail Group's portfolio.

In today's Chinese retail market, the traditional model of relying on a single channel for continuous growth is no longer sustainable. To unlock incremental value in a saturated market, retailers will increasingly depend on omnichannel collaboration, enhanced product competitiveness, and refined consumer engagement. The core demand remains meeting the diverse needs of consumers. Therefore, for retailers, it is increasingly important to understand the role that different formats play in the minds of consumers when expanding their multi-format presence.

For brand owners, it is essential to actively collaborate with retailers and adapt to the development of community-oriented supermarkets, discount retail, and omnichannel integration. By understanding the emotional and functional needs of consumers for their brands and by differentiating product portfolios and marketing strategies, they can strengthen their presence in multiple dimensions and continue to capture consumers' attention.

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.

Report’s 10-year analysis show ‘repertoire’ and ‘loyalist’ behaviors remain but ‘repertoire’ shoppers have been buying more brands

China’s fast moving consumer goods (FMCG) growth has been decelerating over the first three quarters of 2024, according to the 13th China Shopper Report 2024 Vol. 2 released today by Kantar Worldpanel and Bain & Company.

For 2024 Q3 year-to-date (YTD), the average FMCG value growth of 0.8% was a result of a 4.6% increase in volume, coupled with a decline of 3.6% in average selling prices (ASP). Looking at the respective quarters, China’s FMCG grew at 2.0% in Q1, 1.6% in Q2, -1.1% in Q3, with a 3.5% decline in September alone.

“The growth deceleration in China’s FMCG is due to the ASP deflationary trend which we had identified since 2021. We are seeing the highest ASP decline since 2021, while the Consumer Price Index rose by 0.3% during the same period (i.e., 2024 Q3 YTD). The intensifying market competition and the escalating demand for value for money are the primary drivers behind this trend.”,” said Rachel Lee, General Manager of Kantar Worldpanel in China.

“FMCG’s performance lagged total retail sales, partly due to the country's pro-consumption policies aimed at durable goods. There has also been a continuous reallocation of consumer expenditure towards service sectors such as dining and travel, with retail sales in these areas experiencing a 6.7% increase during the first three quarters of 2024.”

Home care - the only segment that recorded positive growth across all three quarters

Within the four major FMCG sectors, home care led growth with an increase of 3.5% in 2024 Q3 YTD compared to the same period last year, closely followed by beverages at 3.3%. Packaged food experienced a moderate growth of 1.4%, while personal care saw a widened decline compared to 2023 Q3 YTD, reaching a similar level to that of 2022, with a decrease of 4.4%. 

Interestingly, home care was the only segment that maintained full three quarters of growth as it experienced the lowest ASP deflation and strongest volume growth compared to other sectors. Overall volume growth was supported by both increased penetration and frequency, benefiting from heightened health and hygiene needs as well as a growing demand for improved quality of life at home.

The personal care sector faced accelerated ASP deflation at -9.6%, compared to -3.3% during the same period in 2023 Q3 YTD. This deflation persisted throughout the year and was driven by consumers' cost-consciousness, competitive pressure from duty-free channels and online platforms’ aggressive promotions, and domestic insurgent brands offering value-for-money alternatives.

Offline channels outperformed market; online penetration showed muted growth

Driven in part by the expansion of discount chains and club warehouse formats, offline channels achieved a growth rate of 1.8% YTD and experienced less price deflation at -3%, compared with -6%ASP of online channels. The channel landscape is characterized by smaller formats such as super/mini and grocery stores gaining share, with discounters outpacing non-discounters. Hypermarkets continued to decline at a mid-single-digit rate, while club warehouses saw notable growth of 17% supported by strong demand in Tier 3 and 4 cities, though this was a slowdown from 58% in the same period of 2023. This growth benefits from China’s expanding middle class, which seeks premium quality and innovative products at good value.

Compared with 2023 Q3 YTD, overall online penetration remained stable with traditionally high online penetration categories (such as skincare, beauty, infant formula) growing at 0-2% online penetration. In 2024 Q3 YTD, e-commerce slightly declined by 0.6% and lost market share for the first time since its inception. Its robust volume growth of 6%,was offset by a similar-sized ASP decline resulting from heavy promotions across nearly all platforms. E-commerce platform Douyin continued to grow at a double-digit rate of 35%, although this growth was slower than the 65% seen in 2023. Douyin has now overtaken JD as the second-largest e-commerce channel by GMV. Discount platforms like Pinduoduo saw lower growth compared to 2023, while Kuaishou declined by 12%. 

Chinese consumers preferences have shifted over past decade

At a time of increased promotional activations by brands and platforms, research found that categories behave differently along the "repertoire-loyalist" continuum, and updated analysis builds on previous studies conducted in 2013, 2016, and 2019. In repertoire categories, increased shopping frequency often leads to consumers buying a wider variety of brands, while in loyalist categories, higher purchase frequency does not increase the number of brands purchased.

This year’s findings reveal both consistent trends and notable shifts:

? Shoppers in most repertoire categories have become more repertoire-oriented, likely due to intensified competition and the increasing availability of brands.

? Online penetration has minimal impact on shopper behavior, regardless of category type or level of online adoption.

? Markets remain highly competitive, with an average of 18% of the top 10 brands being replaced since 2019 across the 27 categories studied.

? Brand penetration continues to be the key driver of performance for leading brands, surpassing purchase frequency and repurchase rates.

? Average shopper engagement with brands, measured by purchase frequency, has steadily declined over the past decade.

? Revenue contributions from low-frequency shoppers have grown in importance across most categories.

“As Chinese shopper behavior evolves, one critical fact holds true: market leadership is determined by a brand’s ability to boost and maintain household penetration. Across all categories studied, the brands that earned market leadership have significantly higher penetration than competitors,” said Derek Deng, head of Bain & Company’s Greater China Consumer Products practice. “The big challenge is that the shopper base is a leaky bucket – and the holes are getting bigger each year. Chinese shoppers still love brands, but many will continue to switch brands.”

To succeed in 2025, China’s FMCG players need to consider five key strategies:

1. Re-examine and keep innovating portfolio.

2. Maximize physical availability, both online and offline - capitalize on the full potential of omnichannel approaches.

3. Embrace the out-of-home opportunities.

4. Implement focused marketing campaigns aimed at recruiting consumers.

5. Continue to manage costs, given the persistent deflationary environment, including the investigation of partnership opportunities and asset-lite operating models.

“The Chinese government has launched more stimulus measures and issued guidance to support household consumption since late September. Although it will take patience and time for the stimulus to fully take effect, it is likely to progressively build consumer confidence which will later translate into higher consumption” said Bruno Lannes, advisory partner at Bain & Company’s Greater China Consumer Products and Retail practices.

Note

Report coverage?Tier 1-5 cities in China.

Tier 1 cities: Beijing, Shanghai, Guangzhou; Tier 2 cities: province capital excluding Beijing, Shanghai, Guangzhou, adding Tianjin, Chongqing, Shenzhen, Dalian, Qingdao; 

Tier 3 cities: prefecture-level city, excluding Dalian and Qingdao; 

Tier 4 cities: county-level city; 

Tier 5 cities: the residence of the county government

According to past research by Kantar Worldpanel (a CTR service in China), a brand's market position is highly correlated with penetration (the number of consumers), and the key for a brand to expand its scale and enhance its strength is to attract more consumers. This is universally applicable regardless of whether the market is in a downturn or recovery phase; regardless of the category or brand size; in any country or region. This pattern is more obvious among manufacturers with consumer bases over 100 million households.

According to the latest report from Kantar Worldpanel, there were 25 Fast Moving Consumer Goods (FMCG) companies reaching over 100 million urban Chinese households during the 52 weeks ending October 4th 2024. Compared to the previous year, these top 25 companies have experienced an overall increase of 2.48 million urban Chinese households, equivalent to a 1.2% growth. Among them, Wahaha has seen a rapid growth of 40.5% and has debuted on this list for the first time. Other companies that have grown relatively quickly include Vinda Group, Hengan Group, Nongfu Spring, Nice Group, Liby Group, and China Resources Group.

"Chinese consumers are becoming more prudent in their spending, considering more on price and total expenditure, but are also willing to pay a premium for products that are healthy, efficient, and have emotional value. In this new reality, the FMCG market is not advancing as rapidly as in the past but is recovering gradually. We have observed that the top FMCG companies, by accurately grasping the needs of different consumers and continuously launching innovative products that adapt to new occasions and new needs, as well as driving emerging channels and penetrating deeper into lower tier markets, have successfully attracted new consumers and stood out in the competition", said Rachel Lee, General Manager of Kantar Worldpanel China, who believes that this strategy is crucial for FMCG companies.

Meeting Sophisticated and Diversified Consumer Needs Helps Top Manufacturers to Attract Fans

Kantar Worldpanel indicates that Chinese consumers' demand for health keeps increasing. Although consumer behavior is now more rational and prudent, with the enhancement of health awareness and the new needs derived from different life occasions, products that can bring happiness and relaxation are becoming more important. Consumers are still willing to pay a premium for solutions that are healthy, convenient, and provide emotional value.

Among these top 25 companies which have over 100 million Chinese urban households, Wahaha is the fastest-growing manufacturer in terms of consumer base in the past year. For packaged water, in addition to the flagship product Wahaha purified water, it has also focused on developing "Oxygen-World water" with water-quality safety and health, and environmental protection as selling points. Packaged water has recruited 36.9 million more urban Chinese households for Wahaha. In addition to packaged water, Wahaha has also targeted the upgrade needs of health, launching a series of low-sugar, low-fat, sugar-free, and fat-free beverage products, meeting the health needs of the Chinese consumers for beverages.

Nongfu Spring's Eastern Leaf Tea attracts consumers with a "healthy original tea" image, while ‘Tea π’ is loved by consumers for its unique taste and packaging. Nongfu Spring's tea drinks have successfully attracted 12.64 million urban Chinese households.

Among the non-food sector, the demand for immediate cleaning is rising, and consumers are relying more on paper products for everyday life. Hengan Group and Vinda Group have captured this market trend, mainly promoting products that are not easy to break when wet, such as the MianRen(??) and YunGanRouFu(????) series, which are welcomed by the market for their high quality. Specifically, facial tissue paper products of Hengan Group and Vinda Group have attracted 9.44 million and 4.55 million urban Chinese households, respectively. In addition, Hengan Group is also actively exploring new usage occasions for paper products, such as oil absorption and cleaning in the kitchen, and actively promoting the development of kitchen paper products.

Liby Group has actively responded to consumer needs on a higher quality of life by promoting Master Fragrance laundry detergent, which can provide a pleasant emotional value. As of October 4, 2024, within 52 weeks, Liby laundry detergent has added a total of 8.4 million urban Chinese households.

Diversified Omni-Channel Strategies to Attract New Consumers

The development of channels in China is becoming more and more multi-dimensional, and future retail channels will also be more diversified, personalized, and intelligent. Effective channel differentiation has also become a key strategy for various manufacturers. This year, consumers choosing to shop in physical channels, especially convenient proximity channels, have increased, while shopping online and O2O has decreased. Kantar Worldpanel data shows that within the 52 weeks ending October 4, 2024, the penetration rate of e-commerce and O2O has dropped by about 1-3 points compared to the same period last year. However, both e-commerce and O2O are still very important.

At the same time, emerging retail formats are now springing up, constantly attracting consumers. For example, membership stores, with store and warehouse integration, brings a convenient shopping experience, combined with streamlined and high-end SKUs, has resulted in an increase in the number of shoppers. Its penetration has risen by about 2 points. On the other hand, discount stores, which caters to consumers' demand for cost-effectiveness, has seen its penetration rise by about 3 points. Snack store is also a new channel format, attracting many children and adults with a variety of novel and interesting snack products, and the penetration has increased by around 10 points.

Although the market share of these emerging channels is relatively small, they provide new growth opportunities in the rapidly changing market. For manufacturers, it is crucial to have a differentiated channel strategy and seize these emerging opportunities. Among these emerging channels, leading FMCG companies have performed well. Data from Kantar Worldpanel shows that within the 52 weeks ending October 4 2024, these 25 leading manufacturers have attracted 19.59 million, 4.42 million, and 2.5 million urban Chinese households in snack stores, discount stores, and membership stores, respectively. It is worth noting that at least 60% of the new consumers in these emerging channels are contributed by these 25 leading manufacturers.

Winning new shoppers in the lower tier

Although the FMCG market is in a gentle recovery, within the 40 weeks ending October 4, 2024, China 1-6 tier cities (including town) have increased by 1.4% compared to the same period last year, and 3-5 tier cities have grown faster, with a growth rate of 2.9%. The growth rate of town markets is even higher. It can be seen that with the development of China and the inclination and support of national policies, low tier markets will be the key to driving market recovery. At the same time, the lifestyle and purchasing methods of consumers in low tier market will become more and more similar to those of consumers in the upper tier cities, which also indicates that winning consumers in lower tier markets can lay a solid foundation for future growth.

As the fastest-growing manufacturer in attracting Chinese households, Wahaha's national consumer expansion, 58% are contributed by 3-5 tier cities. Hengan Group and Vinda Group have experienced a nationwide growth in China urban households up to 4.8% and 4.0%, respectively, with households in tier 3-5 cities contributing 66% and 71% respectively to their overall increases.

In addition to 3-5 tier cities, town markets are also a blue ocean for the development of the Chinese market in the future. Currently, in town markets, the manufacturers with the highest number of consumer households are Yili, Mengniu, Haday, Procter & Gamble, and Master Kong, which is basically consistent with the national ranking, indicating that the leading enterprises with strong distribution advantages still have significant advantages in the town market.

This year, Wahaha, which has the fastest growth in the number of households, has performed particularly well in town market. Within the 40 weeks ending October 4^th 2024, Wahaha's penetration in town has exceeded 70%, greatly narrowing the gap with other leading enterprises.

In summary, in the context of a gentle recovery, it is crucial to attract consumers and stand out from the competition in order to gain market share. Manufacturers must respond to different consumption occasions, deeply understand the real needs of consumers, and capture their attention. In addition, a differentiated omni-channel strategy and tapping into lower tier market are also key to ensuring that consumers can conveniently purchase your products at any time, from any place.

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.

The latest report released by Kantar Worldpanel indicates that the fast-moving consumer goods (FMCG) market in urban China continued to recover steadily in the second quarter of 2024, with a year-on-year sales growth of 2.5%.

In the first six months of 2024, the overall market sales grew by 2.3% year-on-year, with the difference in performance across categories continuing to widen. The beverage category became the main engine of growth in the FMCG market, with an 11% year-on-year increase in the first half of the year, with ready-to-drink teas and fruit juices showing even stronger growth. While homecare and food categories sustained positive growth, the dairy and personal care categories are facing more serious growth challenges.

The latest data released by the National Bureau of Statistics also shows that the retail sales of consumer goods in urban areas increased by 3.7% in the first half of the year, and the contribution of final consumption expenditure to China's economic growth was 60.5%. However, the lack of effective domestic demand is also affecting the full recovery of the FMCG market.

At the city level, the lower-tier market continued to be the key driver of China's consumer market, particularly the consumption of prefecture-level and county-level cities where growth has exceeded 4%. The East and West regions led the consumer recovery, recording year-on-year growth of 6.8% and 3.1% respectively.

click here to access the report

Modern trade: 

Proximity channel continues to lead, while the performance of different formats increasingly diverges

In the first half of 2024, Chinese consumers maintained their proximity shopping habits, with mini-supermarkets and convenience stores remaining the main growth channels among modern trade.

Focusing on consumers' daily life scenarios, a strategy of category management and regional market development, convenience stores achieved 6.2% year-on-year growth.

Among the top ten retailers, Walmart Group increased its market share by 0.2 percentage points compared to the same period last year, driven by the strong performance of Sam's Club.

Jiajiayue within the SPAR group achieved a 0.2 percentage point market share gain through internal resource consolidation and the expansion of new formats such as discount stores.

In 2024, Hema not only continuously improved the quality of store services and consumer experience, but also accelerated the opening of new stores, expanding its presence in lower-tier markets.  According to the Kantar Worldpanel data, in the most recent quarter, the penetration of different formats, such as Hema, Hema X members' club and Hema NB Outlets, has increased. Hema NB Outlets, tasked with exploring the lower-tier market and meeting the needs of price-sensitive consumers, achieved a 190% increase in sales during the second quarter. Overall, Hema achieved a 0.3 percentage point increase in market share in the second quarter.

Regional retail brands continue to expand aggressively.

Biyoute, which has optimised the supply chain and reduced operating costs by simplifying SKUs and implementing shared warehousing, has achieved a 0.2 percentage point increase in market share in the northern region.

The Shizu Convenience Stores, deeply established in the Yangtze River Delta region, have recently expanded into the northern market. In 2024 the Shizu group plans to open 2,000 convenience stores in Shandong and establish a comprehensive supply chain and logistics system in order to achieve cross-regional development.

Ecommerce Platform: 

Interest-based e-commerce continues to Lead

In the first half of 2024, the general trend of FMCG in the e-commerce remained relatively stable compared to the same period last year.

Taotian Group still dominated the market, but its market share slipped by 3 percentage points year-on-year. Meanwhile, JD Group and Pinduoduo gained 0.2 percentage points and 0.8 percentage points in market share, respectively.

Interest-based e-commerce continues to expand its consumer base, with 37.2% of Chinese households purchasing fast-moving consumer goods on Douyin, surpassing Pinduoduo in market penetration.

Despite the normalisation of promotions on e-commerce platforms that diminished the promotional impact of the 618 shopping festival, Douyin still performed outstandingly. Kantar Worldpanel data indicates that, for the four weeks to 14 June 2024, Douyin sales increased by 29.4%. During the 618 shopping festival of Douyin, the platform invested heavily in traffic, and combined with innovative low-priced marketing strategies to attract consumers. Douyin also avoids over-reliance on short term and low-priced promotions, focusing on the goal of GMV growth while ensuring consumer experience and product quality.

The leading discount stores accelerate expansion

China’s fast moving consumer goods (FMCG) sector observed a moderate recovery in 2023 and in the first quarter of 2024, according to the 27th China Shopper Report [2024 Vol. 1] released today by Kantar Worldpanel and Bain & Company.

China’s FMCG market grew 2.4% in 2023, lagging GDP growth (5.2%) and total retail market growth (7.2%, excluding catering), due in part to recovering out-of-home consumption post pandemic. Volume continued to be the main driver of growth, with an increase of 2.4%, while average selling prices (ASP) remained relatively stable throughout the year.

In the first quarter of this year, China’s FMCG sector saw value growth of approximately 2.0%, a half percentage point higher than in Q1 2023, supported by a 3.5% increase in volume. While the volume increase illustrates a continued strong desire for consumption, the market experienced a deflation of 1.5% in ASP, down from the stable pricing trend observed in 2023.

“We continue to see positive signs of recovery such as healthy GDP figures and retail sales growth. Social mobility has also reached an all-time high, and so it is only a matter of time before these positive numbers trickle down to FMCG growth,” said Bruno Lannes, a partner at Bain & Company based in Shanghai. “Some interesting trends we see this time is that Tier 2 cities are leading FMCG growth. Additionally, though average selling prices face deflationary challenges, we still observed premiumization in some categories.”

Geographically, FMCG growth in 2023 was led by Tier 2 cities. These cities have received a population influx of 8 million or more in the past four years and have become must-win markets for most FMCG brands.

Packaged food and beverage led growth in first quarter of 2024; growth in home care decelerated while personal care continued to decline

In the first quarter of 2024, packaged food and beverage witnessed stable value growth of 2.7% and 4.3%, respectively, compared to the same period last year. Most categories within packaged food experienced volume growth due to recovering social mobility and activities. Beverage growth was driven by both volume and ASP particularly in the near-water drinks such as juice, ready-to-drink tea, and packaged water.

Most home care categories saw strong volume demand driven by leading players’ efforts to promote diverse use occasions, increased social activities, and established focus on hygiene and health post-COVID. However, in contrast with the price premiumization of 2023, tracked categories displayed a price deflation in Q1 2024, driven by brands’ price cuts and promotion of larger, bulk-sized products.

Similarly, personal care witnessed robust volume growth, but ASP declined 7.5% as consumers remained cost-conscious, and most personal care categories faced competition from domestic brands offering more value-for-money products.

Offline channels regained momentum while E-commerce saw moderate growth

Offline channels overall grew by 2.4%, slightly higher than the overall FMCG and e-commerce channels, due to recovering offline traffic. Within offline channels, grocery and super/mini formats continued to gain share, growing at 11% and 7% respectively in Q1 2024 compared to the same quarter last year. Hypermarket segment continued to shrink at 6%. However, within the hypermarket, club warehouses saw notable growth of 22%, representing 9% share of total hypermarket channel. Specialist stores declined by 4% vs. a 4% growth in 2023, and the growth for convenience stores fell flat.

E-commerce growth maintained a low single-digit growth of around 2.0%. Notably, Douyin surpassed JD to become the second-largest e-commerce platform in China, delivering substantial growth of 46% and achieving an 18% market share in Q1 2024, six percentage points higher than Q1 2023. Pinduoduo saw increased traffic driven by its value-for-money proposition, resulting in a 6% growth and a 15% market share, one percentage point higher in Q1 2024 compared to the same period last year. JD experienced a 5% growth as a result of its low-price strategy, reversing from a 1% decline last year. Still leading the pack, Taobao/Tmall continued to decline, with their market share landing at 32%, three percentage points lower than in Q1 2023.

Insurgents: Competitive strengths that navigated through cycles

The Chinese FMCG market has witnessed an influx of insurgent brands, supported by venture capital, and leveraging online traffic. However, in recent years, as traffic has peaked and costs have risen, many insurgent brands are starting to see red.

Bain selected representative insurgent brands with “disruptor potential” every three years since 2018 and continued to track their performance over time. The development trajectories of these insurgent brands revealed four success factors in the areas of brand power, product ecosystem, channel prioritization, and organizational capability.

“We selected 46 and 69 brands to form the Class of 2018 and Class of 2021, respectively. This year, we reviewed their performance during 2021-2023, and categorized them into three groups: “Stand-out” (40%), “Hold-out” (20%), and “Fade-out” (40%) brands. We are pleased to see that a significant portion of the insurgents are performing well, with some even rising to become leaders in their categories. This year, we conducted the same analysis to select 61 insurgent brands to form the Class of 2024,” said Jason Yu, Managing Director of Kantar Worldpanel in Greater China.

However, the requirements in each of the four areas evolve over time, as the markets become more competitive and new technologies emerge. For example, in channel prioritization, there’s an increasing need for insurgent brands to capture emerging channels and develop “connected commerce” capabilities to follow consumers across their multiple touchpoints. For example, Yongpu (??) transitioned from being an “online influencer brand’” to establishing an omnichannel presence by expanding its offline distribution networks.Passional Lover (??) achieved accelerated growth on Douyin with a tailored product portfolio, content creation, and operational excellence. 

“With fierce competition, both brands and retailers should follow the true needs of consumers and monitor evolving demands and seize growth opportunities in new segments, geographies, occasions, channels, and touchpoints. They also need to manage costs in the persistent deflationary environment. In addition, brands need to build an integrated route to market and  rejuvenate out-of-home opportunities, strategically reinvest in social settings and food service-related channels with unique value propositions,” said Derek Deng, a partner at Bain & Company based in Shanghai.

*For more information, please contact us.

Coca-Cola remains the world’s most purchased brand for the 12^th consecutive year while at-home treats define reshaped shopper behaviour in 2023.

Kantar’s Worldpanel reveals the world’s most chosen brands and lays out a comprehensive view of how shopper behaviour evolved around the world in 2023. With the global FMCG inflation rate halving from 8.4% in 2022 to 4% in 2023, shoppers started mixing treating and premium purchases alongside the coping strategies of 2022. Brand Footprint, Kantar’s analysis of consumer behaviour in 62 markets representing 76% of the global population and 86% of global GDP, reveals that average grocery spend per household around the world exceeded $1,000 for the first time on record, almost 60% more than was spent a decade earlier in 2013.

Key insights from the 12^th edition of this study include:

• Coca-Cola remains the world’s most purchased brand for the 12^th consecutive year. Penetration – or the percentage of households that purchase the brand – grew 2.6%. The brand was chosen off the shelf by consumers almost 8.3 billion times.
• Red Bull was the fastest growing FMCG brand, with 17.8% growth regarding the number of times it’s purchased (1.43 billion times), thanks to more new shoppers in markets including Brazil, Mainland China, France, Germany and the US.
• Sunsilk was the world’s most successful brand in winning new shoppers, with more than 26 million new households purchasing the brand in 2023.
• Average spend on FMCG brand increased by 8.6% to $1,052 per buyer, as a result of grocery inflation that averaged 4% during the year, as well as greater at-home treats and shifts to premium purchases to offset coping strategies.
• Illustrating the inclusion of treats and premium brand products in shoppers’ repertoires, the average spend per item increased by 6.7%.
• North American shoppers spent the most on packaged FMCG products, averaging $3,063 per household, while consumers in Bangladesh spent the least, averaging less than $159.
• The mix of spending across global brands, local brands and private label groceries continues to evolve. Spending on private label goods increased by 0.5% points to reach 22.7%. Despite a fall in unit sales, global brands retained 30% of spend thanks to increased prices and premiumisation.
• ‘Shopping around’ continued as a coping strategy as shopping trips increased by 2.4%. ‘Discount Grocery Stores’ increased their share of shopper spend by 10.3% to reach 16% share globally (and 24.5% in Western Europe).

The latest report released by Kantar Worldpanel shows that the fast-moving consumer goods (FMCG) market in urban China maintained a modest recovery in the first quarter of 2024, with a year-on-year sales growth of 2.6%.

The eastern region showed more positive growth, increasing by 7% compared to the same period last year, demonstrating the enhancement of the regional economic vitality and the strong resilience of consumer purchasing power. 

Under the combined influence of the holiday effect and the gatherings of families, the consumption of alcohol and beverages at home showed a more significant growth in the past 12 weeks, whilst the dairy and personal care categories showed a relatively weak performance in the first quarter.

At the city level, the lower-tier market continues to be the engine of China's consumer market. With the strong recovery of population mobility and tourism, the consumption gap between lower-tier cities and upper-tier cities is continuously narrowing. Kantar Worldpanel reports that the sales in town markets in the first quarter increased by 3.9% compared to the same period last year, which is higher than the cities.

The latest data released by the National Bureau of Statistics also shows that the national economy continued to rebound, with the retail sales of consumer goods in urban areas increasing by 4.6% in the first quarter. Driven by the service retailing, the demand structure continues to improve.

click here to access the report

Modern trade: 

Retreat to Advance, Accelerate Upgrading and Transformation

Kantar Worldpanel's report indicates that the hypermarkets remained on a downward path in the first quarter, with sales down 1.4% compared with the same period last year. Driven by the purchase frequency and the unit price of customers, the supermarket increased by 1.3% compared with last year. 

Small supermarkets and convenience stores continued to grow. Gift giving occasions during Chinese New Year caused the significant growth of the penetration and purchase frequency of small supermarkets in the lower-tier market.

Kantar Worldpanel indicates that, the market share of the top ten retailers in modern trade further declined by 2.4 percentage points, with increased market fragmentation. Among the major retailers, Sunart Group, Vanguard Group, Yonghui Group, and other leading retailer brands adjusted their strategies, by closing some poorly performing stores and upgrading the remaining stores.

In the face of a severe decline in market share, Yonghui supermarkets still opened new stores in Chengdu, Kunming and other cities, implementing the store optimization strategy that simultaneously promoted “high quality service” and “affordable goods”.

Walmart Group also plans to transform and upgrade more than 30 hypermarket stores with a “one-stop omnichannel shopping experience”, resulting in a reconstruction of products and services, to better meet consumer shopping needs.

In the first quarter, the membership store format continued to perform exceptionally well, with sales growing by more than 20% year-on-year. Sam's Club, as a leader in this pack, increased its market share by 0.4 percentage points. Both international and local membership stores are no longer limited to first tier and new first-tier cities, and the location strategies are also becoming more refined.

In the past year, the German discount store ALDI strengthened its "affordable community supermarket" positioning, expanding their range of private-label products. ALDI also plans to rapidly expand the number of stores in Shanghai from the current 50 to 500-600 and gradually expand its business map to the Yangtze River Delta region. In the first quarter of 2024, ALDI's penetration in Shanghai reached 12.3%, an increase of 7 percentage points from the same period last year.

The regional retail benchmark in China, Pangdonglai, also showed a brilliant performance in the past 12 weeks. Recently, Pangdonglai initiated a plan to help the struggling Bubugao supermarkets. Through the store layout and product combinations, supply chain and other systematic adjustments, it aims to enhance the Bubugao consumers shopping experience and improve the store performance.

Ecommerce Platform: 

Douyin Continues to Grow, Exceeding Pinduoduo in Penetration

In the first quarter of 2024, China's shopping online channel continued to grow steadily, with the sales increasing by about 2% year-on-year, while penetration increased by 0.4 percentage points. This growth was mainly driven by an increase in purchase frequency. Among the major platforms, Taotian Group was the only Ecommerce platform to show a slight decline in penetration, down 1.7 percentage points compared to the same period last year.

The Douyin platform continues to maintain rapid development. In the first quarter of 2024, over 28% of Chinese households purchased fast-moving consumer goods on Douyin, purchase frequency also showed significant growth. 

With the official launch of the Douyin mall version app, consumers can enjoy a complete Ecommerce shopping experience. At the same time, the platform uses its iconic video page to promote sales conversion within the platform. It aims to achieve the interaction of interest and shelf ecommerce platform.

The Expansion of Discount Formats Accelerates

Since 2023, Chinese consumers have shown a growing interest in cost-effective products, and the selection of substitute products has become an important trend in the consumption stratification of some categories, which has also driven the rapid development of the discount store formats in China. 

Data from the Kantar Worldpanel shows that in the first quarter of 2024, 5.9% of Chinese households purchased FMCG from snack discount stores. In terms of regions, the main battlefield of snack discount stores is still the East and South, with steady expansion in the West and North.In the southern region, the growth rate continues to show a double digit increase month to month. 

From the city level, the penetration of snack discount stores prefecture-level cities exceeds 7%, showing the huge attraction of snack discount stores for consumers in lower-tier cities.

China’s discount store format is in a period of rapid development and transformation. By supply chain revolution and value transmission, community discount supermarkets, warehouse discount stores are becoming a new trend in the retail industry and are a new hot spot for investment.

Recently, Busy For You Group and super Ming completed a strategic merger, with the number of stores now exceeding 7500, and they have announced to accelerate the development of the national market, which focuses on the Northern market and increasing marketing support.

Wanchen Group, the parent company of Haoxianglai recently announced 2024 Q1 expected revenue of 5 billion, and lead the snack store discount format industry.

Faced with the intensifying competition and changing consumer demands, snack discount stores are expanding their categories from snacks to daily food and beverage categories, and accelerating the integration of brands and supply chains, with improving operational efficiency and establishing differentiation barriers while expanding their scale.

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.

In terms of different city levels, provincial capitals experienced the fastest rebound. Across different regions, the northern and western regions are leading the recovery. In terms of categories, beverages, and household cleaning products maintained significant growth in the fourth quarter, while food, dairy products, and personal care categories showed signs of recovery, although at a pace slower than the market average.

The latest data released by the National Bureau of Statistics also shows that in 2023, final consumption contributed as much as 82.5% to economic growth, significantly higher than the pre-pandemic contribution rate of 57.8% in 2019, making it the main engine driving macroeconomic growth.

Q4: Membership Stores Deepen Penetration into Lower-tier Cities, Regional Leaders Strategically Expand Market Share 

In the fourth quarter, modern channels experienced a resurgence compared to the previous year's downturn, with hypermarkets and large supermarkets demonstrating notable overall improvement.

Among the top ten retailers, Jiajiayue within the SPAR group experienced double-digit sales growth in the fourth quarter compared to the same period last year, maintaining a stable overall market share. Due to the large-scale closure of Carrefour stores, Suning Group's share in modern channels decreased by 1.3 percentage points, dropping out of the top ten retailer ranking.

Compared to the fourth quarter of last year, the market share of the top ten retailers in modern channels further decreased by 1.6 percentage points, indicating a further reduction in the concentration of the Chinese retail market under the trend of diversified formats and fragmented markets.

Throughout 2023, Walmart and Yonghui increased their market share amongst fierce market competition, while Wumart, the SPAR Group, and Hongqi Chain maintained a stable market share.

Membership stores continued to grow in the fourth quarter of 2023, but the overall growth rate slowed compared to the first two quarters. It is worth noting that since the third quarter, the growth rate of membership stores in lower-tier cities has exceeded that of upper-tier cities. Although the size of membership stores in lower-tier cities in China is still relatively small, with the gradual saturation of membership stores in upper-tier cities and intensified competition, the trend of membership stores expanding into lower-tier cities may emerge.

In 2023, RT-Mart successively opened M membership stores in Yangzhou and Changzhou, indicating that local membership stores will focus more on deepening their presence in affluent second and third-tier cities, while also introducing more small-scale, small-packaged, and low-priced products to meet the quality of life demands of local consumers. Regional retail chain brands in China have emerged in competition, gaining more market share from the national giants.

Retailers such as Hebei Beiguo, Beijing Jingkelong, and Anhui Joymart all saw an increase in market share in modern channels in the fourth quarter. Known as the "Northeast Pang Donglai", Biyoute achieved double-digit sales growth in the fourth quarter. Biyoute took over several Carrefour stores and revitalized them through re-planning layouts and multi-format operations, bringing new vitality to old locations.

Five Outlooks for the Retail Market in 2024 

1. Small Formats, Big Business

In 2023, consumers continued to maintain the habit of shopping in proximity channels. Although the decrease in average spend per trip led to a slight slowdown in the growth rate of small-format sales, small supermarkets and convenience stores continued to enhance convenience for consumers in terms of time, space, and service. They developed new service offerings in response to trends like scene-centric, service-focused, and customized consumption.

Sizable brands such as Meiyijia, Hongqi Chain, and Lawson all increased their market share in 2023 compared to the previous year. The latest publicly available data indicates that Meiyijia, while maintaining its consistent community-centered strategy and deepening its market penetration, experienced significant growth despite challenges. Both its revenue and store count increased, surpassing 30,000 stores and establishing itself as a leading brand in China's convenience store sector.

In the upcoming year, proximity channels will encounter a general slowdown in consumer spending growth, increased competition from community discount formats, and heightened competition for traffic. Small-format brands must enhance their supply chain operations and digital capabilities to swiftly adjust to evolving consumer preferences in their surroundings.

At the same time, large-format brands are actively deploying community retail by opening smaller stores, streamlining SKUs, and increasing investment in fresh produce. Through an integrated online and offline model, they aim to meet consumers' shopping needs across multiple time periods and scenarios.

The penetration of convenience stores slowed down in upper-tier cities in 2023, whereas lower-tier cities, particularly prefecture-level cities, emerged as the main drivers of growth. Compared to mature convenience store markets internationally, there is still significant room for improvement in the saturation of convenience stores in most Chinese cities. For chain retailers, as more foreign and local convenience store brands enter third- and fourth-tier cities, proximity consumption still holds tremendous potential. 

2. Key Year of Transformation for Traditional Retailers, Membership Stores Vie for Dominance

In 2023, the sales for hypermarkets saw an accelerated decline, with a decrease of 1.8 percentage points in the overall market share. Although large supermarkets are on a downward trajectory, their overall performance surpasses that of hypermarkets.

In 2024, large-format retailers will continue to confront significant challenges. Only through transformations, such as product differentiation, supply chain optimization, establishment of distinctive stores, and refined operations, can they survive the intense competition across all channels.

It is noteworthy that the transformation of some traditional brands began to yield results in 2023. Bravo, a premium brand under Yonghui, saw an increase in its market share in modern channels, with penetration remaining stable compared to 2022. While Yonghui is opening new stores against the odds, it continues to advance store optimization and iterative adjustments, enhancing the fine-grained transformation of the "customer flow, product portfolio, and store layout”, and reinforcing the capability for refined operations with a 'store-specific strategy'.

Over 10% of Chinese households purchased fast-moving consumer goods from membership stores in 2023, with sales growth exceeding 40% compared to 2022. As major membership store giants accelerate their expansion in 2024, competition will further intensify, leading to direct confrontations in key cities.

In the short term, foreign retail giants will maintain their advantage. Sam's Club and Metro continue to dominate market share and sustain rapid growth. Domestic brands such as Hema X, RT-Mart M Membership Stores and Fudi still lag behind foreign counterparts in terms of store numbers and expansion speed.

However, with consumer segmentation and the pursuit of value-for-money becoming a consensus, domestic membership stores are introducing products better suited to the daily needs of Chinese consumers, with smaller package sizes and more aggressive pricing strategies.

In the long term, membership stores can only achieve sustainable development through long-term investments in product selection, supply chain and product development. They are more likely achieve long-term sustainability by focusing on core customer groups, providing better experiences to attract customers to stores and achieving differentiated competition.

3. E-commerce Shifts to 'Low Price' Competition: Douyin May Surpass Pinduoduo in Penetration

In 2023, with the return to normal life for consumers, a proportion of them reverted to in-person shopping, leading to a nearly 3 percentage point decrease in the penetration of e-commerce. Accompanied by the normalization of promotions, consumers showed a significant increase in purchase frequency on e-commerce platforms, with overall sales still growing by 5.3% for the year.

In recent years, mobile internet traffic has peaked, and the dividends have gradually saturated. The homogenization of competition has prompted major platforms to intensify their efforts in price competitiveness. As consumers become increasingly rational, simple and direct low-price marketing alone cannot stimulate additional growth. Consumers are accustomed to comparing prices across different platforms, and their loyalty to a single platform is decreasing.

Data from the Kantar Worldpanel shows that the penetration of e-commerce platforms such as Taotian, JD.com, and Pinduoduo declined compared to 2022. To establish long-term price advantages in consumers' minds, platforms must improve supply chain efficiency, reduce fulfillment costs, and expand the ecosystem of non-self-run goods with higher cost-effectiveness.

The strong rise of interest-based e-commerce and the 'lowest price in live broadcasts' have caused significant disruptions to traditional shelf-based e-commerce. Douyin attracted over 40% of Chinese urban households to purchase fast-moving consumer goods in 2023, ranking third among e-commerce platforms.

With the dual-drive of 'content' and 'shelf,' as well as the entry of major brands, Douyin's penetration is expected to surpass Pinduoduo in 2024 and further narrow the gap with Taotian.

For brands to continue to benefit from platforms like Douyin, they must adhere to high-quality content output, achieve synergy between 'content scenes' and 'shelf scenes,' cultivate loyal user groups, expand repurchases through high-quality product services and supply chain efficiency, and thus form a closed-loop of long-term growth.

4. CGB Landscape Consolidates, Retailers Ramp Up Self-Operated Business

Experiencing three years of rapid growth amid the pandemic, O2O slowed its growth pace in 2023. Community group buy underwent multiple rounds of reshuffling, with established giants gradually withdrawing and consolidating their operations. The more sizable platforms now include Meituan Youxuan, Duoduo MaiCai, and Taobao MaiCai, all backed by giant corporations.

Meituan Youxuan and Duoduo MaiCai saw continued growth in sales over the past year, with penetration nearing 25%. It is expected that in 2024, these two platforms will continue to lead the community group buy sector and dominate the market.

Recently, Meituan MaiCai, focusing on fresh produce, rebranded as "XiaoXiang Supermarket," indicating a shift from a focus solely on fresh produce to a comprehensive platform, gradually moving away from subsidy battles and strengthening its proprietary brands and diversified product selection.

Benefiting from higher frequency and average spend per trip, retailers’self-run apps/mini programs have become an important second growth curve for physical retailers, with their share of total revenue continuously expanding.

For instance, Watsons experienced notable growth in its self-operated app/mini program over the past year, despite an overall decline in its performance. The revenue of RT-Mart's self-run app "RT-Mart Youxian" increased by approximately 40% compared to the same period last fiscal year.

Facing continued sluggish foot traffic in stores, it is anticipated that major retailers will invest more in digitalization, especially in self-run delivery services in 2024. They will actively utilize external ecosystems and local life services to drive traffic to offline stores, conduct member-centric refined operations, and thus drive overall business growth.

5. The Expansion of Discount Formats Accelerates Whilst Crisis Looms

In 2023, the discount store format across all categories surged, as seen in the data from the Kantar Worldpanel, indicating sustained sales growth for Hotmaxx and Hema Outlet. Established less than four years ago, Hotmaxx has surpassed 600 stores, while Hema Outlet opened its inaugural store in 2022 and presently operates over 70 stores.

Hunan-based discount brand Le Er Le, an early entrant in the discount store race, recently announced its foray into the national retail market, setting an annual target of surpassing a revenue of 100 billion and opening over 10,000 stores.

Discount store formats improve operational efficiency by engaging in large-scale production and sales of their own-brand products, and by minimizing intermediary steps. This strategy appeals to cost-conscious shoppers, intensifying competition between them and full-service supermarkets in 2024.

As a "category killer" specializing in snack discounts, snack discount stores became popular nationwide in 2023. In the fourth quarter of 2023, over 7.6% of Chinese urban households purchased from snack discount stores.

At the city level, snack discount stores have the highest and most improved penetration in prefecture-level cities, with rapid growth in the East and South regions and significant room for development in the North.

The merged Busy For You Group announced a focus on the Northern region in the future, entering direct competition with the Wan Chen Group, which focuses on the Northern market. Currently, snack discount stores are still in the early stages of development, driven by capital, they leverage scale advantages to form a "low price" mentality and achieve high turnover and efficiency per square meter, leading to a channel revolution in the snack industry.

However, whether full-category discount stores or snack discount stores, compared to European and American markets, they have not yet become mainstream retail formats and they need to avoid the painful lessons of the tumultuous battles of previous years. The closure of Biyide at the end of 2023 signifies that simple "discounting" itself is by no means the winning strategy in the market.

As traditional retailers increasingly join the discount competition, the competition within discount stores in 2024 will not only center on superficial price rivalry but will primarily concentrate on the competition related to building and operating 'vertical supply chains'.

The ongoing rise in industry concentration and the solidification of scale advantages will also compel leading brands to draw in more consumers through enhanced product quality and value recognition, ensuring consistent profitability and fostering the sustainable growth of the entire retail ecosystem.

The overall growth of China’s FMCG industry was modest at 1%, a result of a 1.2% increase in volume. The FMCG market exhibited diverse performance in the third quarter of 2023 compared to the previous year, primarily due to the 2022 baseline. In the third quarter of 2022, China saw a notable recovery with a 6% growth rate after the easing of COVID-19 lockdowns. This set a high benchmark for 2023, resulting in a challenging comparison and a slight decrease of 0.9% in the same quarter this year.

“There are signs of hope. In the first four weeks post Q3, we saw a noteworthy increase of 5% in value, aided by a resurgence in consumer demand due to heightened holiday spending. Although the increased expenditure during this period was not counted in our data, it suggests an overall continuing expansion of the FMCG market,” said Bruno Lannes, a partner at Bain & Company based in Shanghai.

Furthermore, while growth in the FMCG sector appears moderate, this does not necessarily signify a decrease in overall consumer spending. Instead, there may be a reallocation of expenditure towards sectors such as dining out and travel, reflecting a post-pandemic shift in consumer priorities.

Health, value-for-money and exclusive products dominate consumer purchases

Over the past few years, there has been a noticeable shift in consumer preferences towards products that are healthy, value-for-money, and exclusive across various categories. This change in consumer behavior has had a significant impact on the FMCG market. Certain categories such as chocolate, facial tissue, and hair conditioner have witnessed premiumization in average selling price, indicating that consumers are increasingly willing to pay a premium for products for better quality and experiences. 

In the food and beverage sector, consumers are increasingly gravitating towards healthier options such as organic, natural, and functional foods. They are looking for products that offer nutritional benefits, clean labeling, and sustainable sourcing. Additionally, value-for-money options, such as private label brands and price promotions, have gained popularity as consumers seek to make the most of their purchasing power.

Home care continues to grow while other categories’ growth stabilizing at pre-crisis levels

In the first nine months of 2023, China’s FMCG market exhibited a nuanced picture across the four major sectors – home care, beverage, personal care, and packaged food.

Home care sustained its growth momentum with a notable 8.8% growth in value compared to the first nine months of 2022. This effect was driven by robust consumer stockpiling behavior and continued health and hygiene concerns, particularly for essentials such as toilet paper and tissue.

The growth trajectory in the packaged foods sector showed a deceleration, aligning with stabilized demand post-pandemic for staples at pre-crisis levels. 

The beverage segment remained stable in 2023 with higher volumes and a focus on affordability. Consumers exhibited a clear preference for value-driven choices, prompting a shift towards more economical products.

Within the personal care segment, growth was moderated by lower average selling price, reflecting the consumer trend of seeking greater value for money.

Smaller formats thrive, e-commerce competitive dynamics shift, and O2O continues to soar

The shift towards smaller store formats, such as super/mini and grocery stores continued as their value grew 3% and 6%, respectively, between Q3 2022 and Q3 2023. E-commerce outperformed the overall market with a 4% year-on-year growth over the same period. One notable highlight in the e-commerce market was the emergence of social media platforms, including Kuaishou and Douyin, which have captured more than 6% of the market share compared to year-to-date (YTD) Q3 2022.

Hypermarkets, on the other hand, experienced a decline in market share as some players made the decision to close their stores across the country. Club warehouses showed a significant value increase of 58% in YTD Q3 2023, with growth attributed to a growing number of buyers and increased shopping frequency.

“The rise of specialized discount stores is rapidly gaining traction, reflecting a more rational approach by consumers towards daily expenditure in 2023. This emerging trend suggests a potential intensification of competition in the retail market going forward, as these stores continue to attract price-conscious shoppers,” said Jason Yu, Managing Director of Kantar Worldpanel in Greater China.

Online-to-offline (O2O) channels continued to grow with a 11% value growth in YTD Q3 2023 vs. YTD Q3 2022. Consumers are responding favorably to the convenience and speed offered by O2O solutions.

“Despite the challenges, China’s FMCG market has consistently demonstrated long-term resilience and capacity for growth. Overall, brands and retailers must remain agile in adapting to the ever-changing market environment to maintain competitiveness and market share. This involves continuous monitoring of changes in consumer trends, flexible adjustment of pricing and channel strategies, and more efficient investment in marketing and product innovation,” said Derek Deng, a partner at Bain & Company based in Shanghai.

For more details, click HERE

According to the latest report from Kantar Worldpanel, there were 24 Fast Moving Consumer Goods (FMCG) companies reaching over 100 million urban Chinese households during the 52 weeks ending October 6th 2023.

Compared to the previous year, these top 24 companies have experienced an overall increase of 5.63 million urban Chinese households, equivalent to a 2.9% growth. Among them, Nongfu Spring, Hengan Group, Uni-President Group, Liby Group, China Resources Group, and PepsiCo Group grew faster than average. These companies primarily focus on snacks, beverages, paper products, and home cleaning products, reflecting the fact that social life is returning to normal in 2023, with the demand for outdoor snacking and beverage occasions rising, as well as consumers maintaining a strong need for health and sanitisation products.

 “China’s FMCG market shows resilient recovery overall but there is some volatility and divergence across different categories. The growth rate of categories related to in-home consumption has dropped significantly, health-related categories have maintained growth, and the categories related to social and outdoor have significantly rebounded. In the new market environment, FMCG giants can grasp the needs of different consumer groups and launch innovative products that adapt to new occasions and new needs. They also seize emerging channels opportunities and penetrate deeper into lower tier markets, continue to winning new consumers and demonstrating growth resilience in the era of saturation.” commented Jason Yu, Managing Director of Kantar Worldpanel Greater China. 

Developing health demand is the opportunity to sustainable growth

Kantar Worldpanel indicates that, after the end of the pandemic, Chinese consumers have an unabated increase in their demand for health. Although consumers are more willing to save on regular household expenditures, health awareness is continuously rising, health-related needs are becoming more sophisticated, and they are more willing to pay a premium for professional and scientific solutions. The evolution of health needs is an opportunity for sustainable growth in the China market.

Among these top 24 companies which have over 100 million Chinese urban households, Nongfu Spring has been the fastest growing company in terms of consumer base in the past year. It targeted consumers’ sophisticated health needs, achieving explosive growth with its flagship product "Oriental Leaf", which features a "natural and healthy" and minimalist formula, that has won over 17.8 million Chinese households.

In addition, functional drinks, which are closely associated with sports activities, and nutritional fruit drinks have attracted 7.35 million and 7.84 million urban Chinese households respectively for Nongfu Spring. The healthification of snacks is a new trend among young consumers in recent years, catering for novel and diverse needs as well as offering health-related benefits.

Lay’s, one of the brands under PepsiCo’s, has won over 7.64 million urban Chinese households through continuous flavour localisation and innovation. Recently, Lay's in China introduced potato chips with 50% reduced saturated fat, allowing consumers to enjoy the joy of snacks with less burden.

Among non-food categories, Hengan Group has targeted consumers' pursuit of quality of life. By promoting mid-to-high-end products such as "Tea Classical" and "Cloud Sensation Soft Tissue," as well as kitchen paper designed specifically for kitchen scenes, Hengan's paper products have captured 9.34 million urban Chinese households.

Liby Group actively taps into consumers' demand for enhancing the quality of life by promoting the Master Fragrance Laundry liquid. Providing a pleasurable emotional experience, Liby has captured 7.24 million urban Chinese households in the laundry category.

O2O – An effective way to attract incremental consumers

Platform e-commerce traffic seems to have reached its peak as during the 40 weeks ending October 6th 2023 pure online penetration was 80.3%, a slight dip from 83.3% from same period last year.

Meanwhile, the O2O model effectively satisfied consumers’ all-category and multi-occasion need by connecting a vast user base of internet platforms and physical retail stores through digital techniques and logistics infrastructure.

The latest data from Kantar Worldpanel shows that, during the 40 weeks ending October 6th 2023, O2O sales value grew by 11.7% versus the same period last year.

For many brands O2O has also become a channel to uncover new consumption occasions and to reach more consumers.

Among the top 10 companies attracting incremental consumers through O2O, the majority are food enterprises. Wilmar and COFCO leverages O2O to meet consumers’ real-time and convenience needs by delivering daily food supplies, such as rice, flour, and cooking oil, to consumers’ homes, successfully attracting over 18 million new households.

Mengniu and China Resources Group also took full advantage of the convenience of O2O delivery, bringing heavy and inconvenient items such as water, alcohol, and dairy products directly to consumers' homes.

Want Want group leveraged O2O to meet consumers' snacking demand for "buy now, eat now".

Winning new shoppers in the lower tier

With the rise of brand awareness and lifestyles, China’s vast lower tier cities remain a critical growth engine for most FMCG companies. 

With the support of national macro policies and the continuous construction and improvement of infrastructure, such as logistics, the lifestyle and purchasing behavior in lower-tier markets are becoming increasingly similar to those in higher-tier markets. Those who can reach lower-tier market consumers earlier can seize the initiative, laying a solid foundation for future growth.

As the fastest-growing company in attracting Chinese households, tier 3-5 cities’ buyer recruitment accounts for 74% of Nongfu Spring’s consumer expansion.

Both Uni-President Group and Hengan Group have experienced a nationwide growth in China urban households up to 4.7% with households in tier 3-5 cities contributing 89% and 73% respectively to their overall increases.

In addition to tier 3-5 cities, town markets are also a blue ocean for the future development of China market. Besides traditional channels, e-commerce is undoubtedly a key development avenue for brands to outpace competitors and reach new consumers. 

Kantar Worldpanel indicates that town consumers place greater emphasis on interest-based e-commerce, which combines entertainment and social interaction.

During the 40 weeks ending October 6th 2023 Pinduoduo and Douyin in the town e-commerce market have a higher market share by 1.4 and 1.3 times respectively compared to that in upper-tier cities (key cities and provincial capitals)

Manufacturers should tailor their strategies to local conditions and consider entering town markets through new digital channels.

Currently in town markets the companies with the highest number of consumer households are Yili, Mengniu, Procter & Gamble, Haday, Master Kong. The rankings nationwide are essentially consistent, indicating that the leading enterprises with strong distribution advantages still maintain a significant edge in town markets.

However, for the majority of manufacturers, penetrating into the town market remains a challenge. Among these 24 leading enterprises, 14 of them have a lower penetration in town market compared to key to D cities. 

Therefore, gaining comprehensive insights into the purchasing preferences of town consumers, building the right portfolio and channel strategy, and driving consumption upgrades are the key factors for tapping into the town market.

The fast-moving consumer goods (FMCG) market in China experienced a slight 2% year-on-year decrease in sales for the 12 weeks ending on September 8th, influenced by factors such as the delayed Mid-Autumn Festival holiday compared to the previous year and the recovery of out-of-home consumption. 

According to the latest report from the National Bureau of Statistics, the total retail sales of consumer goods continued to recover in the first three quarters of the year, playing a crucial role in supporting economic growth. 

In terms of categories, beverages and house cleaning products continued to see sales growth in the third quarter, with year-on-year increases of 2.9% and 5.5% respectively. Food sales experienced a slight 1.0% decline this year, due to consumer stockpiling during home isolation in 2022, but the decline was notably smaller compared to the previous quarter. 

In terms of regions and city levels, the West regions showed the most impressive sales performance, with a 0.7% increase, while provincial capital cities and county-level cities demonstrated relatively steady performance.

Continued differentiation in performance among leading retail brands

Small supermarkets maintained double-digit sales growth in the third quarter and convenience store sales increased by 3.3% year-on-year. Large supermarkets, which are no longer benefiting from the pandemic-induced supply security advantage, still experienced declining sales but at a slower rate compared to the previous two quarters.

Among major retailers, Wumart Group and Walmart increased their market share in modern channels by 0.3 and 0.1 percentage points, respectively, driven by strong growth in their subsidiaries Metro and Sam's Club. However, Costco's aggressive expansion in 2023 and price challenges at Hema X led to increasing competition among membership stores. It has also raised the bar for retailers in terms of digital capabilities, product differentiation, and supply chain development.

Suning Group experienced a significant decline in market share in the third quarter, decreasing by 1.3 percentage points, mainly due to the impact of the closure of numerous Carrefour stores. Suning’s semi-annual financial report shows that by the end of the first half of the year Carrefour had a total of 41 stores, with 106 stores closed in the first half of the year. In the first half of 2023, Carrefour sales plummeted by more than 60% year-on-year. 

Similarly, Bubugao also faced a decrease of 0.7 percentage points in market share due to widespread store closures. Bubugao recently announced the reopening of some of its supermarkets in Hunan. 

Compared to the same period last year the market share of the top ten retailers in modern channels collectively declined by 4 percentage points, indicating further fragmentation of the Chinese market. Major retailers are exploring new strategies such as premiumization, digitalization, and localization to break through in this competitive landscape.

Regional retail leaders make a comeback, while convenience stores expand through new models

In local retail markets across China, domestic retail giants such as Chaoshifa, Tianhong, Joymart, Wangzhongwang, and Ouya have managed to grow against the challenging market backdrop. Chaoshifa, focusing on Beijing, has continued to grow by tailoring its stores to meet the diverse needs of consumers through in-depth research and customer understanding. Joymart, focusing on the Anhui market, has seen substantial growth with a growth rate of over 20% for fast-moving consumer goods in the third quarter.

In the small-format retail channel, international retailers such as 7-Eleven, FamilyMart, and Lawson all saw increased sales in the third quarter. Local small supermarket and convenience store brands, including Hongqi, Wudongfeng, and Meiyijia, have also maintained growth over the past four quarters. The trend of the development of Chinese convenience stores continues to expand, reaching fourth- and fifth-tier cities and county-level markets.

From a national perspective, convenience stores in various cities still primarily focus on deepening their presence in regional markets. Due to factors such as geographical distance, supply chain, and management efficiency, the development of chain brands across regions is still relatively limited and is in its early stages. Competition in the convenience store market is gradually intensifying in some cities. Regional consolidation among various chain brands is expected to be the next trend.

Among international convenience store brands, the speed of Lawson's store expansion is remarkable. Lawson's sales and penetration have continued to grow this year, with higher growth rates in lower-tier cities compared to upper-tier cities. Through regional licensing and large-scale cooperation with local enterprises, such as Zhongbai Group and Chaoshifa, Lawson has rapidly expanded into new markets, with the goal of reaching 10,000 stores by 2025.

Douyin catches up from behind, Meituan accelerates its entry

In the third quarter, the penetration of E-commerce decreased by 3.2 percentage points compared to the same period last year. Alibaba, JD.com, and Pinduoduo all experienced varying degrees of decline, while interest EC platforms Douyin and Kuaishou continued to grow.  

Over the past 12 weeks, more than 23% of Chinese urban households purchased fast-moving consumer goods on Douyin. Despite a slight slowdown in penetration growth on Douyin in the third quarter, there was still a 5.7 percentage point increase compared to the same period last year, and this growth was most pronounced in key cities and provincial capitals. Whether in top-tier cities or lower-tier cities, Empty Nester households are the life stage with the fastest-growing penetration on Douyin. 

In terms of categories, personal care products still had a higher penetration on Douyin than food and beverages, but the latter categories experienced faster growth.

With 100 million daily active users, Xiaohongshu is continuously exploring a comprehensive commercialization chain from product recommendation to purchase. They have closed their self-run E-commerce platform and are focusing on developing a curator E-commerce model with personalized content to build trust with users. The data from Kantar Worldpanel shows that Xiaohongshu achieved double-digit sales growth in the third quarter.

In terms of O2O, Community group buy (CGB) and KA self-run apps and mini-programs continue to lead growth. In the third quarter, their sales increased by 5.8% and 38.6% year-on-year, respectively. The former primarily benefits from an increase in purchase frequency, while the latter is driven by growth in both purchase frequency and spend per trip. 

Meituan's O2O platforms, Meituan Youxuan and Meituan Maicai, both achieved growth in the third quarter. While the penetration of Meituan Maicai has slightly declined, there was a significant increase in purchase frequency. It is worth noting that "Hourly Delivery" on Douyin Mall now has its own independent entrance, on par with "Douyin Supermarket," indicating that competition in O2O is heating up.

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.

During the second quarter of 2023, the FMCG sector in Asia displayed robust growth, registering a 2.6% value increase. Despite supply chain disruptions and uncertainties across all markets, the industry has shown remarkable resilience, charting a positive upward trajectory.

This latest report presents a comprehensive overview of the in-home FMCG sector in the Asia-Pacific region. Our analysis delves into individual markets, providing valuable insights into their performance. Discover the growth stories of each country, as we explore some of the highlights.

• Chinese Mainland

In the first half of 2023, e-commerce continued to develop steadily, with the highly competitive landscape undergoing accelerated changes. Traditional e-commerce platforms struggled to grow, while interest e-commerce remained in rapid growth.

• Taiwan

As the pandemic subsided, out-of-home (OOH) food service grew substantially while the FMCG food category weakened. People resumed social activities, triggering greater demand for personal care, especially cosmetics – making the category FMCG’s main driver in Q2.

• India

Consumers are shopping more frequently, with food and beverages driving the rise in trips. The increase in shopping occasions is being led by the e-commerce channel. As a result of making more trips, shoppers have started experimenting with brands, and their average pack sizes have shrunk.

• South Korea

Due to an uplift in average price, the FMCG market continued to show an increase in value along with a downturn in volume. Meanwhile, thanks to a weakening downtrend of shopping frequency, the decline in volume slowed in Q2 compared to MAT Q2’23.

• United Arab Emirates

A balanced interplay between costs and consumption, along with a thriving property market and growing demand in the non-oil sector – including FMCG – bodes well for the UAE’s economy.

• Indonesia

The country’s strong and resilient economy is reflected in a slower inflation rate of 3.5%,  combined with steady consumer confidence. FMCG growth during this year’s festive season was at its slowest for five years, but the uplift remained high.

• Malaysia

Modern trade is growing strongly, mainly mini markets, which continue to attract shoppers due to their convenience and better pricing. The fastest-growing channel is drug and pharmacy, driven by an influx of shoppers.

•  Thailand

Convenience stores continue to grow, as consumers shop for in-home FMCG through this channel due to its proximity, attractive promotions, and convenience. On the other hand, local channels experienced a decline due to the lack of government support programmes during COVID.

• Philippines

The Philippine economy remains in growth, but the pace is slower than the previous quarter, coinciding with higher inflation (7.6%) in March 2023. While the inflation rate is softening, shoppers are expected to remain cautious in their spending.

• Vietnam

Although GDP growth picked up to 4.14% in Q2, the economy remains lacklustre. Inflation has cooled down; however, retail sales growth has slowed due to weakened domestic demand from the a proportion of consumers being impacted by rising living costs.

Stay up to date with the latest insights and developments in the Asia-Pacific FMCG sector. Download the most recent edition of Asia Pulse through the button at the top of this page.

Note: The Asia Pulse Q2 2023 report excludes Saudi Arabia due to local panel enhancement.

China’s FMCG market has faced a number of challenges over the last 3 years as a result of the Covid pandemic which resulted in a significant slowdown in the pace of growth. In 2019, before the pandemic, FMCG was experiencing a robust annual growth rate of over 5% but this more than halved during 2020 to 2022. Now that life has returned to normal how do we expect the FMCG market to perform in 2023 and 2024?

To answer this question, the Expert Solutions team at Kantar Worldpanel have ran a forecast model which uses historical sales data for the last 5 years and looks at the relationship between the 4 weekly category performance and Covid case numbers to predict how the category will perform over the next 18 months during a time without the impact of Covid.

The results of this analysis shows that the FMCG market is likely to achieve a growth rate of 3.4% in 2023 which is higher than the growth rate in 2022. The growth rate in 2024 will be slightly lower at 2.4%. The higher growth in 2023 is driven mainly by the rebound effect from a very low Q4 period in 2022 as a result of the significant increase in Covid infections which severely restricted mobility and spending. This means that FMCG performance will be stronger compared to the Covid years but will not return to the pre-Covid levels.

We expect to see a different recovery path for different sectors due to how consumer needs and habits changing during Covid. The chart below shows the historical performance of the 3 FMCG sectors and our forecasted growth rate for 2023 and 2024.

FMCG In-Home Universe based on pre-2020 category list (112 categories), National Urban China (Key/A/B/C/D Cities) Forecast Method Liner Regression at category level with 4 weekly Covid Impact Level

Food & Beverage

Food & Beverage categories generally performed quite well during 2022 as many shoppers were not able to eat and drink out of the home, both during the lockdowns and when becoming infected. This meant shopper stocked up on things like instant noodles, soft drinks and frozen food. Now that there are no restrictions and shoppers generally feel safer to be out of the home we expect there to be less in-home F&B occasions and will therefore see a lower growth rate in 2023 and 2024 for these categories. However, some categories, like herbs & spices and cooking oils, are likely to maintain their growth as the ‘cooking at home’ habits formed during Covid continue for many households.

Household Care

Household Care was experiencing relatively strong growth prior to Covid but saw a gradual slowdown from 2020 to 2022 as consumers looked to manage their spending and switch to lower priced products. However, generally household markets were not as heavily impacted as consumers still need to clean their homes and clothes. We expect household care to perform well over the next 2 years as consumer confidence improves and shoppers are more willing to trade up to premium products with added sanitisation benefits to help protect from future Covid variants.

Personal Care

Personal Care was seeing double digit growth prior to Covid and these categories were the most heavily impacted during Covid, particularly Skincare and Cosmetics, due to the fact consumers spent more time at home. In the post Covid era we expect Personal Care to achieve a robust growth rate of 4-6% but not able to reach pre Covid levels by the end of 2024. This is likely due to the higher price point of these categories and the fact that some shoppers will remain cautious on their spending.

What Does this Mean for Manufacturers and Retailers?

As life returns to normal the future holds a lot of opportunity for FMCG manufacturers and retailers, but we still expect to see some uncertainty and many new needs and habits formed during Covid are likely to remain important. Below are our thoughts on how to best capture growth in the post Covid era

• Understanding how consumers needs and preferences have changed. New needs, such as safety, health and convenience, which were formed during COVID may be permanent changes or consumers may return to their previous habits and lifestyles. Understanding this within your category and then tailoring your innovation and your messaging to meet different consumers’ needs will be essential for future growth

• Channel landscape evolution. Covid has accelerated the growth of channels such as O2O and social commerce. Ensuring that you are able to leverage these channels to get your products in the hands of consumers quickly, safely and in an engaging way will help you to stay ahead of the competition.

• Anticipate demand and understand the role of marketing levers play growing penetration. Capturing new shoppers will still be essential for brand growth. By understanding the forecast for your category and the role that pricing, promotions, distribution and media play in driving penetration will help you to optimize your marketing spend throughout the year.

 Kantar Worldpanel is uniquely placed to help you understand how consumers needs and the way they shop has changed. Through advanced machine learning techniques, we can help you forecast demand for your categories and brands over the next 1-2 years and advise how you should invest your marketing spend to capture more new shoppers and maximize growth.

It looks into the evolution of Guochao trend, reflecting Chinese brands’ effort to expand their presence in the market previously dominated by foreign mega-brands.

It looks into:

1) What are key consumer trends driving the beauty market recovery,

2) How Chinese brands are quickly adapting to these trends and gaining influence in the market,

3) What are the implication of Local Beauty Rising to foreign and/or more premium brands.

China Beauty Brand Footprint was also published by Kantar Worldpanel, ranking the best performing beauty brands in two dimensions: Most-Chosen Brands in growth and Fastest-Growing Brands. The rankings were generated by using the CRP metrics (Consumer Reach Point), which is a consumer index that combines the number of buyers each brand obtained in one year with the average number of times that the brand was purchased by each buyer.

China Beauty Market Brand Ranking presented a clear picture of consumers' actual choice, and helped brands decode potential growth opportunities in this challenging market.

1.  Most-Chosen Brands

Kantar Worldpanel selected the most-chosen brands based on the size in CRP. Dominance of many Chinese, and more affordable brands continued in the Skincare market, and more of them entered the Top 10 list in the Makeup market, otherwise driven by international mega-brands.

In Skincare, consumers' demand for high-efficacy products remained resilient even during the overall market slowdown last year; cream products such as Proya’s Red Ruby leveraged “Essence-added” communication and expanded its brand competitiveness initially driven through Serum. 

In Makeup, makeup specialized brands drove expansion of Blusher, Contour, and Setting Spray to better address increasingly more sophisticated consumer demand.

China beauty market’s most-chosen brands' competitiveness further enhanced as:

1) Brand and product accessibility improved through omni-channel activations, 

2) Target-specific new product launches continued to further upgrade brand image and consumer advocacy,

3) Portfolio drive with Core segments in Skincare and Plus segments in Makeup.

2.  Fastest-Growing Brands

Despite of the overall market slowdown in 2022, there were still many brands bringing new momentum to beauty market.

Local Beauty Rising trend was particularly clear as 8 and 9 out of 10 fastest-growing brands in skincare and makeup, respectively, were Chinese brands. 

Their success was foremost driven by innovation of new consumer needs and formats; 

Winona continued to expand on its equity as a Sensitivity Skincare leader, HBN and Quadha drove new serum format and ingredient innovations, and Proya cascaded its success in serum to cream launches.

Makeup competition became more about small wins; consumers use different makeup steps not only to create a more “perfect” look but as a way to express themselves and get immersed in the ritual in itself as well. 

While need for segments like Makeup Base, Liquid Foundation, and Lipstick, remained big, fastest growing brands devoted to building strong and fashionable brand personality by designing creative makeup look.

Timage with contour and porcelain skin effect in face makeup, Into You with 6V lip makeup, and Florette with easy applicator activation in eye makeup. 

Recovering beauty market brings new development opportunities to both existing/ dominant brands and new/ niche brands of all nationalities.

Kantar Worldpanel identifies the following three factors to best capture these opportunities to achieve vibrant growth, Kantar Worldpanel identified three key factors:

• Expertise building anchored on a leading product in the chosen field

• Right content and product tailored to a clearly-defined target consumer group

Memorable and trend-leading image to resonate the evolving consumer needs

In the past six months, the performance of different categories varied considerably. The household cleaning category continued to maintain a good momentum, growing by 10.2% year-on-year. Beverages accelerated the pace of growth, enjoying a sales increase of 5.2% compared with the same period last year. Juice, functional drinks and ready-to-drink tea increased by more than 18%. Due to the stockpiling in the second quarter of last year, the food category fell by 3.4% in the second quarter.

In the past three months the East and North regions grew by 1.5% and 1.6% respectively, while the South region faced greater challenges, with a year-on-year decline of 3.8%. Key cities and provincial capital cities achieved 2.4% growth in the second quarter, while the lower tier cities, which were relatively less affected by the pandemic last year, saw slower growth in the second quarter of this year. The online channel sales increased by 5.6% year on year, while offline channels sales declined slightly in the past twelve weeks.

Overall, China's FMCG market has shown a steady recovery. Although there is still significant room for improvement in people’s consumption capacity and willingness, the macroeconomic policies aimed at expanding domestic demand and improving expectations are continuously strengthening the internal driving force for economic recovery in the second half of the year.

Modern Trade: Decline of large formats slows, while proximity channels continue to grow

Although the sales of hypermarkets and large supermarkets in the second quarter kept decreasing, the decline slowed down significantly. Among the proximity channels, small supermarkets continued their excellent performance and maintained double-digit growth.

Driven by its Metro brand, Wumart Group's share rose 0.3 percentage points in the second quarter, reaching a market share of 3.5% in modern channels (hypermarkets + supermarkets + convenience stores).

Benefiting from the strong recovery of the East China market compared to last year, Bailian Group experienced a 0.2 percentage point rebound in market share, returning to the same level during the same period in 2021.

Although Yonghui Group's market share slightly declined, its premium supermarket brand Bravo achieved positive sales growth in the first two quarters of this year.

Yonghui has almost completed the renovation of nearly 160 online warehouses in five core cities: Fuzhou, Beijing, Chengdu, Chongqing, and Hefei. This achievement ensures full coverage in the downtown areas. The "warehouse-store integration" model is steadily being promoted in key cities. Additionally, Yonghui has implemented measures such as proactive store optimization and upgrades to support high-quality development.

Sun Art Group's continued to face challenges, with its market share falling to 7.3% in the second quarter, down 0.5 percentage points from the same period last year. 

Sun Art Group hopes to create a "second growth curve" outside of its large-format stores by accelerating the development of multiple formats, especially the expansion of RT Super and the trial of M Membership stores, and leveraging its fresh supply chain and digital membership capabilities. Currently, in addition to the first M Membership store in Yangzhou, Sun Art has planned to upgrade existing RT-Mart stores in Nanjing and Changzhou, transforming them into warehousing-style membership stores.

With the further fragmentation of the Chinese retail market, regional retailers are becoming increasingly stronger. China's leading convenience store brand, Meiyijia, saw a 7.4% increase in sales in the second quarter compared to the same period last year, and its market share and penetration also improved. As of June 2023, the number of Meiyijia chain stores has exceeded 32,000, with over 2,000 new stores added in just six months, averaging more than 10 new stores per day.

With the rapid growth of the middle-income population and the quick rise in purchasing power in China's third- and fourth-tier cities, regional retail giants are continuously expanding their regional operational advantages and implementing flexible franchise expansion policies. They are rising against the trend in the fierce competition within the retail market.

Alibaba and JD.com struggle to grow, while interest e-commerce shows promising performance

In the first half of 2023, E-commerce continued to experience steady development, with the competitive landscape undergoing accelerated changes. In the second quarter, among the penetration of leading e-commerce platforms, Alibaba and JD.com decreased by 0.5 and 0.8 percentage points respectively compared to the same period last year. Pinduoduo, on the other hand, has consistently attracted more consumers over the past three months, resulting in a 0.6 percentage point increase in its penetration.

Interest E-commerce continued to experience rapid growth, with 22.9% of urban Chinese households purchasing FMCG through the Douyin platform in the second quarter of 2023. Douyin has also further maintained its advantage over JD.com in terms of penetration rate.

In the 618 Shopping Festival in 2023, major players unprecedentedly increased their investment, and major platforms provided historic and substantial subsidies. Douyin, which has risen to prominence, also officially launched "Super Red Packets" and commission policies targeting “Douke” during the 618 event. By leveraging “Douke”, Douyin penetrated external channels such as WeChat, Weibo, and Red to drive traffic to its e-commerce platform.

Under the trend of shopping festivals and live-streaming sales becoming more commonplace, the significance of 618 as a low-price festival is gradually being diluted. Consumers have become more rational, and cheap prices and discounts alone are no longer sufficient to drive increased purchasing demand. Factors such as product quality, consumer experience, and logistics efficiency have further amplified their influence on consumer decision-making.

For the first four weeks leading up to June 16, 2022, there was a slight increase in FMCG through E-commerce. Among them, Douyin showed the most impressive performance, with a sales growth rate of 72% compared to the same period last year.

O2O experiences steady growth, with ongoing divergence in performance across platforms

O2O sales continued to rise in the second quarter with penetration growing by 0.4 percentage points over the same period last year, and frequency also increased.

CGB (Community Group Buy), which features "low price and affordable price", experienced double-digit growth in sales in the second quarter. 26% of urban households purchased FMCG on the CGB platforms in the past three months.

Among the CGB platforms, Meituan Youxuan and Duoduo Maicai have made the greatest contribution to the sales growth. Both platforms prioritize product quality and combine online and offline channels to meet consumers' integrated needs in a comprehensive retail format.

Retailers’ self-run APPs/mini-programs, which focus on enhancing consumers’ experience and offering a wide range of product choices, witnessed a sales growth of nearly 60% in the most recent quarter.

After the pandemic, front warehouse platforms faced great challenges in terms of penetration and spend per trip, but there was still a noticeable increase in user frequency. Meituan Maicai and Dingdong Maicai experienced a significant decline in sales, while Pupu continued to maintain positive growth.

After a slow 2022, China’s fast moving consumer goods (FMCG) sector is showing signs of recovery and building the momentum for a positive rest of 2023, according to a report released today by Kantar Worldpanel and Bain & Company.

In 2022, Chinese consumption was hamstringed by two major waves of Covid-related restrictions. Despite year-on-year value growth of 2.8% in the first half of the year and reaching 6.3% in the fall, an infection spike at the end of 2022 caused value to decline to 3.9% in the fourth quarter. As a result, the FMCG market landed at a modest annual growth rate of 1.5% for the full year. Like previous years, local brands gained share from foreign brands, mainly through volume gains, while average selling price (ASP) decreased for both local and foreign brands. 

The first quarter of 2023 revealed promising signs of a moderate economic rebound. China’s GDP grew 4.5% in Q1 2023 compared to Q1 2022, while overall retail sales (excluding auto) grew 10.5% in March year-on-year, both exceeding expectations. The market’s Consumer Confidence Index showed a steady upward trend but has yet to return to pre-pandemic levels.

The 12th edition of China Shopper Report 2023, Vol. 1 reported that consumers are gradually gaining confidence now that Covid restrictions have lifted. Overall, the FMCG industry rebounded from the fourth quarter of 2022 and reported value growth of 1.9% in Q1 2023 vs. Q1 2022, driven by mild volume growth of 2.7%, despite a decline in ASP of 0.8%.

“Although the first quarter’s value growth rate might appear modest, the story is very different on a month-by-month basis. While January consumption was severely affected by a Covid outbreak, the FMCG sector started its growth trajectory in the months after. Full recovery will take time, and we think the first quarter numbers are tracking well,” said Bruno Lannes, a partner at Bain & Company based in Shanghai. 

In April, the year-on-year FMCG growth rate reached 5.1%, in line with pre-pandemic levels. Overall retail sales, excluding auto, also saw impressive growth at 16.5%.

Packaged food and home care continued to grow; personal care and beverage showed signs of recovery

Across all four major FMCG sectors, home care continued to lead value growth at 13% year-on-year in the first quarter of 2023 due to sustained health awareness and increases in both volume (9.5%) and ASP (3.2%). Nearly all key categories grew due to sustained and heightened attention to hygiene and health needs. Packaged food continued to grow at 3.2%, mainly driven by an ASP increase (5.2%), although volume dropped 2%. April data showed that home care and packaged food continued value growth of 12.2% and 3.8% compared to April 2022, respectively.

Beverage value grew 1% in the first quarter of 2023, driven by volume growth of 3.4%, while ASP declined 2.4%. Juice, ready-to-drink tea, milk, and packaged water continued to lead the sector’s growth. In April, the sector experienced further growth of 3.3%, revealing its rebound potential.

In personal care, the trend of declining value slowed in the first quarter of 2023 (2.6%), with an increase in volume (4.1%). In April, the sector achieved a value growth of 5.9%, providing confidence for the coming months.

Deflationary pricing trend across categories further diverged

“The price deflationary trend which started in 2020 persisted in the first quarter of 2023 but became more divergent across categories. Some categories have continued to increase their ASPs through strong innovations and by addressing consumers’ rising health and hygiene needs. For example, the premium juice segment achieved 25% volume growth, and ASP increased 7% year-on-year, a result of new processing methods and new flavors,” said Jason Yu, Managing Director of Kantar Worldpanel in Greater China.

Others have sustained ASP declines as consumers chose lower-priced products and shifted to online for more competitive pricing. The toothbrush category is representative of this. Across all price tiers, the mass segment for toothbrushes had the highest volume growth at 4%, with a 9% ASP decrease.

E-commerce reaccelerated, club warehouses soared, and O2O sustained growth

In the first quarter of 2023, consumers accelerated their shift toward online channels, reaching a sales value growth rate of 9% compared to the first quarter last year, due to Covid infections subsiding and resumption of logistics supply chain.

Club warehouses showed a significant value increase of 38% year-on-year in Q1 2023, with growth attributed to a growing number of buyers and increased shopping frequency.

The club warehouse differs from a traditional hypermarket in three ways: membership fees drive profit more than product margins, items sold are mainly imported or self-labeled, and products are primarily sold in bulk with lower unit prices vs. single packs.

One continuing trend is the sustained growth of online-to-offline (O2O) channels, which saw 16% value growth in Q1 2023 vs. Q1 2022. From a category penetration perspective, O2O has distinct patterns compared with online penetration. Necessity categories with urgent needs, such as frozen food, facial tissue, and toilet paper, led O2O penetration growth. Consumers are responding favorably to the convenience and speed offered by O2O solutions.

“Chinese consumption is recovering, and the government has already implemented stimulus policies to boost consumption, with more expected. The FMCG industry continues to demonstrate resilience, and consumers, brands, and retailers adapt to ever-changing circumstances. The industry’s recovery is likely to take shape over the coming months, repeating a few trends from the first quarter of the year.” said Derek Deng, a partner at Bain & Company based in Shanghai.

For complete report, please contact us.

The latest Kantar Worldpanel China data indicated that in the first quarter of 2023, FMCG sales in urban China returned to growth, increasing by 0.3% year-on-year, which is 4.3 percentage points higher than the growth rate in the fourth quarter of 2022.

The North and East region enjoyed a faster rebound, increasing by 1.8% and 2.3% respectively compared with the same period last year. The data recently released by the National Bureau of Statistics also showed that the total retail sales of social consumer goods in the first quarter increased by 5.8% year-on-year, mainly driven by the resurgence of service industries such as catering and tourism. 

With the steady recovery of the economy, offline consumption occasions gradually increased. Consumption demand returned in the first quarter, and consumption's driving force for economic growth was also significantly strengthened.

As consumers' lives return to normal, the demand for stockpiling food at home has declined, and the sales growth of food and beverages in the first quarter was lower than that of household cleaning and personal care products. The household cleaning category continued its growth momentum in 2022, with particularly impressive performance in the sales of paper products. 

Beverages returned to growth after a brief decline in the fourth quarter last year, with double-digit growth recorded in juice, functional drinks, and ready-to-drink tea. Ambient milk and nutritional supplements increased by 7% and 18% respectively in the first quarter, reflecting the sustained demand of Chinese consumers in the post-pandemic era for improving their physical fitness and immunity.

Modern Trade: 

Proximity channel continues to outshine while competition intensifies in membership stores

Kantar Worldpanel’s latest report shows that hypermarkets and large supermarkets continued their weak trend in the first quarter of 2023. The continuous decline in footfall is still the biggest challenge faced by large format retailers, with a 16.4% and 10.7% decrease in hypermarkets and large supermarkets respectively compared with the same period last year. 

At the same time, small supermarkets sales increased by 15.5% year-on-year, and the purchase frequency and spend per trip both increased. Convenience stores also enjoyed a growth of buyers and purchase frequency. It shows that Chinese consumers are sticking to their shopping habits in proximity channels that they developed during the pandemic.

In addition, Kantar Worldpanel also pointed out that the fragmentation trend in modern trade is becoming more obvious. The overall share of the top ten retailers fell to 34.5% in the first quarter from 37.7% a year earlier. 

Among them, Suning Group's share fell by more than 1 percentage point. Carrefour, a subsidiary of Suning, is under enormous pressure of public opinion, cash flow and supply chain, which has a greater impact on sales. 

In addition, BBG Group's share in the first quarter also dropped significantly compared with the same period last year. With the recovery of offline consumption and the optimization of store layout, 

Yonghui Group's various business indicators showed an improvement trend, but the market share still dropped by 0.2% compared with the same period last year. 

As the key growth engine of Wal-Mart Group, Sam’s Club’s market share in modern trade increased by 0.6% in the first quarter, helping Wal-Mart’s overall share to increase by 0.2%. 

It is worth noting that the competition in membership stores has further intensified, and the market share of Hema X and Metro has increased in the first quarter. Different membership store brands continue to make efforts in product iteration, private label brand building, and supply chain optimization to meet consumers' needs for quality, cost-effectiveness, and multiple experiences. 

Sam's Club opened 6 new stores in 2022, and Hema X launched 9 stores across the country. Sun Art Retail's first member store was open at the end of April.

Among other major retailers, Hongqi Chain, known as "China’s No. 1 stock in Convenience Supermarket", performed well, and its share in modern trade has increased. 

Hongqi's "Convenience Supermarket" business format combines the "everywhere" of convenience stores and the "wide selection of categories" of supermarkets, providing consumers with a timely and convenient shopping experience. After achieving both revenue and net profit growth last year, Hongqi’s revenue in the first quarter of 2023 increased by 4.7% year-on-year.

Platform e-commerce gradually recovers, and interest e-commerce makes great strides

In 2022, the rise of interest e-commerce and the development of O2O (shop online + deliver from offline stores) significantly threatened traditional e-commerce. In the first quarter, the penetration of Alibaba, JD.com and Pinduoduo continued to decline compared with the same period last year but the loss has been decelerated since the reopening after Covid. 

In addition, the purchase frequency of consumers rebounded significantly.

Among interest e-commerce platforms, Douyin and Kuaishou maintained rapid growth in the first quarter. Although the spend per trip has dropped slightly, they managed to have excellent performance in buyer recruitment and driving frequency. In the first quarter, more than 20% of Chinese urban households purchased fast-moving consumer goods on Douyin platform. 

Douyin Supermarket was launched during the Spring Festival in 2023, and the entry of more mainstream brands will also help Douyin accelerate its deployment in essential categories, and cultivate consumers to develop more direct shopping habits on Douyin. Kuaishou's advantage in lower tier cities and towns poses a direct threat to Pinduoduo.

O2O continues to grow, and the competition escalates in the “final round”

O2O sales continued to grow rapidly in the first quarter. Although the spend per trip has dropped slightly compared with the same period last year, the purchase frequency continued to increase. 

In the first quarter, more than 34% of Chinese urban households purchased fast-moving consumer goods through O2O. 

During the pandemic, consumers had more opportunities to use O2O platforms and gradually increased their usage. This shopping habit has not disappeared with the end of Covid. As consumers continue to develop the habit of using O2O in more categories and occasions, it is expected that O2O will continue to maintain a good growth momentum.

At the same time, community group buy (CGB) saw a good year-on-year growth in buyer recruitment in the first quarter of this year. Although the economy has begun to recover, the purchasing power of consumers, especially low- and middle-income groups, still needs some time to recover, and the appeal for "low price, affordable price" will continue to exist. This is a favourable trend for CGB, which features "value for money" and continues to expand the selection of categories and services.

Benefiting from the increase in purchase frequency and spend per trip, retailers’ self-run APPs/mini-programs performed well, with sales increasing by more than 40% compared with the same period last year. As the footfalls of large formats continue to decline, home delivery services have changed from "optional" to "required" for retailers. Traditional retailers have improved their competitiveness through evolution of their business model, SKU and supply chain optimization and customer retention strategies. 

Front warehouse platforms were challenged in buyer recruitment, but Pupu and Dingdong Maicai have achieved growth in sales through continuous enhancement of product superiority, control of supply chain costs, and optimization of their geographic layout.

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.

Kantar Worldpanel is dedicated to continuously improving the way that we capture and understand both shopper purchase and consumption moments. Over the last 15 years, through our ‘LinkQ’ solutions we have been able to connect with our panelists via surveys to understand more about the ‘why’ behind their purchase decisions. 

Over the last few months we have improved this capability to enable us to trigger a survey to panelists within 24 hours from the moment they record their purchase. This new capability is called ‘LinkQ’ Moment and this brings a number of benefits to both manufacturers and retailers. 

To demonstrate these benefits, we conducted a pilot project for the Carbonated Soft Drinks category by sending a survey to 200 panelists who had consumed a CSD product with the previous 24 hours. Some of the key insights and implications from the survey results will be shown below.

Firstly, though, why is it important to trigger a survey as close as possible to the moment of purchase? Through our testing of this approach we found that 96% of respondents were accurately able to recall the trip they had made within the 24 hours previously. This is a very high level of recall compared to more traditional approaches which may require the respondent to recall a purchase from weeks, or even months before. 

This is particularly important for high frequency categories, like snacks and beverages, where many shoppers will alternate between different variants and brands. The more the panelist can remember about the trip the more accurate their responses will be, which enables us to deliver more precise insights.

Impulse vs Planned

Understanding the proportion of trips that are impulse vs planned can guide strategy on the importance of pre-store vs in-store communication with potential shoppers. 

In our pilot test we found that over half (56%) of CSD trips are purchased on impulse and are not planned. 16% of respondents planned to buy the category but had not decided which product to purchase yet and the remaining 29% had already decided the exact product they will buy before going into the store.

This means that 72% of shoppers are making the decision on which product to buy in-store and shows the importance of product placement and the effectiveness in-store marketing for this category in converting shoppers.

Product Location in Store

Understanding where your consumers pick products up from in the store is critical when it comes to planning your product location and in-store activities, especially if your brand operates in more impulse driven categories. 

From our survey we found that there are some significant differences where the product is picked up from between older and younger consumers for the CSD category. Younger consumers are much more likely to head to the chiller to find their drink whereas older consumer prefer to go to the ambient main shelf.

Secondary displays are also important accounting for almost ¼ of trips, and are even more important to shoppers who planned to buy the category but not the product; accounting for 33% of these trips.

Reason for Purchase

Knowing the reason why shoppers choose to buy your product or competitor products can help to understand the mindset of shoppers when they enter the store and tailor your communication to meet their needs. 

From our pilot survey we found that 58% of shoppers buy the product because it’s the one they always buy or it’s a brand they like. This means there are 42% of shoppers who looking for a product their can meet more specific needs and the next 2 most important reasons are that ‘it was the right size for my needs’ (18% of respondents) and ‘the product perfectly suits the occasion I was buying for’ (16% of respondents). 

This shows that optimising your portfolio to meet different needs and occasions is key in convincing shoppers to buy your brand over a competitor’s for at least one third of shoppers.

Further Understanding of Shopper’s Decisions

In addition to the above we can also understand more behind shopper’s decisions whether this be why they choose one brand over another, the different touchpoints they have been exposed to before the purchase, and how they found the in-store experience. 

We also have the capability to understand the consumption moment to find out which specific occasion the product was used for and their experience of using the product. These insights can help to make sure that you are meeting consumer’s needs and allow you to tweak your product to ensure that it stay relevant and delivers a great experience.

If you would like to know more about our capabilities in this area and take advantage of being able to connect with real shoppers about real purchases in real-time please speak to a member of your client service team or contact the person below.

Beauty market performance was hit more severely in 2022, and a new trend of simplification emerged.  

Kantar Worldpanel Beauty analysis showed that women between the ages 15 and 64 decreased their skincare steps to 3.99 on average, lowest it has been in the past 3 years. 

This downward trend was particularly noticeable among the young consumers from the Tier 1 & 2 cities, facing fast-paced lifestyle and pressure. Simplification in product, usage, and communication was found, but this too is an extension of new consumer sophistication, which can be summarized as 5 Ss. 

“Simplicity is the ultimate sophistication.” - Leonardo da Vinci.

5Ss in simplification are as follows:

1. SMART INVESTMENT to Satisfy both Functional and Emotional Needs.

2. SUBSTITUTION BEAUTY: Beauty Services Shifting Consumers’ Focus in Daily Beauty Routine & Rise of Occasional Sensitivity Needs.

3. SKINIFICATION of Total Beauty, from Head to Toe.

4. SOMETHING NEW & DIFFERENT: Niche Segment Exploration for Advanced Holistic Routines and High-Efficacy & New Usage Occasion-driven Innovation.

5. SELECTIVE SIMPLIFICATION: Differentiation of needs and usage habits to better fit into busy lifestyle.

We can look to South Korean market as an inspiration for driving the market recovery. South Korea’s beauty market recovery was driven foremost by products linked with outdoor activities, as well as products that focus on high-efficacy delivery at convenience.

And as the overall market demand recovered, consumer demands started to re-diversify in both the products they sought and platforms they leveraged to fulfil their relevant shopping needs. 

While outlook for the China beauty market recovery in 2023 is positive, there are some hurdles that the businesses need to overcome.

1. Consumer confidence without whose recovery people's money will not convert to consumption still faces much challenge.

2. Travel retail rebound can affect short-term domestic sales and further dial up Daigou activities.

3. Substitution Beauty with a potential to further cannibalize in-home beauty care product demand.

4. Effortless Chic (Natural) Look Trend dampening the makeup market recovery.

5. Aggressive promotion drive from the past 2 years have changed consumers perception of value and purchasing pattern.

Kantar Worldpanel’s latest China Beauty Consumer & Recovery Trend 2023 report addresses the emerging trend in the market and how they can help fuel both the market and brand growth based on an in-depth analysis of consumers’ purchasing and usage behaviors.

Contact your Kantar Worldpanel consultant today for more details. 

In Q4 massive infections nationwide once again lead to higher demand for convenience food categories. Both instant noodles and frozen food saw sales jump by more than 20%.  Thanks to the new optimized COVID prevention policy, the peak of infections reached its peak by the end of December 2022 and the market started to show signs of a quick rebound. Throughout December, high demand for healthy and immunity propositions also created huge demand for nutrition supplements. In additional, increased usage and development of new usage habits also drove the growth of the tissue category by 12% in Q4.

Modern trade faced challenges while proximity channel continued to fly

The performance of different modern trade formats became even more divided in 2022.  Footfalls of offline stores, especially hypermarkets, were severely impacted by reduced mobility. In Q4, sales of hypermarket and supermarket fell by 10.9% and 11.7% year-on-year, respectively. Meanwhile, the performance of proximity channels remained robust, with those small formats closer to consumer movements and communities kept winning a higher share of wallets. Small supermarkets in China reported a stellar growth of 11.3% in Q4 as consumers had to stay at home and chose to shop nearby for daily staples for convenience. Consumers also started to buy products which improved their quality of life, creating new opportunities for growth for those proximity stores. 

The overall weakness of offline stores also created more intense competition amongst the leading players. Retail concentration in 2022 further reduced, as most key players lost market share, even more significantly for Sun Art group, Yonghui and Vanguard group in Q4. At the same time, strong performance of Sam’s Club helped Walmart Group gained 0.3 share point nationwide, and Walmart overtook Yonghui to become the second largest retailer in the latest quarter. Sam's Club gained 0.9 and 0.7 share points in the East and South regions respectively in Q4, with a noticeable increase in both shoppers, and shopping frequency. This indicated an increased attraction of the Sam’s Club offering on the back of its distinctive value proposition and supply chain strength. Jiajiayue, a leading member of the SPAR group, also consolidated its position in its home regions and expanded steadily in nearby provinces. Sunning Group (a holding group for Carrefour in China) and Bubugao Group, however, saw sharp share losses, as both of them accelerated the closure of loss-making stores and retrenched from their past expansions.

What’s in store in 2023?

1.     FMCG market is set to recover despite challenges ahead

With the optimization of COVID prevention policies introduced since Dec 2022, local governments pledged a number of measures to create more incentives to spend and new consumption occasions. Kantar Worldpanel’s weekly purchase barometer report also confirmed a fast recovery of consumers’ FMCG purchases in major cities across China since infections passed peak levels at the end of December 2022. With a strong desire to get back to normal life and recovery of mobility between cities and provinces during the Lunar New Year time, the out-of-home market and brick-and-mortar stores saw a quick pick up of traffic.

Yet uncertainties over the second or third wave of infection as well as global economic turmoil and geopolitical tension remained potential hurdles to a full economic recovery.   Early Kantar Worldpanel analysis also indicated that Chinese shoppers were more price-sensitive and more value driven no matter if they shop offline or online. Consumer confidence in China is also yet to be fully restored. Yet with the strong determination of the central government to get back to growth, it is believed that the market will steadily recover in Q2, providing there is no major COVID disruption and consumers disposable income does not decrease. There are plenty of promising growth opportunities for brands offering health, convenience, pleasure and indulgence, especially in lower tier cities and towns. 

2.     Heated competition amongst membership stores calls for a new route to growth

In 2022, the race amongst existing and emerging players in the membership store model remains heated, as competitors such as Metro, Hema and other local retailers joined the game while Sam’s Club and Costco increased their footprint. Over the past year, Sam’s Club opened 6 new stores across China while Hema X also launched its 6^th store in Shanghai. Metro, now part of Wumart Group in China, also announced an ambitious plan to transform all their stores to membership stores in 2021 and has opened 24 new stores in less than 2 years. Growth of the sector also lured more me-too players to join the market and made competition more intense. Sam’s Club continued to maintain its advantage with its distinctive private label offerings as well as global supply chain strengths. It also expanded its offer to non-food categories with the same distinctive value and quality excellence. Hema X differentiated itself over store design and customer experience. In China, more and more membership stores moved into more densely populated urban districts instead of suburban areas to attract more local residents. Those stores will have to compete more effectively with existing players in those neighborhoods with its solution to consumers’ daily needs rather than ‘stock-up’ shopping. Local retailers in China also made moves into this sector but there was a lack of differentiation from the hypermarket format to build a real value proposition and save themselves from market share losses.

3.     Brick and mortar stores strengthen their delivery experience, while discount stores emerge

Over the past three years, Chinese consumers preferred to shop locally and the habit is here to stay. According to Kantar Worldpanel, small format stores are the only ones that grew within modern trade with number of convenience stores also expanded rapidly. In additional, consumers developed the preference to shop on their mobile. The latest Sun-Art trading report revealed online sales contributed to 35% of its sales, with its ‘1-hour delivery’ service reporting outstanding performance. Yonghui also invested heavily in the development of its digital capabilities to cover all its stores nationwide – its online business reported 21% growth year on year and contributed substantially to the turnaround of its profit performance. Acceleration of digital transformation while building excellent omni-channel experiences remains the strategic priorities for all offline retailers.

In the context of slow economic growth, less pantry loading and lower consumer willingness to spend, Chinese retailers also started to launch discount formats despite some unsuccessful experimentations in the past. Wumart opened its first discount store "Meitao" in August 2022 and Hema also announced an ambitious plan to open its ‘outlet’ stores as its new growth engine, with fewer private label SKUs at deep discount.  Whether hard discount format will eventually become the winning format to compete directly with mainstream retailers remains to be seen. Those emerging players will have to build extremely high levels of operational efficiency and brand power to win the minds and wallets of Chinese shoppers.

4.     Evolving O2O model shaping the growth of online retail

O2O (shop online + deliver from offline stores) was increasingly the mainstream way of shopping for many Chinese shoppers in 2022. Over the past year, 56% of China urban households purchased FMCG through O2O and became a routine habit for many. Although consumers purchased less products as they came out of the lockdown, they tended to increase shopping frequency, with average consumers placing 15 orders yearly, similar to the average number of visits to large supermarkets.

A few local Community group buy (CGB) players saw their business retrenched since the beginning of 2022 as they failed to sustain their business model profitably. However, a few digital giant-based competitors maintained steady growth. For example, Meituan further upgraded their offer to cover more categories. Despite the market turbulence throughout the year, Community Group Buy maintained its foothold as a viable business model, with its buyer base growing by 23% year on year, despite lower ticket price. Retailers based on the warehouse O2O model experienced reshuffling, yet their key customers expanded their basket choice to spend more on fresh foods at premium price. Dingdong Maicai, a leading player in the sector turned around its financial performance with more drive on its own label products and pre-made dishes. It also promoted the concept of "clean label" to reduce the additives in products, catering to consumers' pursuit of a healthy lifestyle.

Key O2O aggregators continued to strengthen their offer in 2022, by increasing the width and depth of categories to meet the everyday consumer needs. Their local delivery capability was also an advantage over mainstream eCommerce platforms. In 2023, O2O aggregators will further improve their delivery efficiency and category coverage to compete with other digital commerce models and build the modern local retail ecosystem with offline retailers.

5.     Interest commerce competing directly with online supermarkets

According to Kantar Worldpanel, eCommerce reported a noticeable slowdown in 2022, yet the overall shopping frequency remained stable.

Source: Kantar Worldpanel China

‘Interest Commerce’, grew on the back of short-form video content and KOL grew remarkably. 33% of the Chinese consumers bought FMCG products through Douyin in 2022, with the number of buyers almost doubling compared to 2021, with more prominent growth in the South and West regions. Douyin also launched a formidable movement into the battleground of online supermarkets, signifying its next chapter of development. Moving from interest in content to a direct search-based shopping model on the back of product supplies, Douyin now started to compete head on with the like of Tmall and JD, and this also created new growth possibilities for eCommerce. Yet a full conversion from interest to commerce, to cover consumer needs across all occasions, will have to be supported by the richness of product offers and strong delivery capability.

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.

We’re proud to announce that Great Place to Work® has named Kantar Worldpanel, a CTR service China, as one of the ‘Best Workplaces in Greater China™ 2022’.

This year, Great Place to Work® surveyed more than 250 companies, out of which, 92 were awarded; representing more than 100,000 employees in Mainland of China, Hong Kong and Taiwan. This survey assesses employees' perceptions of leadership, organizational culture and trust, and is decisive for being selected for the Best Workplaces™ in Greater China.

Under the For All™ methodology, companies are evaluated on how well they are creating an inclusive workplace experience for all employees, regardless of their background or position.

In the Trust Index© Survey to employees, 101,303 valid responses have been considered and collected which generated an average score of 89.3% for Greater China. In the Best Workplaces in Greater China™ indicated over 14% more employees shared the followings experiences in their workplaces. 

? Receiving special and unique benefits? and fair share of the profits made by the organization.

? Feeling that management hires people fit in the organization. 

? Feeling trusted by the management to do a good job without watching over shoulders.

? Feeling agile to quickly adapt to changes.

Jason Yu, Managing Director, Worldpanel Greater China, commented: “I am delighted that we have been recognised again by Great Place to Work® as one of China’s Best Workplaces.  Despite all the challenges experienced during the pandemic, we have worked extremely hard to build an organization where our employees are equipped with the support and trust needed to do their job effectively.  We listened to our people through different forms of feedback and prioritized their wellbeing through various care activities. I would like to thank the entire team for their energy, resilience and dedication to make a great workplace each and every day in 2022.”

About the Best Workplaces in Greater China™ List

Since 2012, Great Place to Work® has identified the top organisations that create great workplaces in Greater China in which they operate through the publication of the the Best Workplaces™ in Greater China list.

The objective of publishing the list is to acknowledge organisations and Great Workplaces from diverse industries and sizes that deliver and establish great culture among the colleagues and associates, so as to sustain and enhance the competitive edge of the region.

To be considered eligible for the Best Workplaces™ in Greater China list, companies must score at least 70% in the overall result of the Trust Index© employee survey and must gain a satisfactory result in the Culture Audit© assessment.

“The big hero this year was volume which rose 5.9% compared to the same period last year. Pandemic-fueled stockpiling behaviors are a likely cause, with volume rising across all sectors,” said Bruno Lannes, a partner at Bain & Company based in Shanghai. “Overall, China’s FMCG market demonstrated some buoyancy in rough waters, signaling there is hope for the months and years ahead.”

Packaged food and home care continue to lead growthAcross the four sectors, packaged food and home care led growth during the first three quarters due to Covid-led stockpiling and heightened health and hygiene concerns. Packaged food alone averaged 7.4% value growth in the first three quarters of 2022, with 4.6% in volume and 2.6% in average selling price (ASP). Home care saw similar pandemic-related gains as packaged food, with a value increase of 6% this year driven largely by a 5.4% volume increase and 0.6% increase in ASP.

Beverages also did well. Its 4.1% value increase in the first three quarters was shaped by a volume increase—mainly in the third quarter—of 7.2%, despite an ASP decline of 3%. Pent-up demand following pandemic confinement was part of the equation, but so was the summer heatwave. In contrast, personal care reversed the trend, dropping 1.9% in value with a slight increase of 0.7% in volume and 2.5% decline in ASP. Cosmetics categories drove this plunge, and Covid provided the push.

E-commerce stagnates, O2O soars

This year, the unpredictable nature of China’s pandemic restrictions introduced new channel dynamics. E-commerce trod at a similar pace as the overall FMCG market during the first three quarters of the year, while smaller offline store formats and online-to-offline (O2O) commerce rode on Covid’s tailwinds. In the third quarter, O2O saw 17% value growth compared to last year as consumers sought to stock up and fulfill instant needs while avoiding fulfilment issues from online-only orders. Frozen food, toilet paper, and facial tissue were among the categories that saw huge growth in O2O penetration.

Interestingly, convenience stores and grocery stores gained traction, growing 9% relative to non-existent growth last year. This represents a reversal of trend from the last report and suggests a change in consumer preferences. Pandemic-related disruption to transportation, along with concerns about virus exposure in large crowds, had consumers gravitating to the predictability, convenience, and safety of shopping at nearby locations.

Average selling price continues deflationary trend

Despite cost inflation at 2% in the first three quarters, ASP continued its downward trend for the third consecutive year and is at its steepest since 2020, declining by 2.1% in the first three quarters vs. last year. Reactions to the decline differed by sector.
Only a few categories showed real ASP growth above inflation level, and these were largely in food and beverage and home care due to pandemic-related consumer behavior changes. Faced with rising input costs, FMCG brands understandably pushed for price increase to manage margins. However, how consumers reacted to the price increases in food and non-food sectors differed significantly. 

“While seeking more ‘value-for-money’ products seems to be a common trend, food and beverage saw a volume increase with consumers stocking up on larger pack size items. Personal care and home care, on the other hand, saw a shift toward less expensive products and channels.” said Jason Yu, Managing Director of Kantar Worldpanel in Greater China.
Category and pricing patterns suggest consumers have learnt to cope with CovidWhile the four distinct category patterns - which we identified in 2020 as Covid erupted ­­- largely still hold true, there were less divergence across these categories during the first two quarters and they converged back much faster, suggesting that consumers have learnt how to cope with Covid.

Four major pricing patterns, premiumization, trade up to mid-range, larger pack stock up and flight to value - identified in Volume 1 – continued to prevail. For example, consumers, particular those from Tier 1 cities, continued to premiumize, with carbonated soft drinks, beer, and fabric detergent due to continual innovation and the introduction of new formats and flavors.In the trade up to mid-range cohort, toothpaste, personal wash, and infant formula were strong players.

Interestingly, consumers veered towards larger pack stock-up during this year’s Covid outbreaks compared to previous years. And in the flight to value group, consumers’ growing preference for ‘value-for-money’ options rose with inflation. In skincare there was a notable shift towards more affordable products through domestic substitution. These latter two pricing patterns were consistent with the downward ASP trend in lower-tier cities.

The research identified recommendations brands should consider as they enter a volatile 2023.

Three ways for FMCG to position for success in 2023

Identify growth opportunities: As market dynamics shift and competition intensifies, brands must find new growth engines. By thoroughly assessing market and consumer trends, they can expand into new geographies, enter or create new market segments, sell into new channels, and interact with consumers via new touchpoints—all potential avenues to growth.

Improve efficiency: Rising input cost and unexpected supply chain disruptions will force brands to manage cost more carefully or even reset their cost base to deliver sustainable financial returns. To sustain consumer demand and preserve brand relevance, brands should adopt a test-and-learn approach: continuously optimize marketing effectiveness, while dynamically adjusting pricing, assortment, packs, and promotion to maximize revenue potential.

Plan for uncertainty: Facing enduring pandemic and geopolitical tension, brands must better anticipate changes and build flexibility and resilience. Scenario planning can help them develop non-regret moves and contingency plans for different events based on signposts and triggers.

Three ways for retailers to position for success in 2023

Transform business model with balanced score card: As the retail industry faces continued deflationary pressures, retailers need to shift focus from gross merchandise value (GMV) and topline growth to sustainable operations and profit margin. Critical levers include optimizing store footprint and SKU assortment.

Improve shopper loyalty with distinct shopper experiences: In a challenged retail market, retailers need to focus on core consumer segments and improve shopper loyalty via differentiated services and consumer engagement across multiple channels. Doubling down on creating a frictionless O2O shopping experience could help pave the path to success.

Build differentiation with exclusive assortment: As consumers are pulling back on spend, and capital markets are investing less into the retail markets, retailers need to establish a differentiated portfolio. Private label or exclusive products could help draw traffic and attract new consumers.

“2023 is likely to remain volatile, resuming some of the trends we have witnessed in 2022 while seeing improvement in others. However, we do see a gradual relaxation of Covid curbs taking place in China, bringing back some consumer confidence,” said Derek Deng, a partner at Bain & Company based in Shanghai. “There are other fundamental reasons to be optimistic as well. China’s FMCG industry has demonstrated remarkable resilience in the first three quarters, as both brands and consumers have honed their adaptability to changing circumstances. If FMCG companies can keep their fingers on the pulse of consumer needs and remain nimble, they can chart a path towards healthy performance.”

FMCG Companies Ranking by Consumer Base (million households)*

 Source: Kantar Worldpanel China

“Despite the pressure from sporadic Covid outbreaks and demand and supply disruptions, the China market continued to demonstrate enormous resilience and impetus for growth. In such a competitive context the top players keep innovating by uncovering new occasions as well as accelerating deployment in new channels and new markets, strengthening their leading positions and riding through the cycles” commented Jason Yu, Managing Director of Kantar Worldpanel Greater China. “With consumers getting more rationale and divided in their needs, market leaders will have to develop more holistic insights in new occasions, develop a clear strategy to win in digital commerce channels as well as penetrate deeper in tier 3-5 cities to unlock consistent growth!”

New occasions under “the next normal”

Under the new era of zero-COVID control, home-based consumption thrives. Cooking and sharing culinary skills has become a social activity among young consumers. Apart from safeguarding daily food supplies to the country, Wilmar and COFCO keep expanding their product portfolios across different categories, and launching new products with healthy concepts, like 0-trans fatty acid and products containing natural ingredients to enhance the quality of life of consumers.

With Covid-19 lingering, consumers are looking for indulgence and relief. Beverage manufacturers, like Nongfu Spring, Coca Cola, PepsiCo, attract more Chinese households in the recent year by communicating the comfort and joy that they can bring. Aside from driving the business of its ready to drink brand Oriental Leaf, a sugar free tea-based beverage, Nongfu Spring also launched fusion products such as Sparkling Tea, with its positioning of “real tea leaves, abundant bubbles and low sugar recipe”, offering sensory joy on top of the Chinese tea drinking culture and expanding the boundary of tea and carbonated soft drink”.

On the non-food side, more at-home occasions also boosted demand for paper product. Leading players, Vinda and Hengan make an effort to extend paper usage occasion at home. For instance, Vinda launched washable kitchen paper, which helps consumers to both clean and prepare food, demonstrating higher value to consumers with multiple usage functions. In addition, consumers also kept stocking up personal care and home care products to stay clean and healthy. Liby, Nice, PG and Unilever constantly tapped into this trend.

O2O – An effective way to attract incremental consumers

As sales of traditional ecommerce platforms saturated, their shopper penetration growth slowed down. During the 52 weeks ending October 7th 2022, pure online penetration was 87.3%, a slight dip from 88.7% from same period last year. Meanwhile, the O2O model (ordering online and receiving delivery from offline stores / warehouses) effectively satisfied consumers’ all-category and multi-occasion need by connecting a vast user base of internet platforms and physical retail stores through digital techniques and logistics infrastructure. The latest data from Kantar Worldpanel shows that, during the 40 weeks ending October 7th 2022, O2O sales value grew by 13.5% versus the same period last year.

For many brands O2O has also become a channel to reach more consumers and uncover new consumption occasions to attract new buyers. For those leading players generating more incremental shoppers from O2O, most were food companies. Among them, COFCO leverages O2O to meet consumers’ real-time and convenience needs by delivering daily food supplies to consumers’ homes, leading to additional 4.3 million new households. Paper manufacturers, like Vinda and Hengan, helped consumer to fulfill the delivery needs by moving bulky tissues directly to consumers. Colgate tailored their product offers by different platforms, for example premium products in O2O marketplace platforms and mass products for the community group buy platforms, which has enable them to gain more new buyers. 

O2O incremental households Top 10 manufacutres

 (000’ households, 52 weeks ending October 7th 2022)

Source: Kantar Worldpanel China

Winning new shoppers in the lower tier

With the lift of brand awareness and lifestyles, China’s vast lower tier cities remain a critical growth engine for most FMCG companies. According to Kantar Worldpanel, tier 3-5 cities contributed 61% of urban China’s FMCG growth during 52 weeks ending October 7th 2022. As the government introduced more supporting policies and gradual improvement of logistics and other infrastructures, the lifestyles and buying behaviors of those in the lower tier cities are increasingly similar to those in the high tier cities. The emergence of Pinduoduo and Kuaishou as well as the successful lower tier city growth of Tmall and JD.com are firm proof of the incremental growth. In past 12 months, the total incremental buyers from lower tier cities for those 24 companies accounted for 72% of their total buyer growth. 

Buyer expansion top 5 risers in 3-5 tier cities

 (Million households, 52 weeks ending October 7th 2022 vs. same period last year)

Source: Kantar Worldpanel China

Haday attracted 4.5 million new families in lower tier cities with its successful strategy to penetrate into small-format stores whilst driving more availability through eCommerce. Nongfu Spring recruited more families in 3-5 tier cities by catering to their needs on health and enjoyment, and pushed for more distribution of its RTD tea in supermarket and mini-mart. Vinda attracted additional 4.1 million more families in lower city tier, by capturing their trading up needs on facial tissue and wet tissues and emerging online shopping habits.  

Notes

1. Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing). From 2022 on, Kantar Worldpanel – household panel covers more categories. All changes may lead to some inconsistencies with previous years‘ data. 2022 newly covered categories are: yellow rice wine, vinegar, Chinese sauce, flour, seaweed, noodles, sachima, nuts, rice, dry fruit/vegetables, laundry sheet, filter cartridge

2. 1-2 tier cities / Upper tier cities: include Beijing/Shanghai/Guangzhou/Chengdu and provincial level cities.

3.3-5 tier cities / Lower tier cities: include prefecture level cities and county-level cities & counties.

4. Mengniu group includes Yashili

5. Nestle includes Nestlé, Hsu Fu Chi, Wyethnutrition, Totole and Haoji

6. Mars includes Mars and Wrigley

7. Colgate-Palmolive includes Colgate and Darlie

8. China Resources includes Jiangzhong group, and excludes Vanguard and Pacific Coffee

9. Ecommerce / pure online includes: 1) traditional platforms like Taobao, Tmall, JD.com, 2) Social ecommerce platform like Little red book, Weibo, WeChat store, WeChat moments 3) Short Video platforms like Douyin,  Kuaishou

10.O2O includes 4 types: Offline retailer self-run, Horizontal marketplaces, Community group buy and Frontline warehouse ecommerce 

The growth of modern trade channels (including hypermarkets, supermarkets, and convenience stores) stagnated yet diverged. Hypermarkets and large supermarkets fell by 4.1% and 4.5% respectively in the latest 12 weeks from a year ago, while small supermarkets and convenience stores rose by 12.5% and 9.0% respectively, both driven by growing baskets and an expanding consumer base.

Sun Art Group held an 8.1% market share in last 12 weeks and maintained its leading position, yet lost 0.5pts in their value share compared to last year. In the latest trading report, the group reported a 2.2% drop in revenue and 0.2% drop in same store sales, as well as indication of the early success of its store transformation. Yonghui Group followed in the second place, with 5.6% market share. Thanks to the expansion of Sam’s Club, Wal-Mart Group gained 0.2pts share year on year and became the third largest retailer, holding 5.3% share of the national market in last 12 weeks.

E-commerce channel grew by 7.5% versus the same period last year, driven by consumers in upper-tier cities accelerating their demand for online shopping as the lockdown impact created more needs for pantry loading. In the past 12 weeks, 71.6% of Chinese urban households purchased FMCG through e-commerce platforms. 

Source: Kantar Worldpanel China

For the core players, Alibaba Group leads the market yet lost 2.8pts market share to 37.1% over the same time last year. JD Group gained 0.3pts share year-on-year, rising to 15.9%, with its consumer base growing as well. The expansion of Pinduoduo appeared to retrench, and it lost 1.3pts market share, falling to 9.7%. Meanwhile, the interest e-commerce platforms are developing rapidly by attracting new users and we are seeing the penetration of Douyin catching up with that of JD. There were 18.1% of urban Chinese households who placed orders for FMCG on Douyin in the past 12 weeks, more than double the number from last year. Both Douyin and Kuaishou are expanding their market shares rapidly year on year.

For the D11 shopping festival this year, platforms focused more on the connections with consumers rather than only focusing on GMV (Gross Merchandise Value). Alibaba reported there were more than 300 million users who watched Taobao livestreaming since the D11 pre-sell, showing the great influence of D11 shopping festival has been retained. The “China-chic” trend remained strong across different sectors. In addition, O2O platforms also actively participated in Singles’ Day promotions, fueling growth to the brick-and-mortar stores.

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.

However, has the recent resurgence of Covid in China impacted shopper’s attitudes and purchasing behaviours towards sustainability? To answer this question, we will take a look at the results from the latest ‘Who Cares, Who Does?’ (WCWD) survey that has been conducted by Kantar Worldpanel every year since 2019 amongst 3,000 Chinese households.

In 2021 we saw that the group of shoppers who were most concerned with the environment and actively change their behaviour (‘The Green Advocates’) had grown in size and represented 30% of the population. In 2022 this group has decreased in size and now accounts for 26% of the population, a decrease of 6.1m households.

‘The Concerned’ group, who are worried about the environment and plastic waste and are making small steps to change their behaviour, has grown in size. Increased pressure on many households in 2022, such as Covid restrictions and increased cost of living, is impacting certain shoppers’ ability to purchase more sustainable products and resulted in ‘The Green Advocates’ moving into ‘The Concerned’ group. This is evident from the fact that 53% of respondents agreed with the statement “Recently I have found it harder to act sustainably because of other social or economic issues”.

Shoppers who have less environmental concerns, ‘The Non-Committers’ and ‘The Sceptics’ have remained relatively stable in terms of their contribution after seeing a large drop in size in 2021. 

More efforts need to be made to raise the awareness of environment issues amongst these groups as well as making it easy for them to act in a more sustainable way without having a significant change in their lifestyle and purchasing preferences.

The gap between intention and action presents a clear opportunity for manufacturers and retailers. Based on responses to the survey we found that 63% of households try to buy products packaged from recycled materials but only 20% regularly avoid buying drinks in plastic bottles. This is due to a number of reasons including the availability of recycled packaging in the category as well as the fact that some households may not be prepared to pay a price premium for these kinds of products.

So how can manufacturers help make it easy for shoppers to shop more sustainably in the current environment with the uncertainty of Covid and increasing pressure on their cost of living? And which types of products should be developed to meet their needs?  

In order to answer these questions, we can take a look at what types of sustainable products shoppers are purchasing in China and see how this compares to the global average. 

In general, more Chinese shoppers claim to frequently choose sustainable products with locally produced fresh food and personal care products with natural ingredients being the top 2. Products made with less harsh chemicals are also popular with over half of shoppers saying they frequently buy these.

Many household care brands have launched new products which are made from natural ingredients and are less harmful to the environment. 

For example, Liby’s Fruit Vingear series of washing up liquid and Chaoneng’s Back to Nature laundry liquid detergent which was launched in Q2 last year and has achieved 2% penetration in the last 12 months. 

Within the personal care sector Lux has launched a new product line in the body wash category which is made from plant ingredients and has no additives and a skincare brand called ‘Sisley’ also focuses on natural ingredients and has gained popularity in Tmalls D11 live streaming hosted by LiJiaQi.

The success of these kind of products is determined by their ability to deliver a sustainable message that resonates with shoppers whilst still delivering on performance. With the uncertainity of Covid and rising inflation brands will have to work harder to convince shoppers of the benefit of buying sustainable brands especially if they are positioned at a higher price point. 

Live streaming is a great communication vehicle to deliver this message whilst demonstrating the product performance and how well this channel is leveraged will be a key factor in the success of new launches in this area.

Asia leads the world in eating out and ‘eating out at home’, with South Koreans averaging 148 ordered meal orders per year, an increase of 13% year over year. Thai and Chinese people make up the top three, averaging more than 100 orders per year. In Europe, the British lead the way with 67 orders per year, up 40% year over year.

Dining out has recovered to pre-pandemic levels in value-terms, although not in the number of visits which remains at about 80% of 2019-levels. On each visit to a restaurant, people are spending, on average 15% more compared to H1 2019. Quick Service restaurants are the big winners in the category, growing 21% in revenue compared to H1/2019. Full-service restaurant revenues are still down 7% compared to pre-pandemic levels, while pubs, bars and café revenue is still down 1% vs 2019.

Meal delivery, which exploded during the pandemic, having attracted venture capital funding around the world, has become a post-pandemic staple for many households. While in Europe, penetration rates have slipped back from their pandemic peaks, in all measured countries, they are still higher than their early 2020 levels. Across Europe’s capital cities, more than half of people order food delivery at least once per month. More than 90% of suburban population in South Korea, China and Thailand order home delivery at least once per month.

Food delivery aggregators now dominate the home delivery scene, accounting for more than half of all deliveries in every measured market except Mexico. In China the top aggregators are Meituan and Eleme. In Great Britain, Uber Eats and Just Eat lead, while in Spain, Just Eat and Glovo are market leaders. 

Growth in frequency of orders has been key to the success of the food delivery industry. Across Asian metropoles, more than one in three consumer order at least weekly. In European capitals, the number of people ordering at least weekly has doubled since the beginning of 2020. The number of Londoners ordering up to three times per month has grown from 14% to 25% in two years.   

Other key findings of the report, which surveyed 15,000 people in 10 countries on a research on top of Worldpanel’s Out-of-Home consumer panel, include:

• People choose to dine out or ‘eat out, at home’ for lunch or dinner every 4 days on average vs every 6 days last year.
• One in 4 meal delivery orders is triggered by treating ourselves or children’s suggestions.
• Pizza is the most ordered food delivery in Paris, Madrid and São Paulo. Brits prefer ordering burgers, while Asians and Mexicans prefer their local cuisine.
• People visit coffee shops almost as much as they did before (91% recovery in value through on-premise sales).

“The past two years taught us the true meaning of disruption and adaptability,” said Javier Sánchez, Foodservice Industry expert, Worldpanel Division, Kantar. “As we navigate increasing financial volatility, we expect consumers to become even savvier with their money. The battle for loyalty will continue the hardest to win across the industry. Becoming meaningfully different through deeper insights that enable innovation and new types of eating experiences is the only way for the food services industry to continue its post-pandemic recovery path.”

The full report is available here.

The East region shows the biggest rebound with 9.0% growth, backed by stronger underlying consumer demand. In the first three quarters, the value growth of FMCG in China went up by 3.9% year-on-year. 

The latest report also found that consumers are buying more products on each trip but are shopping less frequently, suggesting continued stockpiling behaviors amid concern over lockdown and mobility restriction.

Amongst different FMCG sectors, beverages enjoyed the highest year on year growth of 19.6% as the country was impacted by a severe heatwave in the summer. Ice cream remained popular for in-home consumption, with sales up 21.5% in the latest quarter. Dairy and personal care products also started to recover and record lower single digit growth from their lower level in Q2, as the dynamic zero-COVID policy gradually became the norm.

Modern trade competition becomes more fragmented, while expansion membership store formats moved to the next level 

The performance of modern trade channels (including hypermarkets, supermarkets, and convenience stores) continues to diverge. The pandemic has had an on-going impact on offline store footfalls, with hypermarkets and large supermarkets declining by 1.9% and 1.8% respectively in Q3 from a year ago. 

Sales of small supermarkets and convenience stores, on the contrary, lifted by 12.7% and 8% respectively, as consumers continue to favor proximity channels. Growing baskets in those small-format stores also reveals that shoppers are purchasing more categories in those shops closer to their home, driven by convenience and improved assortment. 

 Escalated competition amongst offline retailers and the growth of proximity stores have also transformed the retail landscape, leading to a lower level of concentration within top players. 

Although Sun Art Group maintained its leading position, its position weakened from a year ago, with 0.5 point share loss in the latest 12 weeks. 

The number 2 player Yonghui managed to maintain its share. Guided by its new Omni-channel strategy, Yonghui achieved growth (based on like-for-like store growth), driven by a relentless optimization of its supply chain, operation and technological capabilities to better meet highly different consumer needs in different regions. It’s Bravo banner expanded rapidly in the West while penetration rose by 10.4% from a year ago. 

Sam's Club, of Walmart Group, continued its steady growth in shopper penetration across all regions. It gained 0.4pts market share in latest 12 weeks with a strengthened position in the cities where it operates. Walmart also overtook Vanguard Group to take the third place in the modern trade ranking. The membership-store model is constantly evolving in China to meet the quality life needs of middle-class families and young shoppers. 

Since this year, retailers like Sam's Club, Carrefour, Metro, etc. begun to take more central city locations in sub-urban areas to build their new membership stores. They have adapted their traditional-hypermarket format to explore a smaller format for the residents in the city.  Complemented by their O2O shopping offer, they managed to adjust their merchandise and operations to better suit the changing consumer habits.

Traditional e-commerce recovering, whilst interest e-commerce booms

Supply chain and logistics were disrupted across the country due to the lockdown in Shanghai and a dozen other provinces in Q2. This severely affected the delivery experience of e-commerce platforms. 

Yet all mainstream e-commerce players saw an obvious sign of recovery in the latest quarter. Building on the advantage of its self-run logistic infrastructure, JD.com kept attracting new shoppers and successfully encouraged their repurchases, with its penetration increased by 7.0% in Q3. 

Offering reliable delivery experiences and a solid logistic network are still the key competitive advantages of eCommerce.  In contrast, the shopper base of Alibaba and Pinduoduo in FMCG declined further in the latest quarter.

Source: Kantar Worldpanel China

Interest e-commerce such as Douyin and Kuaishou continued to attract more shoppers. FMCG penetration on Douyin has grown significantly in the latest 12 weeks. According to Kantar Worldpanel, 17.8% of urban Chinese households purchased FMCG on Douyin in Q3. At the same time, the number of consumer on Kuaishou nearly doubled year on year. 

Douyin e-commerce has entered a new stage of development, offering similar interface for consumers to search and buy the products directly on the back of its high quality content marketing. Recently, the "818" and "921" shopping festivals held by Douyin responded well to consumers need for value for money offers amid the COVID-19 pandemic, and the average shopping frequency of Douyin shoppers went up by 23.9% in Q3.

O2O is here to stay and will benefit all parties in the retail ecosystem

Source: Kantar Worldpanel China

 As consumers shop less in the brick-and-mortar stores, retailers will have to find new ways to retain existing shoppers and forge a connection with shoppers. O2O has become the most important engine to effectively drive the growth of offline retailers and brands. Sales of O2O in Q3 increased by 11.7% from a year ago. 

The uncertainty of the pandemic has further boosted the daily consumption through home delivery, with urban Chinese households purchasing FMCG for 5.5 times on average through this channel. In terms of platform types, Aggregators (e.g. as JDDJ, Meituan, Ele.me, etc.) have seen a significant increase in the frequency of orders. Chinese consumers’ spend for each trip expanded with the Frontline Warehouse platforms, thanks to more efficient delivery promise fulfilled by those platforms.  

To provide shoppers with a better experience, O2O platforms have been optimizing the supply chain with more refined operations. At the same time they also introduced omni-channel digital solutions to help retailers improve their operational efficiency, leading to the transformation of the entire retail ecosystem.

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.

Our latest report illustrates the macro environment in key APAC beauty markets, and takes a deep dive into how these twin forces drive consumer decisions.

Worldpanel by Kantar has released its latest annual Beauty Trends in Asia report, unveiling the insights behind beauty shoppers’ decisions. Covering nine Asian markets – Mainland China, South Korea, Taiwan, Thailand, India, Indonesia, Malaysia, the Philippines, and Vietnam – it looks at trends in the facial skincare, colour cosmetics, hair care and body care categories.

Asian consumers are known for being agile and adaptable in the face of change. Never has this been more vividly demonstrated than in the last year. Like much of the world, the APAC region has been under the influence of two major forces – inflation, and post-pandemic recovery.

Learning to live with inflation

The inflationary surge isn’t being felt as hard across Asia as it is in the US, EU or UK. The rate of inflation rate has gone as high as 9.6% in the EU, and 9.1% in the US, compared to 7.7% in Thailand – the most impacted market in our study – and just 2.5% in Mainland China.

In Mainland China, South Korea, Taiwan and Thailand inflation is a relatively new phenomenon, and is giving rise to more extreme behaviours than can be seen in most South-East Asian markets. Consumers there are familiar with the experience of rising prices, and are likely to be more adaptable in their purchase patterns.

Post-pandemic positivity 

The factors affecting the beauty sector are not all negative. The end of the pandemic in most markets has been a positive for many shoppers. People want to celebrate. Beauty, a key element in the joy of going out again, has benefited.

As a result, the market is almost stable: in Q2 of this year data from Kantar’s household panels revealed a drop of just 0.1% in total beauty spend compared with the same quarter in 2021.

In the Beauty Trends in Asia 2022 report, we look at three key trends, through the lens of the specific markets in which they are particularly strong:

• Sophistication in affordable beauty in Malaysia, the Philippines, Thailand, and Vietnam 

Here we see value decline year-on-year based on the relative levels of inflation in each market, with drops in sales of between 1% and 5%. Consumers can be won even here, however, with brands willing to lower trial barriers and make affordable beauty a reality. There remains a desire to try new formats and products.

• Continuous premiumisation in Mainland China and Taiwan 

Despite minimal inflationary pressure in Mainland China (3.6%) and Taiwan (2.5%), rising concerns about the pandemic and mobility constraints caused by the lockdown led to a 5% drop in value sales in Taiwan and -1% in China for the year ended June 2022 compared to the previous year. In both markets, mask-wearing is still mandatory in public spaces. However, it appears that some facial skincare categories are being picked up by shoppers as the ‘new lipstick’, to satisfy their desire for a little bit of luxury even while their daily lives are disrupted, and disposable income decreases.

• Resilient beauty in Indonesia, South Korea and India 

With total value growth of between 5% in Indonesia and 8% in both India and South Korea, these markets did experience inflation but benefited more from the post-pandemic lift. As a result beauty purchases continued to rise. The challenge for brands here is to determine what beauty add-ons will encourage consumers to drive further growth.

Asia is not a homogeneous region. Inflation may be changing consumer behaviour and priorities, but it’s doing this in different ways in different markets.

The counter-trend to inflation is, of course, post-pandemic optimism, with consumers eager to make new memories and get out once again.

The impact of inflation depends on local shoppers’ experience of rising prices, while the post-pandemic bounce will be influenced by how restricted consumers were during peak moments of concern.

Understanding the balance between these two opposing pressures is critical to knowing where to invest the marketing budget, and which messages are likely to be most engaging.

Who Cares? Who Does?, which surveyed almost 100,000 shoppers in 24 countries, finds that, for the first time in the report’s four-year history, the number of ‘Eco Actives’ shoppers has declined. Eco Actives, those most engaged in sustainability issues, dropped by 4% in 2022 compared to 2021 and 2020 – while ‘Eco Dismissers’ rose by 7% to 44% of the global population. The Eco-actives decline is widespread, with the largest drops seen in Spain (-8%), Portugal (-5%), Ireland (-5%) and India (-5%). More positively, France, the US, and Colombia experienced flat or growing Eco Active groups.

Despite the overall fall, Eco Actives shopping power is still worth $376 billion to the FMCG market in 2022. The Eco Active segment is forecast to grow to $763 billion by 2027 in a pessimistic scenario or to $1.12 trillion in an optimistic prognosis. The broader population, that has at least some interests in sustainability globally, is equal to $1.14 trillion in spending in 2022.

Household segments

The Who Cares? Who Does? study segments households into three categories based on their actual behaviours:

• Eco Actives: Shoppers who are highly concerned about the environment and are making the most of actions to reduce their waste.
• Eco Considerers: Shoppers worried about the environment and plastic waste but are not taking many actions to reduce their waste.
• Eco Dismissers: Shoppers who have little or no interest in the environment and are making no steps to reduce waste.

Environmental attitudes segmentation of global households

Economy vs environment: the cost of conscious consumption

The ‘cost of living’ crisis is having an environmental impact. Almost one-half (45%) of respondents reported that it was harder to act sustainably due to social or financial constraints. Recent findings from our Sustainability Sector Index study revealed that the cost of living means sustainability is becoming a luxury of wealthy consumers. The Who Cares? Who Does? study reinforces this point. In the UK, for example, the top 20 brands that outperform with Eco Actives are, on average, 75% more expensive than the average price in their category. However, given the financial headwinds, this positioning may face challenges. Within the total FMCG market, brands with price points more than 10% over the category average are already experiencing share declines.

Good intentions are a great opportunity

When it comes to consumer behaviour around packaging, there is a large value-action gap – between people’s stated values and their actions. 62% of people try to buy products with environmentally friendly packaging. Only 24% however, regularly avoid buying products packaged with plastic. These unfulfilled good intentions mean there is a market opportunity for brands in helping shoppers to close this gap. Closing this value-action gap represents a $991 billion opportunity for those FMCG companies willing to pursue stronger environmental credentials.

Value-Action gap in packaging

Discussing the findings, Natalie Babbage, Discussing the findings, Natalie Babbage, Global Director for Kantar’s Worldpanel LinkQ Solution, commented: “Amidst a difficult world climate – from conflict and political instability, to spiralling costs and inflation, environmental issues have dropped down the priority list for many people in their day-to-day worries. It is unsurprising that against these very prominent and present issues, sustainability and its more long-term negative effects are not being prioritised.

The post-pandemic era has had a life-changing effect. As lifestyles have got busier, with more people back at work and social lives back on track, people don’t have the time they may have had during government and state-enforced lockdowns. This means a return to seeking convenience over plastic-free items: we see people buying fewer refills, avoiding plastic less and buying plastic drink bottles more, which may all be symptoms of this ‘back to normal’, time-poor lifestyle we experienced pre-COVID.

Frustration at lack of progress from companies also appears to be a factor for shoppers. Eco Actives are a group that thrives on optimism, yet we found that there is cynicism among them regarding how far brands are going, and how much brands truly care about the environment.”

Who Cares?, Who Does?, Kantar’s study into sustainable shopping behaviour can be found at www.kantar.com/whocareswhodoes.

Throughout all these events, we observe shoppers across APAC continuously adjusting their FMCG purchasing to deal each new challenge. And the brands and retailers with the deepest understanding of FMCG shopping behaviours have been best placed to win hearts, minds – and baskets!

Looking to the future, we expect to see further upheaval in FMCG shopping behaviours. Therefore, shopper-centric decision making will continue to be more important than ever, ensuring brands and retailers achieve their growth targets by delivering what the shopper wants and needs.

Join us on our journey through these changes as we launch Ready, Steady, Shop! - a monthly series of bite-size insights into FMCG shopping behaviours, uncovering opportunities and pockets of growth, and leaving with some food for thought.

Get your report by "Download" button. If you are keen to explore more on this topic, please contact us.  Our experts will be happy to have a discussion with you.

In the second year of the pandemic, we’re seeing Asian markets start to reopen and recover, while facing another challenge: inflation. Beauty shoppers across the region are being forced to confront the financial pressure they’re under in order to sustain their consumption of products in the category.

In these exclusive webinars, Kantar’s beauty experts from across Asia will share insights on how shoppers are living through the age of inflation, and where the most significant opportunities lie for beauty brands seeking to grow in the region.

In this webinar, we’ll take a detailed look at the current beauty landscape in Asia, including:

• A birds-eye view of the macroeconomics
• The impact of inflation by Asian markets
• Beauty consumers’ priority in categories & how it is evolving now
• How consumers react to premiumisation in beauty offers
• Key brands & products leading the trend

Join our webinar

ASIA BEAUTY TRENDS 2022

Understanding the Behaviour of Asia’s Beauty Shoppers in the Age of Inflation

Date: Wednesday 21 September
Duration: 60 minutes

Time

• 15:00 – 16:00 South Korea
• 14:00 – 15:00 Mainland China, Malaysia, Philippines & Taiwan
• 13:00 – 14:00 Indonesia, Thailand & Vietnam
• 11:30 – 12:30 India

Total modern trade continued to post a moderate sales gain of 2%, driven by the stronger performance of smaller supermarkets and CVS. Hypermarkets reported a decline of 2% as a result of reduced shopping trips. Amongst the major players of modern trade, Walmart led the growth and thanks to the eye-catching performance of Sam’s club. Yonghui maintained its position with a 5.6% value share of modern trade. Sun-Art still retained its leading position, with 7.9% value share, but 0.7 points lower than last year.

With the gradual recovery of delivery capacities in the last 2 months, the eCommerce channel managed to get back to its previous growth momentum, with 9% growth year on year, especially in key cities like Shanghai, Beijing and provincial capital cities. Among the major ecommerce platforms, JD maintained a strong growth momentum with a 0.9-percentage point increase in penetration, and its market share further improved by 0.7 percentage points.

Likewise, Douyin and Kuaishou kept taking on more shoppers and reported strong gains. The rapid growth of Douyin e-commerce also proves that livestreaming e-commerce is further unlocking consumer demand.

Source: Kantar Worldpanel

Community Group Buy and Aggregator saw the fastest growth within the platform-based retail, especially Community Group Buy with substantial uplifts in penetration, resulting in significant sales growth, even post lockdown.

Although total retail sales of consumer goods of the first half in 2022 mildly declined by 0.7%, compared to 2021, purchases on daily necessities increased, especially via ecommerce-based channels. As Shanghai and Beijing came out of the lockdown the FMCG market quickly recovered and reached a 5.2% year on year growth for the month of June. With productions and social activities restored, beverage and personal care categories regained their growth momentums.

Although June’s market rebounded significantly, lockdowns in Shanghai and Beijing incurred shockwaves that slowed down the growth across the East and North regions in Q2. Comparatively, the South and West regions earned an advantage and delivered greater a market value by 4.4% and 2.8% compared to last year, which is mostly attributed to higher purchase frequency. The divergence among channels was further amplified. Many CVS and Small/Mini Supermarkets were able to continue operations and meet the demand of convenience which led to a sales lift of 13.8% and 11.4% respectively, whereas hypermarkets bore the blunt of the lockdown experiencing a decline of 3.3%, which was an acceleration of the 0.7% decline seen in Q1.

Competition in Modern Trade Heats Up as Yonghui and SPAR Post Eye-Catching Performances

Competition has been heating up for modern trade retailers since offline shopping has faced greater challenges resulting from of COVID. As hypermarket in the East staggered, Sun-Art lost 0.8 percentage points in market share, whereas Yonghui stepped up and took 0.1 percentage points. Due to its successful transition into the small supermarket format, Bravo Yonghui seized a 7.4% lift in value sales. This narrowed the gap further and shows that shopping habits have developed in the direction of faster, closer, and lighter occasions.

Source: Kantar Worldpanel

In the meantime, Sam’s club demonstrated that hypermarket can indeed compete against the small and mini supermarkets by leveraging its highly differentiated retail model. Sam’s club has helped the Wal-Mart group replace Vanguard as the third biggest retail group, and this momentum was mainly attributed to higher penetration and purchase frequency, suggesting that acquiring new customers plays a decisive role in omni-channel development.

SPAR group, which includes the Jiarong banner in Guangdong and the Jiajiayue banner in Shandong, backed up its growth by 0.3 percentage points and reached 2% market share, driven by substantial penetration increases. Guangdong Jiarong doubled down on the omni-channel development and raised its penetration by 0.4 percentage points in a single quarter. Shangdong Jiajiayue maintained steady along its growth path in Q2, with the help from the newly-developed discount store.

Jingdong and Interest-Oriented Ecommerce Continued to Recruit New Shoppers Despite Logistic Challenges Facing Many Retailers

Among major ecommerce platforms, JD maintained its leading position in growth. With a lift by 0.8 percentage points in penetration, JD sealed a consistent growth for three consecutive months throughout the second quarter. JD’s market sales increased by 4.5% and market share by 0.2 percentage points in the Q2 as self-managed stores were able to alleviate the disturbances along the logistics chain. Meanwhile, Alibaba and Pinduoduo struggled to stabilize their market share with both platforms seeing a slight penetration decline in the second quarter compared to last year. With the help of popularity of short-video, Douyin and Kuaishou pumped up their consumer base by another 9.3 and 2.3 percentage points in Q2.

Source: Kantar Worldpanel

As the shopping pace was disturbed by the previous stock-up, brands and platforms wished to leverage this 618 to respond to the repressed demand resulting from the lockdown. Major platforms offered more promotions and shortened intervals between marketing points. However, due to the absence of top influencers, the expected rebound was not detected. In the 4 weeks to 17th June, the total ecommerce channel increased by just 7.5% on a year-on-year basis, with beverage, food, and household products seeing the stronger growth rates. 

New Retail Gained Ground on the Lockdown

O2O and other new retail formats are very well placed to meet the need for convenience, safety and quick delivery of fresh products, the demand for which has been significantly heightened both during and post lockdown. Many new retail companies were still able to operate during the lockdown and were less impacted by disrupted logistics and store closures compared to many offline retailers and traditional eCommerce retailers. This resilience and flexibility may be crucial for the future, due to continued demand for convenient, safe, fresh and quick delivery. This is clearly depicted in the consistent growth of O2O even under the lockdown; on a year-on-year basis, April and May delivered growth of 20% and 23% in the market value.

As the competition among major platforms heated up, economies of scale manifested as the “winner-takes-all”. In Community Group Buy, Meituan Youxuan and Duoduo Maicai combined took more than 80% of total market shares; and Jingdong Daojia alone ensured almost half of the aggregator market value. Owing to the lockdown, Community Group Buy enjoyed the most penetration increase, compared to Q2 of 2021, while the Warehouse channel also successfully maintained an increasing spend on each shopping trip. 

Kantar Worldpanel reveals that upper-tier cities, as expected, led the growth as channel fusion was more active in a well-developed ecommerce environment. As certain shopping habits were formed when coming out of the lockdown and with bigger networks being established, new retail will further strengthen its capability and performance, providing even more convenience and efficiency for consumers.

Notes:

O2O including: KA Self Run/ WeChat mini program, Aggregator, New Retail, Frontline Warehouse Ecommerce, Community Group Buy.

The report also highlights that the beauty market has become more volatile since the initial outbreak of COVID-19 in 2020, and zooms into the key trends driving consumer demand.  It also gives an indication on what it takes for brands to become China’s beauty market leaders and/ or disruptors.

1.  Most-Chosen Brands 

Pechoin maintained its leadership position in the skincare market for the sixth consecutive year, and it was the only beauty brand to be chosen more than 100 million times in the latest one year in China. Among the market leaders, L’Oreal Paris and Kans continued to perform strongly thanks to the renewal of their Hero SKUs (L’Oreal “Purple Iron Eye Cream” and Kans “24K Golden Eye Mask”), coupled with active engagement with potential consumer base through various touchpoints both on and offline.  Skincare market leadership in CRP was dominated by mass and masstige brands with an exception of Lancome, which joined the rank for the first time, thanks to its portfolio and TA expansion efforts. 

In the makeup market, Florasis newly joined the Top 10 brands on the back of strong presence in the rising demand segments (“Air-brush Powder”) coupled with its unique China brand equity building.  Carslan stood out as it was 1 of only 3 makeup brands that remained in Top 10 brand list since 2017 and recorded positive growth in CRP at the same time; its ‘Baby Cat Foundation’ has been renewed to better attract consumers with different skin types, and IP collaboration and on and offline touchpoint expansion was behind its success.  

Kantar Worldpanel summarized three key factors that enabled the current market leaders’ success as follows:

-     Cultivation of Hero SKU that can anchor the brand identity and differentiate vs other brands

-     Formula and Package innovation to prevent brand/ product fatigue

-     Use of intuitive benefit/ product positioning language to better appeal to wider consumer base, especially the younger consumers whose influence over more mature consumers remain strong. 

2022 China Beauty Brand Footprint: Top 10 Most-Chosen Brands in Skincare and Makeup

2.  Fastest Growing Brands 

There were different trends that led the market development in the latest one year.
In skincare, consumer sophistication continued to grow, and led to the efficacy regimen expansion, benefit demand evolution, and specialist care needs growth, which resulted in strong growth of Essence Water, Anti-age, and Derma segments.  And these trends were led by market leaders as was the case for SK-II in Essence Water and Winona in Derma, as well as fast-rising emerging players such as Bio-Meso in Essence Water and Proya in Anti-age.  Proya not only led the new product innovation in both formula and packaging but also leveraged the popular ‘C in the morning and A in the evening’ concept to raise consumer awareness and drive trial of their ‘Dual Anti-oxidant Serum.’ 

In makeup, we saw the rise of ‘New China Makeup’ style that features spotless and matte face makeup, full and saturated lip makeup, and clear eyebrow-focused eye makeup.  Pramy rose in rank within face makeup from #26 to #7 thanks to its “Backstage Hydrating Setting Spray” by specifically targeting growing consumers’ need for long-lasting makeup.  Colorkey was the superstar in lip makeup thanks to its affordable and trendy color offers that led to strong consumer word-of-mouth on its seasonal and fashionable application.  Flortte’s user-friendly eyebrow pencil captured consumers’ increasing interest in eyebrow-focused eye makeup look. 

In increasingly volatile beauty market, Kantar Worldpanel identified the following three key factors for brands to win the heart of more consumers:

-     Timely drive of the emerging segments to be the face of latest trends

-     Efficacy superiority for skincare and usage experience for makeup as the key communication point

-     New usage occasion development to encourage more consumers to trial 

2022 China Beauty Brand Footprint: Fastest Growing Brands in Key Segments

Our latest Asia Brand Footprint publication unveiling the ranking of the region’s most chosen FMCG brands is now available!  

2022 is the 10th year of the Brand Footprint report. In the past 10 years, Brand Footprint has measured, analysed, and diagnosed the rapidly changing competitive FMCG market, to help the brands innovate and evolve. This report revealed the most chosen brands in 2021 and identified insights on how Chinese consumers shopping behaviours have changed during the last 10 years:  

• Similar with global consumers’ shopping behaviour, the average number of FMCG brands chosen per year in China has remained around 50 per household. 

• Finding more shoppers is always the key to win in Chinese market. For growing brands in 2021, 100% of the contribution is from penetration only or a combination of penetration and frequency. Small brands should aim for 0.6% penetration point gains and bigger brands should aim for 1.3%. 

• In the past 10 years, the top 10 most chosen brands are instrumental, contributing 45% of Consumer Reach Points (CRPs) to the top 50. 

• Yili, Mengniu, Master Kong, Shuanghui, Want Want and Bright, are 6 brands which have continuously been in the top 10 most chosen brands list for 10 consecutive years.

"With the outbreak of Omicron and global inflation, volatility is the normal in FMCG market. Although the Chinese market has undergone rapid changes in the past decade, the leading brands always stay ahead of the curve, set up a sustainable growth model of shoppers through building the power of brands, channels and product innovation. Nowadays, brands must have a deep insight into the impact of pandemic which has led to constantly changing shopping behavior and new usage occasions. It is also critical for them to constantly review their product assortment and supply chain agility as well as the development of new channels to grow against the headwind." Said by Jason Yu, the managing director of Kantar Worldpanel Division, Greater China.  

Top 10 most chosen brands in CRP – Total FMCG 

According to the report, the top 10 most chosen brands are dominated by local brands. If we look from 2014 onwards, more and more Chinese brands joined the rank of most chosen brands, demonstrating the growth of Chinese brands' power. These brands focused on providing health and wellbeing solutions to satisfy Chinese consumers' everyday needs and allowing them to grow consumer reach.  

Yili and Mengniu remain in 1st and 2nd place respectively, managing to grow their shoppers to reach 9 out of 10 households whilst still expanding their CRP. By building up a wide range of dairy categories with comprehensive health and nutrition product matrix, both brands have put their efforts on catching the rising needs of immunity and diversified usage scenarios since the pandemic of Covid-19 began in 2020. 

The growth of hygiene needs post COVID-19 outbreak has led to paper brands Vinda and Hearttex growing their consumer base to join the list. Vinda was one of the fastest growing brands, growing in both consumer reach points and penetration. Its move to respond to the upgrading needs of hygiene, expanding to niche categories and satisfying usage requirement of multiple usage occasions attracted more new consumers. 

Top 10 fastest growing brands in CRP 

2022 also marks the first year in 10 years that more personal care and household brands joined the top 10 fastest growing brands list.  

Hygiene and environmental awareness remained high after the 2020 COVID outbreaks, and for that reason brands which provide comprehensive house cleaning solutions were well placed to achieve rapid growth. C&S effectively grew its CRP by continuous optimizing its offer and driving growth across different channels. In addition, domestic brands such as Yunnanbaiyao and White Cat obtained more attention and recognition of young shoppers by evolving their brand image and upgrading their products. 

As the out of home market gradually recovered, the need for in-home cooking and convenient foods slowed down. Pepsi is the only food brand whose growth has ranked in the top 10 every year for past 3 years. Chinese shoppers' needs for coffee products with a variety of flavours help to drive Nescafe's growth, a brand which has focused on the Chinese market for 30 years, continually launching new products and looking for new growth opportunities. Nescafe joined the fastest growing club for the first time in 2021.

The list of top 5 fastest growing brands in CRP by five sectors was also published. For more information, please click

Explore the data (kantar.com)

These are among the findings of new research released today in the 11^th annual China Shopper Report Vol I, by Kantar Worldpanel and Bain & Company’s. As in each of the past ten years, Kantar Worldpanel and Bain & Company analyzed the key 26 categories that span the four largest consumer goods sectors: packaged food, beverages, personal care and home care. We also looked at another 17 categories to form a more comprehensive view of the market. 

“Through this research, Chinese consumers are showing us new ways of thinking in a volatile environment, as they return to shopping with different behaviors, and brands should take notice of.” explained Bruno Lannes, a partner at Bain & Company based in Shanghai. “While there are signs of recovery in the market, brands must work even harder to connect with their consumers, highlight their value proposition as consumers have become more cautious and price sensitive.” 

The report recaps FMCG performance in 2021, during which many consumers exhibited distinct post-pandemic consumption behavior, and then report on the critical changes in that behavior during the first four months of 2022, with implications for consumer goods companies and retailers. With Covid restrictions eased, consumers made more frequent trips to stores in 2021 which contributed to a 4.1% gain in volume growth for the year. However, consumers also took advantage of heavy promotions, such as those offered during Double 11 and Double 12 shopping festivals in the fourth quarter. That was a factor in the .9% drop in average selling prices. The wide swing in performance throughout the year is best illustrated in the 10.6% value growth in the first quarter and –1% value growth in the third quarter.

Until the Covid-19 pandemic, FMCG companies enjoyed a steady five-year run of premiumization, with those companies still increasing prices, but now consumers are adapting their behavior to compensate. They are becoming cautious again, but in different ways across different categories. Among the four major sectors, beverage categories enjoyed the best performance in 2021, with 5.9% growth compared with a 4.1% loss in 2020, while packaged foods went in the other direction, losing 1.2% in value growth based on a 2% drop in volume and 0.8% increase in average selling price (ASP). The tentative end to Covid concerns in 2021 led consumers to curtail their practice of stocking up on instant noodles, for example, and that category saw volume drop by 9% in 2021.  

Personal care and home care categories continued to grow in 2021 by 4% and 6%, respectively. Volume was up for both—personal care volume grew 3.6% and home care volume rose 7.5%. However, those gains were offset by ASP. Prices rose only 0.4% for personal care, and they dropped by 1.4% for home care categories. In makeup and personal wash, companies reacted to fierce competition by selling more on promotions, and local insurgents gained share with value products. There were some bright spots, though. For example, the personal care breakout category of 2021 was shampoo, which rose more than 10% in value. 

“The two-speed growth phenomenon we identified in 2016 is still being seen with quality-of-life improvements all growing remarkably, while other categories have begun to lose market share and so the analysis of the market has been fascinating,” said Derek Deng, a partner in Bain & Company’s Shanghai office. “Consumers have adapted to this new environment and so brands need to as well, while ensuring that they understand what their customers want, need and demand both in turbulent and non-turbulent times.” 

The research shows that E-commerce was the only channel to maintain solid growth in 2021, although that growth slowed to 15% from the 30% range of previous years, and e-commerce platforms became increasingly fragmented, with more consumers shifting to options like Pinduoduo and interest-e-commerce platforms (Douyin and Kuaishou). 

“The winners in FMCG market are those respond actively to these changes by reevaluating their e-commerce channel strategy across platforms, striving for portfolio differentiation and specialized operations capabilities to reach different consumer segments and satisfy different needs”, said Jason Yu, Managing Director of Kantar Worldpanel Greater China.  “They are also able to leverage the rise of online-to-offline (O2O) commerce to drive more incremental value.” 

Insurgent brands also continued to gain share from larger brands in most categories in 2021, however top brands started to regain lost share in a few categories, such as hair conditioner, packaged water, makeup, and infant formula. Similar to previous years, local brands on aggregate gained share against foreign brands in these 26 categories in 2021 while local brands focused on volume growth while foreign brands relied on premiumization to grow. 

Implications for brands and retailers 

Uncertainty introduced in 2020 by the outbreak of Covid was a dress rehearsal for volatility in the years to come. We believe this year businesses may need to accept that volatility is the new normal. Companies should proactively practice scenario planning and be ready for various potential outcomes instead of counting on succeeding with a single plan. For consumer goods brands specifically, that means closely watching the following:

• Product/brand portfolio: Assess varying opportunities by price segment and city tier, customizing portfolio strategy to capture them with different product propositions, instead of focusing on only one segment.
• Supply chain optimization: Simultaneously manage the pressure on cost structure and the development of resilient supply chains to ensure business continuity under all scenarios.
• Integrated online and offline route-to-market: Diversify into insurgent channels (such as PDD, livestreaming, and community group-buying platforms) in the short term and build direct-to-consumer capabilities to integrate online and offline channels in the long term. 

Brands should also be optimistic about the future and expect a much better 2023, as the fundamentals of the Chinese economy remain strong with a growing middle class, continuous urbanization, and inflation under control. Brands should use the year 2022 to prepare for a strong rebound in 2023, so retailers need to:

• Build resilient supply chains so that they can ensure business continuity
• Redefine the retailing value proposition to shoppers in an increasingly digitalized and omnichannel environment
• Focus on categories where there is a higher chance to win vs. online
• Double-down on O2O, prioritizing small to midsize stores and convenient locations
• Provide consistent experience in offline stores, online self-owned app, community buying and other horizontal O2O platforms
• Reduce complexity in operations, look for alternative sourcing options and establish a new cost baseline in order to cope with the increasing input and energy costs. 

Turbulence and uncertainty are likely to remain concerns for a large part of 2022, with consumers responding by becoming increasingly more price sensitive in many categories, but challenging times always create opportunities. Looking farther out into 2023, there is reason for optimism with the long-term fundamentals in place for a return to healthy growth. Inflation remains relatively lower in China compared with Western markets, and the energy crisis is under control, with strong indications that the government is still striving to maintain GDP growth and is committed to balancing Covid clearance and economic development. Just as they have prepared for the challenging times, the best FMCG companies will prepare for a likely rebound.

Although the lockdown and reduced mobility tilted demand toward stock-up buying, the shockwaves in key cities was not offset by more “home-based” consumption. This resulted in a year-on-year decline by 0.8% in sales value in key cities for the past twelve weeks. During the same period of time, provincial capital cities and prefecture level cities continued to report stronger growth values of 2.1% and 3.2% respectively.

Modern Trade Performance

Modern trade saw 2.1% growth in the latest 12 weeks compared with the same period last year, driven by the strong performance of smaller supermarkets and convenience stores, whereas hypermarkets saw 3.2% drop in sales. Amongst the key players,  Sunart group reported 8.9% drop in sales as its store portfolio in the East region was more severely impacted by the forced closures. Yonghui, while focusing more on the West and South regions, reported a moderate growth of 4.7%. Walmart group continued to race ahead with 7.8% growth, thanks primarily to the strong gains made by Sam’s Club.

Ecommerce Channel

E-Commerce witnessed a moderate growth of 1.4% for the latest 12 weeks and 3.9% growth in the 4 weeks to May 22^nd. JD continued to lead the growth, with an increase of 4.8% in sales and a steady year-on-year penetration lift of 1.2 percentage points. Alibaba and Pinduoduo maintained their market share and penetration. The short video platforms, Douyin and Kuaishou, managed to acquire additional penetration of 4.7 and 1.3 percentage points respectively in May, capitalizing on the increased consumption of short video contents during the lockdown period.

Source: Kantar Worldpanel

With restricted transportation affecting the delivery of mainstream Ecommerce players, online-to-offline (O2O) commerce saw further increases. Community Group Buy, Aggregator, and frontline fulfillment-based delivery companies all delivered outstanding performances in May. 34.7% of Chinese families used O2O to shop for groceries in the latest 12 weeks.

From the outbreak of COVID-19 to digitalisation of shopper habits, there has been a lot of change in the FMCG industry landscape. And with spiralling inflation and a war at the heart of Europe, upheaval and unrest shows little signs of slowing.

Despite this, the biggest brands have remained resilient. For brands at both a local and global level, this is an opportunity to take stock, and review the last decade and take our learnings forward.

This is why, in this edition of Brand Footprint, you will find the usual detailed findings of brand success and shopper habits, as you may have come to expect. You will also, however, gain exclusive access to additional data and analysis covering the past ten years of FMCG progress.

You will discover the huge role that population growth has played in the industry, as the number of households globally has grown by 17%. This amounts to an increase of 180 million households. This means that brands are having to work harder than ever to maintain even constant levels of brand penetration against this expansion.

You will also find that, on average, 25 of the Top 50 global brands have grown on a yearly basis – but just a handful have grown consistently over the decade.

It’s not all about change, though: we showcase some consistencies across ten years of data – namely that the average household buys a portfolio of 55 FMCG brands in a year. We also share how growing brands achieve success.

For those unfamiliar with this report, we use a unique metric: the Consumer Reach Point (CRP). This measure combines population, penetration, and consumer choice, meaning we’re able to see how many times shoppers have chosen any given brand.

From there, we can rank the most successful brands across markets, giving you a micro and macro view of brand success. All the global, regional, and local market rankings will be available on our dedicated microsite, giving you easy access to the data you need, so you can review your performance across markets and against competitors.

This year, as much as every other year, I would like to thank our partners: Europanel, GfK, IRI, Intage and CTR. Their support makes this report possible and, vitally, it allows us to reach an unmatched depth and scale to make these findings truly stand out.

Brand Footprint is the undisputed guide to finding success in the FMCG market, uncovering key, actionable insights to power your strategy and drive brand growth. So, read on to find out who the top-performing brands are, and what they have done consistently to achieve growth.

Please click on the following link for complete report of Brand Footprint 2022.

https://kantar.turtl.co/story/brand-footprint-2022-p/page/1

According to the latest government statistics, total retail sales fell by 11% year on year, posing a significant deceleration since the first COVID-19 outbreak in 2020. As millions of consumers were confined to their homes, FMCG in the 4 weeks to April 22nd went up by 1.4%, as consumers are stockpiled food purchases but moved away from non-food categories. 

Strict COVID restrictions in Shanghai put severe downward pressure on FMCG, with value sales dropping by 19.6% in April, as food supplies were difficult due to disruptions in supply chains. 

Modern Trade Performance

As consumers in major cities rushed to stockpile their fridge, modern trade managed to maintain steady performance despite store closures under the Zero-COVID policy. Sales value and the trip size of modern trade correspondingly grew by 2.4% and 2.9% in the latest 4 weeks, driven mainly by more purchases of staple food categories which grew by 9.9% in market value.

Among the leading players, Yonghui and Wal-mart managed to maintain their growth momentum from Q1. The sales value of Yonghui went up by 3.2% in the last 12 weeks. Sam’s Club continued to report stellar performance. On the contrary, Sun Art bore the blunt of contractions due to its East region focus, being hit more severely by the COVID disruption. Rising supply chain costs and store closures continued to challenge the profitability of brick-and-mortar retailers in 2022. 

Ecommerce Channel

Ecommerce grew by just 1.2% in the latest 12 weeks with strict restriction in warehousing and transport. In Shanghai, Ecommerce took another 5.4 percentage points in market share in the latest 4 weeks, thanks to new formats of group buying which allows residents in the same apartment compound to buy fresh foods and packaged grocery together in bulk. The location-based approach based on Wechat helped Ecommerce giants like Pinduoduo to attract new users in Shanghai. 

Amongst key Ecommerce players, JD continued its advance in penetration, by 0.8 points, while Alibaba saw some contraction in its buyer base in the last 12 weeks. At a national level, Douyin and Kuaishou continued to recruit new shoppers to buy FMCG products through their platforms, with 12.5% and 4.7% penetration reported respectively in the latest 12 weeks.

Source: Kantar Worldpanel

Key findings from the study include:

• Ecommerce was again the fastest growing channel, delivering 15.8% growth, building on the 45.9% growth delivered in 2020. This growth lifted ecommerce’s share of the grocery market to 7.2% compared to 6.3% in 2020 and 4.8% in 2019.
• At 2.1%, global annual growth is back in line with the pre-pandemic five-year average of 2% - as much of the displaced out-of-home spend from 2020 remained in-home in 2021.
• Western Europe declined 0.2% as purchase patterns began to normalise with fewer lockdowns in the year. Latin America delivered 9.2% growth in 2021, mostly driven by inflation and continued lock-downs, while the U.S. grocery market grew by 2.7%.
• Supermarkets/hypermarkets remain the dominant channel for FMCG sales, however with growth of just 0.1% its share of sales fell to 51.4%, from 52.4% in 2020 and 53.1% in 2019.
• Groceries bought on a promotion accounted for 21.6% of sales during 2021. That's up from 20.9% in 2020, but still not back to 2019’s pre-pandemic level of 22.1%.
• Beverages were the strongest sector growing at 2.9%, driven by sports and energy drinks and carbonated soft drinks. Food, excluding dairy, grew at 2.5%, while dairy grew 2%. Home care fell back to 1.1% growth, while health and beauty products grew only 0.7%.
• Kantar forecasts global growth in the FMCG market will slow to 1.3% in 2022.

According to Kantar Worldpanel (a CTR service in China), sales in China's fast-moving consumer goods (FMCG) market in the first quarter of 2022 increased by 2.8% year-on-year, supported by the policy of “Growth Stabilization and Consumption Promotion”. However, offline consumption in March bore the brunt of the nation-wide market disturbances caused by transmission of the Omicron variant.

According to the National Bureau of Statistics the total retail sales of consumer goods witnessed a shrinkage of 3.5% in the last 4 weeks, driven by the impact of the surge in Omicron cases and the implementation of lockdown measures, but the FMCG market delivered a 1.6% growth in March. This illustrates that consumers tilted their basket weights towards FMCG goods given the uncertainties and challenges under COVID. Subsequently, packaged foods and beverages grew by 5.1% and 5.6% respectively year-on-year, household cleaning-related sales grew by 5.7%, while the personal care sector declined by 1.4%, driven by less demand for these products for households who are locked down.

This restriction shrunk the turnover in Hypermarkets and Large Supermarkets, leading to mild year-on-year decline by 2.7% and 0.2% respectively. In contract, Online shopping* kept its leading position through the first quarter increasing by 10% year-on-year, even if its growing pace had slowed to some extent.

Leading Grocer Share within Modern Trade – National Urban China

© 2022 CTR                                    Data Source: Kantar Worldpanel

Since 2020, suppressed by COVID transmission and challenged by newly-emerged digital platforms, retailers have been inclined to take a position of greater cautiousness in store and with their business development. Furthermore, the disparity in performance among retailers was more evident in the first quarter, especially when a new-round of COVID hit the more developed coastal China, planting new uncertainties in the growth expectation of retailers that are heavily based in the affected areas.

Although Sun Art and Vanguard have managed to maintain their leading positions, their market shares witnessed a substantial decline compared to the first quarter in the last year. Sun Art lost 1.3 percentage points of penetration. While closing some stores to narrow its deficit, RT-Mart doubled down on resigning 30 stores, a hypermarket transformation that would better fit the new retail fashion in China. In the meantime, Yonghui focused on its omni-channel strategy - “Based on Fresh, Centered on Client”, and won a growth of 6.5% in sales value and 0.3 percentage points in market share, successfully reversing its previous decline. Wal-mart delivered an even better increase by 8.3% for the first quarter and 14.3% for March only. This growing momentum would probably maintain in face of an elevated demand for stocking-up.

The Consistent Growth of Ecommerce Players

E-Commerce* kept its triumphant progress throughout the first 12 weeks. Compared with the last year, the sales value of eCommerce further grew by 10% with a 0.6-percentage point uplift in penetration. The consistent driving force was the increase in purchase frequency. Self-managed stores and a strong logistics capacity helped JD further acquire penetration by 1 percentage point against its rivals, which resulted in a year-on-year value growth by 9.7% for the first 12 weeks. With this 10% growth, JD managed to stabilize its market share while Alibaba and Pinduoduo had to face share losses, especially in March. It is not difficult to imagine the enormous challenges posed by the requirement of “Zero-COVID” and the underlying uncertainties embedded in local containment policies in logistics costs for eCommerce platforms. In others, a self-managed logistics network with better disinfectant measures may help secure the sales if the outbreak escalates further.

As for the short-video based platform, Douyin and Kuaishou continue to experience growth in shopper with 12.7% and 5.0% of consumers using Douyin and Kuaishou in the first 12 weeks to purchase FMCG products. Potential increases in working at home are likely to correlate with increased usage of Douyin and Kuaishou as consumers have more time and need for an interactive shopping experience. This not only nurtures the habit of “live shopping”, but also facilitates the development of related supply chains and logistics network, which makes the outlook for the rest of 2022 very positive for these platforms.

The New Retail Goes On

O2O kept climbing during the first quarter, but the growth substantially varies across city tiers. For the 4 key and Tier-A cities the first quarter provided a penetration boost by 7.8 and 7.7 percentage points respectively. Besides, the purchase frequency substantially increased as well, implying that O2O, ordering with an APP via a smartphone, can play a crucial role in stock-up requirements. Community Group Buy and Warehouse-based retailers also delivered eye-catching growths in sales value by 28% and 30% respectively, suggesting an ongoing consumer divergence that may underlie a further diversification of the retail channel structure. More penetration growths of community group buy occurred in the eastern and southern China, as a consequence of certain supply chain adjustments after the market reshuffle amongst eCommerce giants.

Notes

  1. Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing).

 2. E-Commerce: doesn’t include wechat digital platform system

3. Modern Trade: Hyper+Supermarket+CVS

4. Suning Group includes Carrefour and Suning CVS; Wumart Group includes Metro, Wumart, and New Century; Better Life Group includes BBG Department Stores, Nancheng Department Stores, and Jiarunduo.

After two years of uncertainty living under the pandemic, we thought we will finally see a new normal in Asia. However, before this happens, we are now hit by another challenge of inflationary pressure that is affecting both consumers and brands. 

Looking across the key markets in Asia, we are indeed seeing price increase seen across most markets with volume slowdown. Shoppers in Chinese Mainland, Indonesia and Philippines are potentially switching to cheaper products. 

Data Source: Kantar Worldpanel

The good news is, we are still expecting FMCG to grow in 2022.

Across South East Asia markets, we are projecting that Q4’22 growth will be around 3% despite price increase as likely due to the opening of local economy. 

Data Source: Kantar Worldpanel

Understanding how shoppers will react to price and inflationary pressure will help in determining our brand growth strategies and in this paper we will be looking at the different behaviours that shoppers will potentially demonstrate during uncertain times across FMCG categories. Some of the key potential shopper reactions to categories are:

1. Increase/reduce in Overall Category Volume
2. Increase/reduce in Choice of Segments
3. Switch Channels
4. Increase/reduce Promotional Reliance
5. Switch brands or move to Private Label
6. Changes in Product Mix (segment, pack sizes)
7. New/Lost Buyers

In addition, we have enlisted key industry views from our key partners who each excel in their sector: Friesland Campina, Coca Cola, Mars Wrigley and Unilever who will also be sharing their insights and views on how brands can cope with inflation and continue to reach consumers during these times.

Don’t miss out, download your copy on the right side of this page.

Before COVID-19, the Beauty sector was the fastest growing part of the FMCG industry. But the pandemic changed that. Masks went on. Lockdowns came in. And one of the best performing sectors suddenly found itself struggling in the face of people going out less often and using fewer products.

Fortunately, the Beauty sector is on the road to recovery, and we are seeing consumer trends diverge in two distinct directions: simplification and sophistication.

Our latest report On trend: The evolving Beauty consumer takes you through the very latest global purchase and usage trends from the sector including:

• A look at the size and growth of the main Beauty categories and how changing usage occasions impacts their performance
• Understanding the factors driving changes in behaviour – such as longer hair among females and an increasing number of people with facial skin conditions
• The trend towards ‘natural looking beauty’ and how this differs across the world.

If you would like to find out how to future-proof the Beauty sector, please do not hesitate to reach out to our experts, watch the webinar and read the report.

?????FMCG spending for in-home consumption in Asia continues to grow by 3.2% in the second year of the pandemic, higher than the growth of 2.9% in 2020, reported in our latest issue of Asia Pulse.

The market growth is mainly driven by the rebound of Beverages sector, particularly in Chinese Mainland.

FMCG performance across sectors, in general, enjoyed healthy growth. Dairy and Personal Care showed an improved growth in North Asia while flatting or slowing down in other areas. Meanwhile, Food and Home Care cooled down its year-on-year growth pace after last year’s pick-up.

In terms of retail landscape, Online kept the good momentum in 2021 with a robust increase in both FMCG value sales and number of purchases across the region.

Reviewing the performance of each market in-depth, the report reveals some key insights:

• Chinese Mainland: The growth in e-commerce channels slowed down in 2021 due to the traffic peaking and diversion from the new digital formats.
• Taiwan: Ecommerce kept growing with double-digit growth over years and is now the 3rd largest channel in Taiwan FMCG market since shoppers are getting used to shop online.
• South Korea: Personal Care especially skincare products showed an upsurge in value thanks to the increased demand for skin recovery.
• India (Urban): Consumers made more shopping trips yet less spend in each trip, rationalizing their spends by shifting to small packs.
• Indonesia: Shoppers have spent more on home-cooking categories, such as cooking oil and sesame oil, with major growth coming from the online channel.
• Malaysia: FMCG sustained at a higher level after double digit growth in 2020 with Packaged Foods being the fast growing sector.
• Thailand: Consumers continue to purchase larger basket sizes while reducing shopping trips as the stock up trend remains during COVID-19.
• The Philippines: Filipinos continue to prioritize food staples and home & hygiene essentials, but they also deprioritized some categories already stocked up in 2020 such as baking products.
• Vietnam: Convenient retail formats including Online and Minimarket kept winning consumers' choice amid the social distancing periods.

The latest government statistics also reported a 6.7% increase in the retail sales of consumer goods for the first 2 months of 2022*. However, the COVID outbreaks in the first two months restricted family visits and mobility, and the foundation for a full recovery in consumer spending remains uncertain.

Within modern trade Small/Mini Supermarkets grew its salevalue by 9.3% during the last 12 weeks. ReceivedGifts, a popular form of hospitality, recovered slightly under the festival effect, reaching 19.2% of total market value, 1 percentage point higher than the previous year. Ecommerce continued to slow down during the last 12 weeks asdeliveries were impacted by the holiday break and capacity constraints, reporting a lower sales growth rate of 6.9%.

Among major retailers, Yonghui reports a stable value share of 5.5%. The retailer’s latest trade update alsoreveals 1.6% increase in like-for-like store growth in January and February, as it steadily drove its omni-channel integration and operational efficiency. Wal-Mart and SPAR also retained their share of 5.1% and 1.7%, respectively. In contrast, Sun Art lost share by 0.5 percentage points compared to same period last year.

A polarized trend looms Ecommerce: over the past 12 weeks, strong growth was witnessed in both keycities and counties, the opposite side of the market spectrum. Growth was fueled by penetration and frequency increases at the same time, suggesting positive sales gain from staying put during the New Year season in large cities and ordering festive goods from digital channels in lower tier cites.

Within eCommerce, Alibaba Group retained its penetration of over 49% with its “No-Close Spring Festival” campaign. Fueled by its sponsorship of the CCTV Spring Festival Gala and further investment in delivery capacity, JD Group increased its penetration by 1.2 percentage points and GMV by more than 50%*.

Source: Kantar Worldpanel Urban Household Panel

Noticeably, short-video marketing delivered eye-catching performances and has demonstrated the potential these platforms have to reach new consumers and grow sales. Kantar Worldpanel revealed that 12.5% urban households ordered FMCG products via Douyin, a popular short-videosharing platform, over the past 12 weeks. More recently, Pinduoduo also acceleratedits short-video investment and upgraded its portal by adding short-video to the front loading page to enhance conversion through a more content-based strategy.

NOTES

*JD 2022 Spring Festival Stats (by 5th Feb, 2022)

*Source: National Bureau of Statistics

OOH value sales rose for the third consecutive quarter in the fourth quarter of 2021, increasing 19% compared with a drop of 25% in the same period in 2020. This boosted the value of the total in-home and OOH market by 6% year-on-year; almost three quarters of which was contributed by the UK, Spain, Mainland China and France.

While this overall picture is positive, looking at the evolution of OOH spend in these categories over a three year period provides valuable perspective: it is still 10% lower than it was in the fourth quarter of 2019, before COVID-19 hit. In addition, while the proportion of total value contributed by OOH sales has risen to 34% from 30% in the fourth quarter of 2020, this has still not reached the pre-pandemic level of 39%.

Soft drinks, coffee & ice cream lead the way

OOH drinks sales are performing more strongly than snacking food – with growth of 22% and 14% respectively. Recovery is most rapid in the categories that are very dependent on OOH: soft drinks, coffee and ice cream. These were the categories most affected during the pandemic, partly because they were unable to reproduce OOH occasions at home as successfully as chocolate and salty snacks did.

OOH soft drinks spend increased by a third (34%) year-on-year in the fourth quarter, without affecting the category’s evolution in take-home, which also grew by 4%. The opening up of on-premise occasions has not affected take-home purchases, indicating that a new habit has been formed. This highlights the potential to retain in-home spend while continuing to push up impulse and on-the-go consumption in OOH. Soft drinks OOH purchases contributed 49% of the total In&Out market value – a rise from 42% in the fourth quarter of 2020, but still below the 57% share it commanded in 2019. The full recovery of this sector will depend on boosting spend in bars, coffee shops and restaurants.

While coffee and ice cream have still not recaptured their previous levels of OOH spend, both are growing. The complete recovery of coffee value will depend on coffee shops and bakeries, while the consumption of ice cream has shifted during the pandemic to impulse channels and convenience stores.

Mainland China shows the route to recovery

We can look to Mainland China for inspiration, where the OOH market has not only fully recovered, but has intensified compared with pre-COVID figures (2019). This has been driven by two new occasions:

1. impulse and on-the-go consumption, with people spending most in convenience stores
2. the growth of on-premise consumption, thanks to the expansion of milk teahouses – both premium and mass – and the rise of local premium coffee shops, such as Manner, Seesaw and M Stand, which have opened hundreds of new stores.

As a result, this additional OOH consumption in Mainland China is benefiting coffee, ice cream, soft drinks and chocolate, which are the categories enjoying the highest growth.

Of course, the channel landscape varies from one country to another. Brands and retailers can learn from what’s happening in Mainland China, however, and take advantage of the shift in consumers’ habits by adapting to offer on-the-go and ready-to-drink options in their most relevant local channels.

Find out more about the global snacks and non-alcoholic drinks market by downloading the full Q4 Out-of-Home barometer through the form below, or by reaching out to our experts.

Sun Art still leads the market with a value share of 8.5%, but saw a weakening trend down from 8.8% last year. By contrast, Wal-Mart group outpaced its rivals by gaining additional share points of 0.2 pt, driven by the strong performance of Sam’s Club. Yonghui Group has managed to stabilise its share in the last 12 weeks, maintaining the same level of 5.5% of value share as the same period in the last year. Its latest trade update also indicated its same store sales recorded 1.6% growth in the first two months of 2022, confirming early sign of success with its omni-channel digitalization strategy.

Over the past 12 weeks, close to 80% of China urban families shopped online, with JD and Pinduoduo continuing to grow share at expense of Alibaba. Pinduoduo now holds the second largest consumer base of a 32.1% penetration. Meanwhile, with a growing logistics capacity, online purchase in counties increased by 15.7%, suggesting acceleration of shopper acquisition in lower tier cities continued to be the enduring theme to win in Ecommerce in 2022.

*Kantar Worldpanel expanded fast moving consumption goods categories coverage from 2022. Changes may lead to inconsistencies with previous year’s data. New categories include flour, seaweed, Chinese noodle, sachima/baked bran, laundry sheet/tablets, nuts, vinegar, rice, dried vegie and fruit, Chinese sauce and water purifier filter.

In order to better understand what the current attitudes and behaviours of Chinese consumers are surrounding climate change, and how they are changing, Kantar Worldpanel has conducted a survey amongst their panelists for the last 3 years.

According to the results of Kantar Worldpanel’s latest ‘Who Cares, Who Does?’ (WCWD) survey the top 2 environmental concerns for people in National Urban China are Water Pollution Water Pollution and Food Safety with around half of people selecting these in their top 3. 

This is similar to the results we saw in 2020 but in 2021 concerns around Air Pollution has risen to 3rd place, most likely due to the impact of the East Asia Sandstorm in March last year. Concerns around the use of plastics was still important with, with 36% of households including this in their top 3 concerns. About one third of shoppers included Climate Change in their top 3 concerns, which is a significant increase compared to 2019, and we will likely see this concern continue to increase in importance in the future as this topic continues to get more news coverage and businesses start taking more actions.

The level of concern people have for climate change and whether they are willing to change their behaviour to reduce their carbon footprint differs from one person to the next. 

To better understand these differences, Kantar Worldpanel classified consumers into different groups based on their response to the WCWD survey. We found that they are 4 distinct groups of shoppers in China ranging from those who care the most about climate change, labelled as ‘The Green Advocates’ to those who have a very low level of concern, called ‘The Sceptics’.

Source: Kantar Worldpanel, “Who Cares, Who Does?” China 2021

The Green Advocates are now the largest group of people in China representing 30% of the population of national urban China, an increase of 4ppts versus 2020. This shows that more and more people are worried about the environment and are actually changing their behaviour to reduce their carbon footprint. 96% of Green Advocates agree to buy products which are packaged in an environmentally friendly way and 81% which use their own bag when they go shopping for grocery products.

The next segment is ‘The Concerned’ who are people that do have concerns about environmental issues but this is not their main driver of product choice. However, they are making some small steps in their daily life to reduce their environmental impact. For example, 55% of people in this segment will use refillable bottles in order to reduce their plastic waste. 

It is likely that this group will become more concerned in the future and will be more willing to choose sustainable products, especially if they do not compromise on quality or are not more expensive compared to products they have previously purchased.

Source: Kantar Worldpanel, “Who Cares, Who Does?” China 2021

‘The Non-Committers’ are people who are aware of climate change and environmental issues but they are not too concerned and are not yet willing to change their shopping or lifestyle behaviour. For example, less than half of this group will use their own bag when shopping and would only be prepared to switch to more sustainable packing if there was an additional benefit, such as price or convenience. This group has reduced in size as previous Non-Committers changed their level of concern and behaviour, moving them into The Concerned segment.

People who have the lowest level of awareness and interest in environmental issues are ‘The Sceptics’. This group represents 21% of the population and has decreased in size over the last year. Sceptics show no interest in plastic waste challenges and are not making any steps to reduce their carbon footprint. Only 12% will use refillable bottles and less than half agree to buy products packaged in an environmentally friendly way.

It is likely this group will continue to decrease in size as climate change issues continue to gain more media attention and as the government implements more sustainable programs (such as sorting refuse) which impacts their daily lives.

Source: Kantar Worldpanel, “Who Cares, Who Does?” China 2021

The Green Advocates spend 7,856 RMB a year on FMCG products which is significantly more than the other group and, given the size and growth we are seeing, this is a very important group of shoppers for manufacturers and retailers to target. We have seen a significant increase in the numbers of sustainability programs and products over the last year which are not only aimed at reducing carbon footprints but also helping to deliver growth to manufacturers and retailers by appealing to sustainable shoppers.

For example, last year Unilever and Alibaba Group teamed up to encourage recycling and sustainability. One of their joint initiatives is to install 1,000 AI-enabled plastic recycling machines at universities across China which can sort different types of plastic in order to accelerate the recycling process. Also, during the D11 shopping festival, Alibaba introduced a dedicated vertical for eco-friendly products, which resulted in 2.5 million consumers buying 500,000 low-impact products, and Unilever ensured that all of the packaging for it’s eCommerce orders from in Cainiao warehouses were recyclable and plastic-free.

During 2022 we will continue to see environmental issues grow in importance as well as the number of consumers who are concerned and who are willing the change their behaviour. 

Kantar Worldpanel is well placed to help you understand how sustainable shoppers behave and how to target them through linking their attitudes towards environmental issues with how they buy your category and brands.

For more information, please contact us.

According to the National Bureau of Statistics, consumption contributed to 65.4% of China’s economic growth in 2021, highlighting the importance of domestic demand. With new COVID cases still being reported from time to time over the past two months, uncertainties continue to be a key theme of FMCG market this year. 

However, backed by a series of government initiatives to stabilise growth and promote consumption, and brands’ efforts to grow supply, the FMCG market in China is set to attain a healthy growth in 2022.

In 2021, the food and beverage sector in China increased by 2.3%. The beverage sector returned to growth with the liquid milk and cheese growing well ahead of other categories. Ice cream and pet food continued their growth momentum, attracting more new consumers. The daily personal care sector was up 4.5% in 2021, fueled by stronger consumer demand for products that provide higher quality home life and refined lifestyle, e.g. air fresheners, fragrances, clothing care products, hair care and mouthwash.

Modern trade (including hypermarkets, supermarkets, and convenience stores) saw a downward trend throughout the year with sales decreasing by 1.5%, which was mainly due to the continued downturn in consumer flow in the large format channels. Sales in hypermarkets and large supermarkets dropped by 3.6% and 3.9% respectively for the year. Small supermarkets in the proximity small format channels grew steadily by 6.7%, driven by rising shopping frequencies. This trend indicates that small formats who serve communities and meet high-frequency, immediate needs are still favoured by consumers. 

The growth in e-commerce channels slowed down in 2021 due to the traffic peaking and diversion from the new digital formats, but still leads all the retail formats with a growth rate of 15.2%.

According to Jason Yu, managing director at Kantar WorldpanelGreater China, although the risk of the Delta and Omicron variant inChina has had a significant impact on travel and social life, the steady risein income of Chinese shoppers and also innovations in supply chain willcontinue to drive consumption upgrade. Digitalized retailing and sustainableconsumption concepts will help grow more consumption potential.

Source: Kantar Worldpanel China

Compared to the last year, the market share of Sun Art Group increased by 0.3pts to 8.8% in 2021. It is still leading the market despite slightly dropped in the fourth quarter. Yonghui Group continued to grow its market share, mainly benefiting from its expansion in the western region. The overall share of Walmart Group rose steadily compared to the previous year. Sam’s Club of Walmart had an outstanding performance with a year-on-year uplift of 0.3pts in its share.

Among the regional retailers, both Bubugao Group and SPAR Group continued to expand in the national market. Pangdonglai and Rainbow Supermarket also saw strong growth in their core regions.

What’s in store for 2022?

1. The evolution of hypermarkets: experience and efficiency

The Chinese retail market has witnessed an accelerated downward trend of hypermarkets in 2021. The increased market competition, the consumer diversion caused by multi-format development and the changes in consumer lifestyles all led to a gradual decline in customer flow and sales. The latest data from Kantar Worldpanel reports that there are 67.8% of Chinese households who visited hypermarkets, decreasing by 4.9pts over the last year. 

The public statistics show that Walmart closed more than 30 hypermarkets in 2021. While Yonghui has been converting more than 50 hypermarkets nationwide into warehouse stores, growing its footfall and sales by offering selected cost-effective products and optimising the shopping experience. The reconfiguration of ‘RT-Mart Store 2.0’ highlights the scenario-based layout and the in-store experience. Key potential customer groups are targetted and provided with differentiated products. Meanwhile, RT-Mart invested in improving the efficiency of its O2O service. It can be seen that hypermarkets will undergo more profound upgrades in 2022, moving from the "big and comprehensive" all-customer-groups development stage to an era of refinement and focus. The customer experience will be upgraded and the profit model would be based on digital empowerment.

2. New Tier-1 cities will become the battleground for membership stores, with supply chain being the key to success

Throughout 2021, the major retailors launched paid membership stores one after another, making it undoubtedly the hottest retail track. Walmart Group accelerated the expansion of Sam's Club and opened five new stores nationwide in the past year. Besides, Freshippo, Metro, Carrefour and other retailers also join the battlefield of membership stores. 

The paid membership stores are now mainly located in first-tier cities such as Beijing and Shanghai, where families with middle-to-high income have higher requirement for product differentiation, price performance and value-added services as their consumption levels increase. With the strong product competitiveness (especially for private labels) and high sense of value, membership stores are certainly the growth point of the depressed modern channels. Sam’s Club has been a star performer in the last year attracting 3.5% of Chinese which demonstrates the potential of membership stores in 2022.

It is worth mentioning that the competition of membership stores is heating up in the first-tier cities and the retailers look to differentiate their offer and attract new shoppers. The purchasing power of middle class has reached a significant scale in China’s new first-tier cities and major urban clusters, where the transportation and infrastructure are getting more mature, providing opportunities for the expansion of membership stores. Thus these areas will still be the main battlegrounds for membership stores expanding in the near future.

Additionally, the value of membership is reflected in the differentiation and non-replicability of products and services. Imposing charges for membership can ensure the loyalty of members in a certain period, yet the essence of success is whether the sense of value has been brought to customers. Therefore, the key to success lies in the construction of the core supply and related infrastructure of membership stores. 

Besides, the innovation which is adapted to the China market based on the lifestyles of Chinese consumers and regional cultural and culinary habits will also be a topic for the membership retailers to continuously explore.

3. Instant retail (O2O) achieved incremental growth through more occasions and categories

After a rapid growth since the pandemic outbreak in 2020, instant retail (O2O) continued its growth in the past year, driven by penetration and shopping frequency. The food and beverage sector maintained a stable increase, contributing nearly 70% of the total sales, with dairy products becoming the most popular FMCG product on O2O platforms. Furthermore, instant retail has been evolving across all categories. More convenient and efficient delivery services and more effective marketing drove more purchases of paper products and home care products. 63.8% of Chinese urban households purchased FMCG through O2O services in 2021, with the shopping frequency reaching 11 times. 

To optimize and to enhance customer experience of O2O has become one of the essential parts of digitalization in the retail industry. More and more retailers are transforming their warehouses of their stores and are partnering with multiple instant retail service platforms, in order to provide consumers more efficient and wider coverage home delivery services. O2O platforms such as JDDJ, Meituan and Tao Xian Da launched one-day, half-day and even hourly delivery services. With personalized choices provided, they offer a greater category coverage to improve consumer experience. 

The competition in instant retail will reach the next level, where major platforms are going to work more closely with brands. On one hand, market segments will be selected for more precise operations. On the other hand, the competition will transfer from penetration to basket size of each purchase so that consumer needs of more segmented buying scenarios can be met to meet different occasions, such as dinner for tonight, family gathering etc.

At the same time, e-commerce platforms will also import more online traffic into O2O platforms and focus on the third and fourth tier markets, which will allow a manfacturers to reach more consumer and grow incremental consumption.

4. Community group buy will be more polarized, with a clear trend of market consolidation

Community group-buying (CGB) grew rapidly in the early time of the pandemic, attracting much attention, when major platforms invested heavily to expand their consumer reach. However, CGB experienced a downtrend as the problems with the CGB business model arose. According to the latest report of Kantar Worldpanel, 48.1% of Chinese urban families brought fresh food and FMCG products on CGB platforms in 2021 with country markets reporting a higher penetration of 51.3%. Since the government strengthened the regulation and the model of burning money to attract flows failed, some CGB players gradually withdrew from the market or underwent mergers and acquisitions. A clear fragmentation can be seen in the second half of 2021.

Among the existing players, the internet platforms such as Meituan Youxuan, DuoDuo MaiCai and TaoCaiCai have covered the national market. While players like XingSheng Youxuan have abandoned the national expansion, focusing instead on regional markets due to their advantages in local supply. In order to solve the structural problems of CGB in profitability and operation, key players like Alibaba have also experimented with innovation in their business models. 

During 2022, CGB will pay more attention on improving the operational efficiency of the overall CGB ecosystem, providing a better service experience and promoting the community consumption upgrades. Moreover, traditional retail chains also started CGB businesses in order to expand their existing portfolio and reach new consumers.

5. The continued resurgence and consolidation of regional retailers

China's regional retailers enjoyed significant growth through their multi-format development and digital transformation in 2021. Relying on its multi-format development, Jiajiayue of SPAR Group gained 0.4pts of market share expansion in North China. Jiajiayue successively opened its new hypermarkets, supermarkets, convenience stores and discount stores last year, as well as its first warehouse membership store in December, strengthening its ability to meet customer demand. Rainbow Group also continued its expansion in the South China through its digital transformation, achieving a higher degree of integration between online and offline stores. It vigorously developing its private label brands to enhance their differentiation versus the competition.

For the year 2022, digitalization, differentiation and multi-format developing will remain the key words for the development of regional retailers. It is worth noting that the concentration of the retail market in China is still not high as that of developed western countries. The research of Kantar Worldpanel reports that the top 10 retailers in China only account for 38.6% of the overall modern channel, with a slight uplift of 0.3pts over the previous year. The degree of market concentration in western and northern regions lags far behind the national average. The excessive fragmentation of the retail market has little benefit to cost reduction and efficiencies for brick-and-mortar retailers to achieve scale. In 2022, the best players among the regional retail will further expand their market share through cross-regional acquisitions and supply chain partnerships. While the national retailers will expand cautiously, focusing on the areas of strength to restructure and transform their businesses.

Modern trade (including hypermarkets, supermarkets, and convenience stores) showed a slow recovery yet still slipped by 0.6% compared to the last year. There was a 3% decline in hypermarkets and large supermarkets while small/mini supermarkets still saw a positive year-on-year growth of 8.1%. 

Sun Art Group holds a 8.5% value share of modern trade in the last 12 weeks, leading the market and is followed by the Vanguard Group who owns 5.8% of the market share. Yonghui Group increased its share by 0.3pts to 5.6%, with it continuing development of its own brand through omni-channel innovative marketing.  

Wu-Mart Group lost 0.3pts of its share compared to the last year whereas SPAR Group uplifted it’s share by 0.2pts, reaching 1.7%. Jiajiayue has recently opened its first membership store in Shandong which is also the first warehouse membership store in Jinan. 

The E-commerce channel retained a solid growth of 12.7% compared to the last year. Upper-tier cities drove the growth, up 15.9% year over year. The consumer base of ecommerce is continuously expanding with 76.3% of Chinese urban households having bought FMCG on e-commerce platforms during the last 12 weeks. 

For the major players, Alibaba Group leads the e-commerce market with 45.1% of the share, yet it lost 4.7pts of the value share compared to the same period last year. It is noticed that Taobao recently tried to improve its social attributes by launching new features such as sharing shopping baskets with friends. At the same time, Pinduoduo grew its market by 2.9pts year on year to 9.5% of the total share. It is still effectively recruiting new users yet at a slower pace of growth, up 35.1% over the last year.  

Affected by '11.11', the sales of e-commerce channel in the past 12 weeks has increased by 20.7% compared to the 12 weeks ending on September 10. It is worth mentioning that Alibaba and JD respectively announced their 540 billion and 349 billion GMV during the '11.11 Shopping Festival'. Although the growth rates have slowed down compared with previous years, the trend of high-quality consumption have been witnessed and can be further expected in the future.

Despite the stalled third-quarter growth, strong fundamentals of consumption are still in place. China’s middle class continues to expand its ranks and repatriation which is contributing to a steady growth. Following years of 5% growth up until 2019 and flat growth in 2020, FMCG volume gained 3.3% and value rose 3.6% in the first nine months of 2021 for a modest post-Covid-19 recovery, even if average selling prices (ASP) remained depressed, gaining only 0.3%. 

Channel shifts have also been shaping China’s shopper behavior and this transition accelerated in the first three quarters of 2021, with penetration increasing in online channels at the expense of most offline channels. E-commerce value grew 24% in the first 3 quarters of 2021 while all offline channels except convenience stores lost value (the grocery channel by 13%). However, within online channels, the share of growth has been steadily changing over the past three years. A game that was once mostly limited to two main players is rapidly expanding to include a host of new competitors.

“We have seen that COVID-19 has deeply changed the way that Chinese consumer shop, with live-streaming becoming an important marketing and sales channel on eCommerce platforms with top KOLs contributing to sizable sales, and more brands starting self live-streaming due to the unsustainable economic model by KOL-led live streaming,” explained Derek Deng, a partner at Bain & Company based in Shanghai. “The sales (GMV) contribution percentage of top KOLs is growing, apparently seeing the consolidation trend in the KOL matrix. Community Group-buy also emerged in 2016 and has accelerated dramatically during Covid, however, the market started to cool down and consolidate in Q3 2021, with new business models created by Alibaba to try to improve overall operational efficiency and service quality.” 

As in previous years, we identified categories that grew very fast and those that grew slowly or declined in 2021. In general, categories associated with improved quality of life, such as cheese, air refresher, mouthwash and ready-to-drink coffee, grew at high speeds while categories popular during the lockdown months, such as instant noodles, biscuits, disinfectants and hand wash, experienced negative growth.

“Since 2018, we have tracked 46 insurgent brands to see what determines success or failure. Of these 46, only 17 have continued to do well, while the others faded away or plateaued,” explained Bruno Lannes, a partner at Bain & Company based in Shanghai. “In this dynamic market, change is the only constant and quality growth is critical today for both insurgents and incumbents.”  

Of the insurgent brands that were tracked, their successes and failures came down to four critical dimensions, and an insurgent needed to excel across the majority of the four to become a standout. The capabilities that underpinned success were:

• Brand Power: Earn share of mind with the target consumer group, and scale that group
• Product Ecosystem: Build superhero SKUs and extend from the core to establish a winning portfolio and a pipeline of innovations
• Channel Capability: Develop a consumer-centric, omni-channel presence and extensive geographic reach, empowered by digital tools, to go deeper and wider
• Organization Capability: Build agile iterative capabilities (empowered by data and insights) to constantly review and improve product development, channel expansion and business model

 “Both incumbents and insurgent brands will always co-exist in China’s FMCG market and contribute in their own ways. The best companies will learn from each other and thrive together.  This cross-fertilization will eventually bring more possibilities and excitement to Chinese consumers,” said Jason Yu, managing director at Kantar Worldpanel Greater China. 

Interestingly, in the 2021 class of insurgent brands, which were identified using the same methodology as in 2018, more than 12 brands are owned by large local or foreign companies. This is a positive sign that these insurgent brands can be seeded and nurtured by larger corporations moving forward.

Total FMCG value sales grew by 3.6% compared to the same period last year. Beverages shone brightly as the fastest growing sector, recovering rapidly with a 5.3% increase in value, mainly driven by the Chinese Mainland market.

Nutritional and hygiene categories are still benefiting from the pandemic, with value sales in Dairy and Personal Care rising by 3.1% and 4.2% respectively. Meanwhile, Food and Home Care slowed down following their peak in 2020.

Convenient channel formats – especially ecommerce – continue to perform well, leading growth in the APAC region with a double-digit increase in transactions. 

Reviewing the performance of each market in-depth, the report reveals some key insights:

• Chinese Mainland: Instant retail (O2O) has maintained a strong growth trend since 2020, with 57% of urban households using O2O home delivery services to purchase FMCG in the first nine months of this year.
  
  
• Taiwan: Taiwanese shoppers have become more used to purchasing FMCG products online, across all categories and age groups.
   
• South Korea: In-home beverage consumption is likely to decrease in the coming months as COVID-19 restrictions ease.
  
  
• Indonesia: Despite a slowdown, Food and Dairy continue to lead the market’s total FMCG growth.
  
  
• Malaysia: All sectors continue to record growth except Beverages, due to the implementation of a national lockdown in 2021.
  
  
• Thailand: Consumers keep reducing their shopping trips, with larger basket sizes a result of stockpiling during the pandemic.
  
  
• The Philippines: Households continue to value traditional trade and proximity stores over other channels.
  
  
• Vietnam: The level of FMCG spending remains higher than before the pandemic, driven by another peak in the purchasing of packaged foods during periods of lockdown in the country’s fourth wave of COVID-19.

Shopper behaviour will continue to change and knowing how shoppers are adapting and evolving will continue to be important. Hence, the question of understanding how to win in Festive has now become critical in order to be ahead of the game.

 In this publication we will be examining the following

• How festive are Asians and how important is it to FMCG since Covid-19? How much more would consumers spend during festive vs the average months of the year? 
• What are the key drivers of shopping behavior during Festive?  Do we see higher frequency, more transactions, or more spend? 
• In terms of products and categories, has consumer preference changed? Are there new sectors that have risen in importance due to the pandemic?
• Who are the key cohorts that is key to reach during festive? Do the lower income or SEC spend as much as the higher income during festive?
• Where are the key channels to reach to drive festive sales? 

We will also be hearing from local market experts on what the key lookouts for 2022 would be, in order to help us navigate the new normal.

In Module 2 of our Retail & Shopper Insights series, we deep dived into the eCommerce development across the region zooming into the key stages of the shopper journey, exploring the next source of frontier for growth and how online can drive incrementality.

In this module 3, we will be looking specifically at brick and mortar stores which have been resilient through the pandemic era to the surprise of key industry experts. This channel still contributes to about 80% value to FMCG. And with mobility restrictions that will continue into 2022, we expect to see the current behaviour of larger trips to keep momentum, but with frequency of shopping will continue to be challenged.

We breakdown the analysis, looking into big format modern trade channels (hypermarkets and supermarkets) and proximity channels (minimarkets, convenience stores and general trade). It is key to understand the difference in missions and categories mix across the different channel types.

Understanding the different roles of categories and having the right mix and assortment (including efficiency of promotions) will become even more crucial, against the changing basket missions due to the continuity of ‘stay at home’ and consumers being cautious. Creating the right shopper experience and engagement is also key to how big format modern trade will continue to evolve and sustain.  

Our key partner experts across both key manufacturers (Nestle, PepsiCo & Reckitt Benckiser) and retailers (Dairy Farm Group & Lazada) continues to provide insight and food for thought into our last and final module for the year on brick and mortar stores.

The latest study from Kantar Worldpanel indicates that 23 Fast Moving Consumer Goods (FMCG) companies attracted over 100 million urban Chinese households each during the 52 weeks ending October 8th 2021.  

As a total these 23 companies added 74 million more households to their shopper base compared to the previous year.

FMCG Companies Ranking by Consumer Base (million households)

Yili, P&G and Mengniu each attracted more than 170 million families in 2021. In terms of growth rate, Vinda is the top riser, with a 9.9% growth in their number of consumers year on year. This is also the first time Vinda has joined the ranking.  

Aside from Vinda, PepsiCo, Want Want, Coca Cola and Unilever are also top performers, reporting significant growth in their consumer base.   

“The biggest players in FMCG continue to win the hearts and minds of Chinese consumers as they entered a new stage of development. We saw most companies cemented their position on the back of continuous innovation and broader brand portfolios.” Commented Jason Yu, Managing Director of Kantar Worldpanel Greater China. “The market leaders’ enduring brand power are further enhanced as they have actively embraced the new reality and transformed the way to act on the new opportunities.” 

1.A world of new normal

Covid-19 has profoundly enhanced consumers’ consciousness towards health and wellbeing. Dairy players, such as Yili and Mengniu continued to hold on to their leading position, while Want Want managed to grow their consumers by 4.4% thanks to its dairy product line adding 9.2 million new families to its franchise.  

However, consumers are still looking for indulgence during a period of stress and anxiety. Therefore, companies offering fizzy drinks and ice cream brands, such as PepsiCo, Coca Cola and Unilever, added new consumers by attracting those looking for comfort and joy while spending more time at home. 

On the non-food side, though the pandemic is mostly under control, demand for hygienic environment remained high. Consumers continued to stock personal and household hygiene products that are effective in protecting their families and this helped to boost the buyer base for P&G, Unilever and Vinda amongst others. 

2.O2O – a new background to win offline

Digital channels remained a crucial driver of FMCG growth in China. In the last 12 months to October 2021, 93% Chinese families bought FMCG through digital channels.  

While eCommerce continued to grow steadily, fuelled by new formats such as social commerce, live-streaming and short-video based commerce, the new O2O model (order online and receive delivery from an offline store) is rapidly transforming the shopping experience by connecting the vast user base of internet platforms and physical retail stores across the country.  

Leading national and regional retailers are able to achieve incremental growth through more efficient user recruitment and order fulfilment.57% Chinese families ordered FMCG products over the past 3 quarters in 2021 through either major delivery platforms, retailers’ own APPs or Community Group Buy APPs. 

For major FMCG companies, O2O helped them to attract new shoppers and tap into new consumption moments as footfalls in the physical stores continued to decline. Vinda, Haday, Nice, Unilever, and Dali are the top players to seize growth opportunities from digital channels, either by providing consumers with delivery options to satisfy their needs for convenience or providing on-demand services to fulfil immediate needs.  

Through extensive collaboration with O2O platforms, Haday managed to make their seasonal products available to consumers within 30 minutes as consumers decide to cook at home more often with attractive promotions, hence attracting more new shoppers to the brand.  

Both Mengiu and Master Kong provided options of full-case pack milk and 5 pack instant noodle options through O2O platforms to offer consumers who want to have the hassle-free delivery convenience. Coca Cola, for examples, also built a strategic alliance with Meituan, under the strategy of ‘food+” to further tap into meal occasion opportunities. 

3.Winning new shoppers in the lower tier 

As the Chinese economy changes gear, lower tier cities remain the growth engine for most FMCG players.  With the development of short video and mobile commerce, lower-tier city consumers displayed a higher aspiration to adopt new lifestyles similar to their high-tier counterparts.  Tier 3-5 cities saw a faster growth of 3.2% year on year in comparison to the smaller growth of 2.5% of tier 1-2 cities based on data to 52 weeks ending October 8th 2021. 

To drive incremental growth in shoppers, winning players targeted lower tier city shoppers with the right offer and right way of value delivery. Analysis from Kantar Worldpanel suggests that across the top 23 companies, gains of shoppers in lower tier cities accounted for 73% of their overall buyer base expansion. 

Vinda managed to recruit most new buyers from tier 3-5 cities as consumers upgrade their choice to buy more paper categories (e.g. wet tissues and kitchen rolls).  In addition, Vinda also benefited from expanding its business to emerging categories like adult diaper to future proof its business.  

Over the past year, Vinda reached 6.3 million more families in tier 3-5 cities. PepsiCo also actively acquired 5.4 million new families in tier 3-5 cities with its successful strategy to penetrate into more small-format stores while driving more availability through eCommerce. 

Notes

1. Lower city tiers include prefecture level cities and county-level cities & counties.

2. Digital channel: Including O2O and eCommerce. O2O including “To-home O2O” and “Community Group Buy”. eCommerce Including: 1)EC platforms like Taobao, JD.com, 2) Social-commerce like little red book, Weibo, WeChat store, WeChat moments 3) Short Video platforms like Douyin,  Kuaishou

3. To-home O2O is the shopping journey starting from online platforms, leading to offline purchases and normally reaching consumers within 1h by delivery services

4. Community Group Buy is the shopping journey starting from online platforms (often with the presence of WeChat groups), assisted by group leaders in shoppers’ neighborhood, leading to offline purchases which are ready for pick-up next day at gathering points

5. Modern trade Including Hypermarket, Supermarket?Including Large Super?Small Super?Personal Care Store? and CVS?including chained and non-chained CVS?

According to the research from Kantar Worldpanel, over the latest three years, the value share of Chinese local brands has been gradually expanding, not only in the total market, but also in food & beverage as well as non-food categories.

Domestic Product: Barcode begins with“69”?Source: Kantar Worldpanel Household Panel

The reason why Chinese brands are winning more popularity is because of the transformation in the new generation’s tastes and values, leading to higher awareness of Chinese brands, as well as confidence in the product.

Take dairy category as an example. From Milkground which has a slogan that “focus on cheese, specifically for the Chinese” to Feihe Infant Milk Formula which claims that they are the most suitable for Chinese babies, those Chinese brands devoted themselves completely to launching products to meet the demands of Chinese customers, resulting in their leading position in the market. 

Source: Kantar Worldpanel Household Panel & Baby PanelNote:52 w/e 2021/09/10 vs. 52 w/e 202/09/11, national

As indicated by the data from Kantar Worldpanel, local brands continued to reporting exciting market share gains until this September within the dairy category compared with the same 52 weeks last year.

Milkground experienced a 53% value increase on year-on-year basis. Meanwhile Feihe also saw a rise in its sales by 25%, which is much higher than the category average value growth rate. 

In some categories which used to be dominated by foreign brands, domestic brands have made breakthroughs, enjoying the preference of more and more Chinese consumers. 

However, the demand for imported brands remains robust in China. Both opportunities and challenges hide in this high-potential market. Thus, how could foreign brands stand out from fierce competition? 

High-tech food introduces the concept of health and environmental protection

Chinese consumers are gradually upgrading their perspectives towards health and they are paying more attention to health-related topics. Snacking type health care products and the “planted-based” brands are coming recently becoming the new favorite of consumption, it means that seizing this new trend of healthy diet is a must for imported brands.

Source?Who care who does 2020,  Kantar WorldpanelSource?Kantar China MONITOR 2020

More and more international brands that focus on "health" and "sustainability" have resonated with Chinese consumers and secure their share of mind amongst the middle class consumers. 

For example, Beyond Meat, a planted-based meat brand which uses plant proteins to replace animal proteins, combines advanced technology with the sustainable concept to advocate a more responsible and healthy lifestyle. In China, Beyond Meat succeeded in getting into Chinese market by distributing in Hema, Sam’s club and Metro. 

In the meantime, through the cooperation with food chains like Starbucks and KFC to include plant-based diet into menu, Beyond Meat captured the market opportunity quickly and opened up a new way of distribution which could be a reference for local plant-based meat brands for developing themselves. 

Localization gives a hand to market development 

Besides, effective localization in communication and social E-commerce strategy cannot be ignored. Every time when Chinese New Year approaches, international cosmetic brands would launch creative seasonal limited editions to drive brand communication, such as the limited-edition lipstick and loose powder for Chinese-New-Year red from Givenchy and the zodiac powder compact from Estée Lauder. While attracting attention through “Chinese elements”, these international brands also expressed their deepest desire to be integrated in the consumer sentiment. 

Apart from that?Lancôme, an imported cosmetic brand which is excellent in marketing localization in China, even collaborated with the famous actress Dongyu Zhou to release a gorgeous video in the spring festival in the theme of Chinese new year red. 

Sinking to lower-tier channels to broaden brand distribution 

In terms of channels, imported brands also have to promote supply chain cooperation, broaden sales channels, and expand channel coverage to create greater possibilities to deepen their availabilities in the local market. 

The case of Zespri which has been in China for over 20 years is a perfect example. As a leading brand in Kiwi fruit market, it collaborated with JD Fresh on supply chain, and by doing this, Zespri could build an omni-channel shopping ecosystem and explore new E-commerce modes for fresh food. 

Relying on JD’s advantage in cold chain logistics and ability to sink to lower-tier market, Zespri would also be able to attract the purchase of more Chinese consumers in those markets and provide them with high-quality and convenient service. 

In addition, Zespri also established a direct supply chain with Pagoda to accomplish deep cooperation from upstream planting to retail sales and upgraded the shopping experience simultaneously. Pagoda’s thorough distribution channels, as well as its integration of online and offline retail would help Zespri to further penetrate into Chinese market, thus achieving rapid growth. 

Imported technology empower Chinese brands 

Imported brand and local brands can mutually reinforce and benefit each other. International brands which have comparative advantages in technology and premium image would encourage consumption upgrade in Chinese market while exploring the path to localization. 

More and more local brands are adopting imported technology to enhance their competitiveness. For example, domestic skincare brand Dr. Yu adopted the Refractance Window dehydration technology from USA to create freeze dried essence mask. 

Unlike traditional masks, the product could perfectly preserve the effective active ingredients in the mask, and also take high-activity, stability and safety into consideration, promoting the efficacy of the product.  Empowered by the patented technology, Dr. Yu’s mask rapidly grew its popularity among Chinese customers. 

With the surge of China pride, Chinese customers express greater needs for any high-quality products that help them to live a better life. Therefore in China, imported brands have plenty of opportunities to grow.  With the injection of global economic vitality and innovation capabilities, China market is set to grow sustainably. 

Modern trade (including hypermarkets, supermarkets, and convenience stores) showed a deceleration in their rate of decline posting a fall of 1.3% in value sales versus the same period last year.   

Both hypermarkets and large supermarkets continued to decline as did convenience stores which decreased by 5.7%. However, small/mini supermarkets maintained its fast growth with a 9.0% increase compared to last year.

The Sun Art Group leads the market with its sales value share of 8.6% in the last 12 weeks. Yonghui Group recently announced that its sales in the third quarter grew by 3.9% compared to the same period in last year.  

Its omni-channel developing strategy brought a satisfying result, growing its market share by 0.2pts year on year to 5.5%. Yonghui converted its 35 stores into warehouse stores in the third quarter, and the online sales of Yonghui contributed 13.9% of its total revenue up to Q3 this year.  

Local retailer SPAR Group rose 0.4pts and reached 1.8% of market share. Jiajiayue under the SPAR Group reported a year-on-year uplift of 5% in Q3 2021, according to its quarterly report. 

E-commerce maintained an upward trend, growing by 13.8% year on year 

Online buyers increased their shopping frequency by 25.5%. In the past 12 weeks, there were 72.2% Chinese urban households purchasing FMCG through e-commerce platforms, with an average of 6.6 orders. 

Among the major e-commerce players, Alibaba Group remained its leading position, yet lost 3.6pts falling to an online market share of 40.4%.  

Pinduoduo grew its sales by 3.9pts to 11.0% of total online market share, mainly driven by its consumer expansion. 

The annual Single’s Day shopping festival kicked off on October 20th with shoppers able to place pre-orders.  

Kantar Worldpanel’s survey of 4,285 consumers nationally showed that 63% of consumers have paid attention to the “11.11” promotions this year and nearly 77% of them claimed that they have followed multiple e-commerce platforms to find the best deals. 

 Livestreaming broke the record on the first day, as Li Jiaqi and Viya sold 20 billion RMB worth of goods. 

How heated was this year’s Double 11 pre-sale activities? Have you gone through your favorite KOL’s recommendations and instructions and filled your baskets with amazing bargains?  And did you find the willpower to stay away from making impulse purchases or did you just go all in without any hesitation?

Kantar Worldpanel conducted an interesting survey on Double 11 pre-sale on 4,285 consumers though Dandanpai APP in the past 3 days. 

Number of livestreaming platforms followed > 1

In order to find the best deals for their favorite products, most consumers follow promotion campaigns across different platforms. According to Kantar Worldpanel Double 11 survey, 63% of customers pay close attention to Double 11 promotions this year. Meanwhile, nearly 77% of them followed several livestreaming platforms in search of the greatest deal.

It is clear that consumers’ enthusiasm for livestreaming remains un-wavered during Double 11, even though this form of advertising and promotion is now quite common every day. 

Sense vs. Sensibility

 “Rational shopping, happy consumption” is being advocated during this year’s Double 11. The survey shows that 80% of those who kept an eye on the promotion activities would add products into their shopping carts in advance. Why? This allows greater convenience and bigger saving when they make the actual purchase because everything can be done all at once. 

So would these people turn to rational shopping and just let the passion for shopping wane after they pay the deposit for advance purchase? 

The survey indicated that, although over 90% of consumers paid a deposit for advance purchase, more than 60% of them paid a deposit only for some, not all, of the products in their basket. This means they still take time to think rationally and make a final decision for purchase. This is not a surprise given that the heated atmosphere when the pre-sale begins can easily arouse consumers’ desire for shopping.

Additionally, 66% of consumers also continue add new products to their shopping cart, after their initial advance purchase. 

As 0:00 on November 1st draws closer, how many consumers will actually follow through their commitment from their advanced purchase?  Let’s wait and see. 

Beauty is a highly developed category within Asia, but it never stands still. COVID-19 has driven many shoppers to become more digital savvy – and brands must not get left behind. Our webinar – Digital ecosystems for Beauty: How to play to win – will provide the vital knowledge you need to understand how to build your brand’s presence in the e-retail environment, and to grow business.

The Worldpanel division of Kantar in Asia will be hosting an exclusive webinar featuring its Beauty experts from the region, who will be sharing insights on where the greatest opportunities lie for Beauty brands seeking to grow in APAC.

In this webinar we will take a detailed look at the current beauty landscape in Asia, including:

• The evolution of online vs offline environments
• Who is buying beauty online?
• Key beauty products consumers are purchasing
• Biggest platforms, how they are developing and how shoppers use them

What you will takeaways from this webinar:

Where to focus investment. We will explain how to select and prioritise the digital platforms that will work best for your brand. Is it more profitable to focus on the top two or three? Or should you be present across them all?

Which types of shoppers you should target. Taking into account the platform, and the ‘evolutionary’ stage the buyer is at. We will also describe how to reach new addressable markets, including the growing Boomer and Silver segments.

How to deliver sustainable growth. Our Beauty experts will share strategies for increasing digital sales while protecting offline business, ensuring growth is incremental. And we’ll explore how to win new buyers while retaining existing ones. Should you use ecommerce to drive trial? Or to strengthen loyalty, example by encouraging trade-up?

The route to category captaincy. Through examining your competitors, to determine opportunities to source growth and increase your brand’s share of the market. Excellent for new or emerging beauty brands looking to capitalize and grow market share.

A comprehensive report is yours! At the end of the webinar, each participant will receive a detailed report with all the data and insights across markets in Asia. This will provide you with the competitive edge to drive brand growth into 2022.  

3 November 2021

16:00 – 17:30 (Singapore time)

SGD$120 per participant

CLICK HERE TO REGISTER

Under the dual impact of sporadic outbreaks of the COVID delta variant and floods in a few regions, the total FMCG market experienced further weakness compared with Q2, with East China suffering the most.

The market had seen a steady recovery since the second quarter of 2020 but the stagnation in the recent two quarters has brought about a higher level of uncertainty towards the growth prospects for full year of 2021.

In the latest quarter, food and dairy sectors reported a weaker performance, with sales down by more than 2%, while the home care sector remained the bright spot with a year-on-year growth of 6.2%. This indicates that consumer choices are making some permanent shifts in this era of the ‘new normal’.

China FMCG Performance by Quarterly

Source: Kantar Worldpanel Urban Household Panel

The out-of-home food and beverage market in China's upper-tier cities continued to rebound, with a year-on-year growth of 4.4% in Q3. Beer, packaged beverages and on-premise drinks made major contributions to the growth.

Tea-based drink is one of the important driving forces behind the booming outdoor consumer market. Driven by strong demand, the consumer base of tea-based drinks expanded by more than 10% year-on-year. At the same time, the office consumption occasions continue to thrive, leading to new growth opportunities for many categories and brands. 

Membership store and omni-channel digitalization accelerate the transformation of modern channels

Modern trade (including hypermarkets, supermarkets, and convenience stores) experienced a 2.9% fall in sales, compared to the same quarter in 2020. Sales in large supermarkets and hypermarkets declined by 5.4% and 6.1% respectively year on year.

Small supermarkets are the only growing channel with a year-on-year increase by 7.9%, driven by rising shopping frequencies. It can be seen that consumers’ preference for proximity shopping is still strengthening even as consumers get back to their normal lives. Intensified market competition, emerging business models (frontend warehouse for fresh foods and community group buy) are taking more shopper traffic from large-format stores.

Leading Grocery Share of ModernTrade – National Urban China

Source: Kantar Worldpanel Urban Household Panel

Among the major player, Sun Art Group kept leading the market with a value share of 8.3%.  Vanguard Group firmly occupied the second pace, with a 6.2% market share in Q3. Vanguard has introduced innovative banners in recent years, such as Vanguard Mart, Vanguard City, etc. to target specific customer needs while re-focusing their resources and investments in selected regions within China. On the back of their supply chain strength, they used packaged foods rather than fresh foods as key traffic builder to lure shoppers back to their stores.

Membership store models are one of the most popular formats that retailers have launched recently. The latest flagship store of Sam‘s Club in Shanghai immediately became a popular shopping attraction amongst middle class shoppers, as it offered more differentiated merchandise and high value-for-money proposition. Hema X, Alibaba’s first membership wholesale store, is also joined by Metro, Carrefour, and Beijing Hualian in the new battle of membership store formats. The requirement to constantly add innovative and highly differentiated own-label products is also a test of retailers’ shopper insights and supply chain strength.

Amongst regional retailers, Wu-Mart Group grew 0.1pt year-on-year of its share in the third quarter. After the acquisition of Metro, Wu-mart continued to digitize its store operations with the empowerment of Dmall. At the same time, its own brands and imported goods continue to generate more sales. Both Bubugao Group and SPAR Group increased their market share by 0.3pt year-on-year to 1.8%. The online penetration of Bubugao rapidly increased following the outbreak of COVID-19 and its deployment in the community was further improved.

O2O further integrated online and offline operations

Instant retail (O2O) maintained a strong growth trend since 2020. The latest report of Kantar Worldpanel indicated that 57% of urban households used O2O home delivery services to purchase FMCG in the first nine months of this year. The penetration rate in upper-tier cities reached 65%, while that in lower-tier cities hit 52%. 

Among different regions, the number of O2O users in South China increased faster year-on-year than any other region. Compared with the peak time during the pandemic outbreak, consumers in China spend less on the O2O platform on each shopping occasion, but significantly increased the number of orders. This reflects that O2O has gradually moved from high-frequency and essential categories such as fresh food to cover all categories and all occasions.

JD and Tmall launched their own enhanced versions of instant retail, with the promise of “One-Hour Delivery”, utilizing platforms such as Dada Group and Taoxianda to deliver the products stocked in the shops nearby. This indicates a deeper integration of online search with products and logistic capabilities in the offline world. Kantar Worldpanel suggests that O2O brings different level of incremental sales opportunities to different categories. Through the effective use of online traffic, retailers can effectively upgrade their existing businesses, meeting the needs of consumers in more occasions, and breaking away from the challenging shopper losses.

The analysis of Kantar Worldpanel on shopping receipts  also  reveales that the community group buying (CGB) market has encountered strict policy and market supervision. It stopped growing in Q3, with some players phased out of the market. However, still nearly 32% of consumers in urban China purchased FMCG through Community Group Buy platforms in the latest 12 weeks, indicating that the consumer base remained solid.

Leading e-commerce companies are also transforming their group buying model under the new policy. High-frequency community group buying based on fresh and FMCG is in line with their strategy of developing local community ecosystems. As CGB steps into the next stage of development, key players will turn from price competition to full competition in the supply chain and operation excellence. 

Omni-commerce era in virtual shopping

The online shopping channel continued its growth trajectory, with a 11% year-on-year rise. The growth of upper-tier cities rebounded, and their performance was better than that of lower-tier cities. The latest report shows that the online shopper base is still expending. Although consumers shop with smaller baskets, they placed more orders compared to last year. 
By Q3 2021, eCommerce holds around a 29% share of the total FMCG market in China. More than 74% of Chinese urban households purchased FMCG online during this quarter.

Source: Kantar Worldpanel Urban Household Panel

Though growing at a slower rate, Alibaba platforms still attracted 49.3% Chinese urban families in Q3. In order to improve the online shopping experience of buyers in lower-tier cities, Tmall Supermarket has deployed frontend warehouses in 132 tier 4 and 5 cities across the country to achieve one-hour delivery of general groceries.

Pinduoduo kept its strong expansion, with more than 27% of Chinese urban families buying FMCG on Pinduoduo at least once in Q3. It is reported that the annual active buyers of Pinduoduo reached nearly 850 million as of H1 2021, with its users becoming more active and engaged.

In addition to traditional e-commerce platforms, e-commerce services developed on the back of short video platforms is developing rapidly and becoming more popular in lower-tier cities. Based on content, short video e-commerce attracts customers with specific interests and actively promotes products to boost conversion and repurchase. This opens up new growth opportunities for FMCG brands.

At the same time, evolving consumer demands have pushed brands to innovate. While no brands are completely safe in maintaining their market position amid ever-changing environments, all brands have the potential for phenomenal growth through adaptation and transformation. Brands must continuously explore market opportunities, and continue to refine their product portfolio and brand equity accordingly; it helps brands to build an identity that can resonate with a clearly defined target audience group.

This white paper from Kantar Worldpanel and Ocean Engine provides an overview of the Chinese beauty market and highlights growth opportunities for different brands to explore.

Market Overview

01. Asian and China beauty market

The 2020 pandemic had negatively impacted beauty consumption in most countries across the world. China was one of the first markets to be hit, it was also among the quickest to recover. Despite recording double-digit decline in Q1 2020, China's market value almost fully recovered to the previous level by the end of the year.

02. E-commerce and livestreaming

E-commerce is the engine behind market recovery and enjoyed a +20% growth in 2020. As the fastest growing channel, e-commerce expanded its market share from 50% to 59% between 2019-2020.  Meantime, livestreaming has become a new important revenue stream, and is also contributing to holistic brand communication.

03. Content

Consumers are paying extra attention to beauty-related content, which helps boost brands' sales performance. According to Douyin's 2020 Statistics, skincare and makeup-related content account for the largest share in the beauty, maintaining a strong growth momentum at 50+%.

Douyin content ecosystem has become more prosperous. Everyone is participating in content creation. From amateur content creators to KOLs and official brand accounts, the creator community is quickly expanding.

Content featuring new products and special occasion-based products (giftsets, limited edition) were among the most popular. Also, consumers are growing tiresome of price-focused communications and are instead on the lookout for more authentic and experience-driven content.

Evolving Demands

The pandemic has not hindered the overall skincare market demand, and most segments recorded positive growth in 2020; most noticeably, high-efficacy regimens are outperforming the others.

Essence segment in particular saw an astonishing demand growth, eye creams emerged as a new popular choice, and products featuring specialized ingredients also gained popularity. Brightening and acne treatment continued to be among the top benefits sought after by consumers, and anti-aging and repair also quickly gained more share of voice.
Consumers are looking to try out innovative and novelty ingredients. It is increasingly important for brands to incorporate innovative ingredients that are closely associated with product efficacy.

Product Strategy

01. Bestsellers

It is becoming increasingly difficult to create bestsellers, but their influence is here to stay.  In 2020, the number of bestsellers decreases to 775 from 850 a year ago, but the remaining bestsellers maintained their influence at 25% market share. A competitive bestseller can exponentially improve a brand's chance in securing their footing in the market.

Also, bestsellers have to fight to maintain their market leadership. Bestsellers from 2019 decreased their market share from 25% to 22%, with some of them falling out of consumers' favor.  Continuous effort is needed to stay current with the latest trends in order for a bestseller to maintain its leadership.

02. New products

35,526 new products were launched in cosmetics market in 2020, at roughly the same level as in the previous year. Consumers' spending devoted to these new products saw a marginal increase.

Brands need to evaluate competition density against ROI to drive new product strategies. For example, there was a significant increase in the number of essence new products, but their sales contribution decreased, to reflect the growing challenges in the success and even survival of new products. Sunscreen stands out with a relatively lower competition density and a growing consumer preference and sales volume for new products.

Competition Dynamics

01. Brand dynamics

In today's Chinese beauty market, multinational and local brands account for similar market shares and fiercely compete against each other. Among local brands, existing giants' performance stagnated but emerging brands flourished to record an impressive +40% growth in 2020.

02. Product strategy

Bestseller: Multinational brands are very competitive in building bestsellers, contributing 53% of the bestsellers in their number. Meanwhile, there is a diverging trend for local brands; while local giants' presence significantly eroded over the years, many new local brands have claimed leadership in a number of segments.

New product: Multinational brands launched fewer new products in 2020 and became more targeted in their new product drive. In contrast, local brands, especially the mature giants, were more active in innovation to offset the external impacts and fuel brand transformation.

03. E-commerce and content quality

The growth in e-commerce sales is strongly correlated to the increase in a brand's voice. Having the right voice is the key to success, content optimization is crucial.

Multinational brands doubled their content views on Douyin. This growth was led primarily by market leaders who took on the role of consumer education and communication through high-quality contents.

Traditionally, local big brands were weak in content marketing, but they are quickly catching up, and this helped their e-commerce business grow +19% despite their sluggish performance overall. Local emerging brands are ahead of competitors in terms of content communication, and continue to create more innovative content to attract consumer interest.

04. Competition landscape

On Douyin's 2020 annual beauty industry ranking, International giants such as Lancome, Estee Lauder, and Dior are among the top, but they are joined by local newcomers such as Florasis and Perfect Diary.

Consumers' search behavior can accurately reflect their purchase intent.  Usually, the first-searched brands are the ones with strong brand power; other brands need to increase their digital presence and zoom into the real consumer needs to better convert account followers to loyal users.

Consumer Insights

01. Young women and lower-tier city consumers

Young women are the key contributors to the beauty market.  In 2020, young women under 40 y.o. spent more than ¥1,000 per capita on cosmetics, and they accounted for nearly 70% of the total market, far exceeding their population share.

Meanwhile, consumers in lower-tier cities proved more resilient to external risks; tier 4 and 5 city markets were less severely impacted by the pandemic and recovered more quickly.

02. Beauty lover profile

Brands should also choose an appropriate communication platform that will help increase the effectiveness of content delivery. For example, young consumers and people in lower-tier cities are more inclined to use Douyin, and content in new formats such as short-video ads and livestreams can quickly capture their attention. At the same time, Toutiao's demographics are also leaning towards younger audiences, allowing advertisers to tap into this TA by leveraging both platforms.

03. Four key user segments

According to Douyin's beauty user data, the acne user segment is generally younger, with over 50% of them 18-30 years old, and are more likely to be from higher-tier cities. There is a relatively even gender distribution, which shows that acne is a common concern for both men and women alike. On the other hand, anti-aging, brightening, and sensitive audience segments are more female, disproportionately between the ages 18-30.

04. Segment evolution

While age and geographic profile can provide a general guidance, consumer preference, and purchase decisions are further affected by their personalities, lifestyle, and environment.
Once brands have identified the most relevant high-potential consumer groups, they need to evaluate these TA's spending power and evolving demands to update communication and portfolio development effectively.

Marketing Solutions

01. Decoding 2020 marketing strategy

For multinational brands, there is a significant increase in the share of performance advertising, and the mixed investment in both branding and performance advertising is likely to become a long-term strategy. Many are also tapping into new media and advertising formats to showcase their abundant contents of which the performance is carefully measured. Local brands are faced with an urgency to transform themselves and putting a greater emphasis on branding communication, which indicates that local brands are starting to look beyond a short-term ROI to building "brand power."

02. Beauty industry marketing breakthrough in 2021

Intensifying traffic competition and ever-growing consumer demand for content presents brands with new challenges. Multi-dimensional brand building to capture the hearts of users is a must to achieve business growth:

• Branding ads help set the tone of the brand and convey the "official image" through qualified imagery,

• KOL endorsement provides in-depth information and infuses the brand with greater credibility, and

• Auction ads can feature diverse details that might be overlooked by the above two.

Ensure the brand image is imprinted in the consumers minds as they travel through the consumer journey:

• Find the right people: Ocean Insights classifies consumers into new 5A groups to help brands reach the right consumers and drive meaningful impact from their communication.

• Multi-faceted contents: Leverage KOL influence and quality content to drive buzz and enhance brand equity.

• Strategic and efficient use of popular IPs to extend marketing potential.

• Strategic use of KOLs to drive multi-faceted social media presence.

The out of home food & beverage categories increased by 15.1% in the second quarter compared to 2020 Q2. As travel restrictions eased, many consumers are now back to their normal day-to-day lives and the impact of this can be seen by the rapid recovery of the out-of-home market. Products sold through on premise channels reported surging sales, with ice-cream and beverage showing strong growth.

Big-format stores are launching new models to counter growth pressure

Modern trade (including hypermarkets, supermarkets, and convenience stores) reported a sales dip of 4.6% compared to the same quarter in 2020. Small supermarkets and convenience stores sustained growth, yet at slower pace of 4.4% and 1.7% year-on-year increase respectively. Sales in large supermarkets and hypermarkets fell by 7.2% and 7.7% respectively. This indicates that proximity and convenience channels remain a favourite choice for many consumers since the outbreak of COVID-19.

© 2021 CTR Market Research    Source: Kantar Worldpanel China

Among the major players, Sun Art Group maintained its leading position with a value share of 8.5%, up 0.3pt year on year. Sun Art Group has announced plans to develop more medium-sized stores this year in order to expand the density of store networks and improve accessibility. Yonghui grew its business by 0.2pt to 5.3% share of the total market. Over the last three months Yonghui opened more than 30 warehouse hypermarkets, featuring selected core SKUs and everyday low price to attract mainstream shoppers. The model is different from the newly emerging membership store launched by Costco, Hema X and Metro Plus which are targeting to win the loyal middle-class shoppers with exclusive product offers and a full range of services and experiences. As big-format stores continue to face strong competition from eCommerce and emerging retail business models, such as Community Group Buy, the return to selected but quality product offers is a sign of how offline stores can maximize their value proposition to key shopper groups.   

Regional retailers continued to make notable gains in Q2. Both Bubugao and SPAR grabbed 1.7% share of the total market. Bubugao expanded its market in the South and West, up 0.3pt of total national level. While SPAR mainly grew in the North, increasing its national share by 0.2pt year-on-year. Jiajiayue, a member of the SPAR family, started expanding its presence outside Shandong province and in the meantime invested in their supply chain in nearby Northern provinces to empower more regional players.

Online to Offline (O2O) is here to stay

Despite most consumers returning to their normal life, the shopping preference of ordering online from an offline store and receiving at home or office remained. Sales through O2O channels have continued to grow accordingly and in the first half of this year, nearly 50% of Chinese urban families have purchased FMCG through O2O platforms. Major retailers and ecommerce companies are striving to develop their O2O business, many of whom have also thrived during the ‘618’ Shopper Festival originally held by pure play eCommerce players. Online sales of Yonghui exceeded 250 million during the "618" festival, and its order volume exceeded 3 million, which is double the previous year’s amount. Carrefour's O2O business and its mini-program orders also doubled during the "618" period.

E-Commerce continues to gain in the battlefield

Online shopping channels maintained an increasing trend with 10.6% year-on-year uplift, yet seeing a slowdown compared to the first quarter of 33.2%. The number of ecommerce shoppers is still growing, and consumers shop much more frequently than they did last year. By 2021 Q2, ecommerce holds a 28.4% share of the total FMCG market in China. There are more than 74% of Chinese urban households who purchased FMCG online during this quarter.

© 2021 CTR Market Research   Source: Kantar Worldpanel China

Alibaba Group is leading the market among the ecommerce platforms with its market share of 43.9%, up 0.4pt year on year. Around half of Chinese urban families shopped for FMCG on the platforms of Alibaba at least once in 2021 Q2. Pinduoduo maintains its remarkable performance with a year-on-year gain of 5.7pt market share, accounting for 9.3% of the ecommerce market. It is well noticed that the number of Pinduoduo’s users doubled within one year. Pinduoduo announced that they reached 800 million annual active users by the first quarter this year. In addition to traditional e-commerce, online shopping through live streaming on short video platforms has also developed rapidly. Nearly 10% of urban households made FMCG purchases on Douyin or Kuaishou in the first half of 2021, according to Kantar Worldpanel.  

China Beauty Brand Footprint was also published by Kantar Worldpanel, ranking the best performing beauty brands in two dimensions: fastest growing power brands and fastest emerging brands. The rankings were generated by using the CRP metrics (Consumer Reach Point), which is a consumer index that combines the number of buyers each brand obtained in one year with the average number of times that the brand was purchased by each buyer. China Beauty Market Brand Ranking presented a clear picture of consumers’ actual choice, and helped brands decode potential growth opportunities in this challenging market.

1.  Fastest growing power brands

Kantar Worldpanel selected the fastest growing power brands based on the size and the incrementality in CRP. Many leading international brands made it to the list by consolidating their key competitiveness and market position with signature ingredient and recipe. For example, Estee Lauder launched the seventh generation of Advanced Night Repair, which renewed consumer perception and experience of the iconic product.  Also noteworthy are Chinese brands that focused on building expertise through high-efficiency products like ‘Little Red Scorpion’ anti-aging essence launched by Marubi to meet the consumers' advanced skin care needs. In addition, smart mix of multiple touchpoints become an increasingly important driver for the continuous expansion of big brands. Winona, ranking the first in CRP incremental among the top skincare brands, leveraged the popularity of Tik Tok platform and variety show IP, to actively attract fans through tailored-designed IP content delivery and livestreaming events.

Kantar Worldpanel summarized three key drivers behind the fastest growing power brands:

• Leverage and expand key competitiveness: enhance core products to meet upgraded needs
• Focus on high-efficiency care: continuously strengthen R&D capability, deliver high functionality
• Utilize innovative touchpoint: creatively develop different touchpoints to communicate and engage.

2021 China Beauty Brand Footprint: Fastest growing power brands

© 2021 CTR Co.Ltd                                         Source: Kantar Worldpanel Beauty, 2021           

Fastest growing power brands criteria: Ranking by absolute increase in CRP in 2020 among the Top 50 CRP brands from 2019.

Skin Care definition: facial care and eye care, exclude hand & body, lip balm. Make up definition: face, eye, lip exclude lip balm, nail.

2. Fastest emerging brands

Despite of the overall market slowdown in 2020, there were still many brands bringing new momentum to beauty market. Geoskincare quickly gain popularity on the back of their offer in two relatively smaller segments – makeup base and non-tissue mask. Its image as experts in these two segments was carefully fostered from the early stage of brand development, and it quickly became the top-of-mind choice for many consumers for those segments. Sharper targeting specific to one consumer segment is also an effective way to kick-off growth. My Little Ondine and Colorkey have been devoted to building strong and fashionable brand personality and designing creative makeup look, much coveted by young consumers actively looking for new ways to express their individuality.

2020 China Beauty Brand Footprint: Fastest emerging brands

© 2021 CTR Co.Ltd                                         Source: Kantar Worldpanel Beauty, 2021   

Fastest emerging Brands criteria: Ranking by absolute increase in CRP in 2020 vs 2019.

Skin Care definition: facial care and eye care, exclude hand & body, lip balm. Make up definition: face, eye, lip exclude lip balm, nail.       

Recovering beauty market brings new development opportunities to both existing/ dominant brands and new/ niche brands.  Kantar Worldpanel identifies the following three factors to best capture these opportunities to achieve vibrant growth, Kantar Worldpanel identified three key factors:

• Expertise building anchored on a leading product in the chosen field
• Right content and product tailored to a clearly-defined target consumer group
• Memorable and trend-leading image to resonate the evolving consumer needs

These are among the findings of new research released today in Bain & Company’s 10^th annual China Shopper Report Vol I, done in collaboration with Kantar Worldpanel. As in each of the past nine years, Bain and Kantar analyzed the key 26 categories that span the four largest consumer goods sectors: packaged food, beverages, personal care and home care. The research also looked at another 19 categories to form a more comprehensive view of the market.

Through 2020, prices declined for both beverages and packaged food, however, packaged food volume grew as consumers stocked up through the COVID-19 crisis as worries of food shortages increased spending on nonperishable foods. Personal care and home care spending grew as well, mainly due to a higher volume of purchasing, with home care prices rising with increasing concerns about hygiene.

“We have seen that COVID-19 altered the way the Chinese consumers are thinking about why and how they purchase fast moving consumer goods,” explained Bruno Lannes, a partner at Bain & Company based in Shanghai. “Throughout the crisis, the drive has been to keep themselves and their families healthy and safe, so they have been focused on purchasing products in a way to help them achieve this goal. There was also an increase in the purchase of goods which would get a family through food shortages, and these items were bought in bulk across the country.”

E-commerce was the only retail channel which experienced rapid growth, although convenience stores almost matched their pre-COVID-19 level. This shift to online has persisted across all categories into 2021 and continues to gain market share and penetration. Livestreaming e-commerce also more than doubled in 2020, led by apparel, skin care and packaged food. As more consumers had to shop from home during the pandemic, due to safety concerns or lockdowns, online-to-offline sales grew by more than 50%.

 “The boom in online retail has been one of the greatest changes to the FMCG industry during COVID-19, not only in China but globally,” said Jason Yu, managing director at Kantar Worldpanel Greater China. “We expect that this shift will continue to be prevalent moving forward as consumers and retailers have now shifted their habits and models to account for these changes.”

To understand the full impact of COVID-19 on FMCG sales in China and what to expect in 2021, we compared performance in the first quarter of 2021 with the same pre-pandemic period in 2019.  Overall, growth is regaining traction, but remains subdued. The slow FMCG spending recovery and modest gains in the first quarter of 2021 contributed to a 1.6% year-over-year value growth rate, slower than the 3% growth achieved two years earlier. Value grew 1.6% despite a 1% decline in ASP. Volume was the key contributor to value growth, spurred by a recovery in the frequency of shopping trips. Meanwhile, as the pandemic eased in China, the typical two-speed growth-rate difference between food and beverage sectors vs. the home care and personal care sectors returned.

Another trend that took root in the pandemic: community group buys. In this growing trend, Internet platforms source directly and sell to “community captains” who handle delivery throughout the neighborhood. The new distribution approach resulted in 27% penetration by the first quarter of 2021 and is becoming so important that all major retail Internet platforms are investing heavily in it to stay connected with consumers.

“COVID-19 will have lasting implications. To stay ahead, brands need to restructure their product and brand portfolio to better fit post-COVID market conditions, and adapt the entire cost structure to serve both the premium oriented and the value-driven consumers. Brands will need to manage the tension between inflationary pressures on raw materials and the development of the new deflationary, volume-driven growth environment.  Also, brands should focus more on recruiting new consumers, especially in lower-tier cities,” explained Derek Deng, a partner at Bain & Company based in Shanghai.

In 2020, local brands continued to lead China’s Top 10 most chosen brands list. Yili remained in the top spot, reaching the most households, and has been chosen the most times per household for the sixth consecutive year. The concept of “a cup of milk every day will give you a strong body” is deeply rooted in the Chinese consumer’s mindset while, more recently, advice from experts on how drinking milk and eating eggs can improve your immune system to help defend against coronavirus mean that dairy categories are now consumed by most households on a daily basis. This has enabled Yili and Mengniu to attract more than 1 billion consumer reach points each. Haday and Shuanghui have witnessed the fastest growth in consumer reach points among the top 10 brands, driven by rising demand for their products as well as their strategy of penetrating lower tier markets in China.   

Top 10 most chosen FMCG brands in China

Source: 2021 Asia BrandFootprint Brands on the rise Increased penetration has been a major driver for the fastest growing brands, with many seeing a double-digital increase in consumer reach points in 2020. More in-home cooking occasions led to rapid growth for leading cooking sauce brands Chu Bang and Haday. Jinluo and Shuanghui have seen increased demand for sausages, which provide a convenient in-home protein meal. Self-indulgent snacking occasions at home also saw a rise, which benefited the carbonated soft drinks and savoury snacks categories, and brands such as Coca-Cola, Pepsi and Lay’s. The eighth fastest-growing brand Panpan has entered the China Top 50 for the first time, with an 8% growth in consumer reach points. 

  Top 10 fast growing FMCG brands in China?Based on top 50 total FMCG brands?

Source: 2021 Asia Brand Footprint

 Jason Yu, Managing Director of Kantar Worldpanel Greater China commented: “The pandemic brought unprecedented disruptions and opportunities to FMCG players.  Finding more shoppers remains key to growth. True winners are those who are brave to embrace the ‘new normal’ and able to tap into new consumer demands and innovate to create newgrowth levers. ”

The report also pointed out that the unique circumstances of the pandemic accelerated four key trends:

• An increased focus fromphysical hygiene to inner health and wellness. People are taking a more holistic view of wellness. Prevention, protection and function become more important, and they are also paying attention to emotional wellbeing. Health supplements are booming as consumers are willing to spend on products that will boost their immune systems. FMCG brands have embraced this trend by targeting communications towards specific concerns, reassuring shoppers, and developing innovative products that meet new needs.

• Behaviours differ by countryand category therefore do not average Asian.As we predicted last year, some consumers shifted spend to value brands, while others moved to the premium end of the market. Not everyone was willing to give up luxury during lockdown, and people also bought treats when they could not go out. FMCG brands excelled at showing consumers they do not need to compromise, by creating great “moments” and generous promotions to encourage trading up.

• Stay home economy will continue to remain important. Consumers’ desire to live better during this period of lockdowns has boosted in-home categories. For example, consumers prepared more exquisite meals in their homes or mimicked outdoor experience at home. For example, personal care brands that launched ‘home spa’ products that enabled people to give themselves that moment of relaxation and self-care. This has also given rise to consumers becoming more environmentally friendly in their product selection. 

• Ecommerce with continuous potential for growth. Millions more consumers have turned to ecommerce as a regular shopping channel. Users have increased inquality as well as quantity, with a rise in ‘middle aged’ shoppers who have huge spending power. Brands are using digital platforms to transform the way they sell, with livestreaming video proving highly effective as both a sales conversion point and a brand communication point. Many have introduced delivery services, to ensure they retain existing shoppers and maintain loyalty.

   

Marcy Kou, Managing Director, Worldpanel Asia at Kantar Worldpanel, said: “ 2020 was a challenging year for companies to navigate, but FMCG brands across Asia have remained consistent and responsive to consumer trends. The events of COVID-19 turned the previously slow growth of FMCG brands on its head, leading to more innovations required of brands to maintain their growth in 2020. With penetration being the crucial driver of brand growth, 86% of growing brands saw an increase in the number of shoppers choosing them.”

IMF manufacturers need to address this challenge of a decreasing baby population between the ages of 0-3 years and find new opportunities to grow the category and their brands.

One of the opportunities to offset this challenge is to focus more on IMF Stage 4 which targets 3 to 6 years old kids.

According to Kantar Worldpanel Baby & Kids panel, in the past 52 weeks ending on Feb 2021, urban domestic sales of IMF Stage 4 jumped almost 34% on a year-on-year basis and its penetration reached 9.3%.

Since Stage 4 is now the most rapidly growing segment compared to Stage 1-3, how can manufacturers play big on this growing segment and attract more new consumers?

Identify the growing nutrient demands for kids

IMF Stage 1-3 has already seen a huge demand for ingredients such as lactoferrin, OPO, A2 protein. Will there be a similar trend in IMF Stage 4?

Looking at the category performance for IMF Stage 4 before and after Covid-19 outbreak, its market value grew to a new record high.

This shows that parents now attach more importance to their kid’s health and are also purchasing IMF Stage 4 due to some specific health concerns for their kids.

Therefore, it is essential that manufacturers keep following the demands of a growing nutritional ingredients trend to attract more new buyers.

 Establish a clear positioning for IMF stage 4 vs. other supplementary categories

The diet structure of kids over 3 years are different from that of the babies.For kids over 3 years, IMF is just a supplementary feeding option.

Other options such as kid snacks, kid nutrient supplements and kid liquid milk can act as replacements for IMF stage 4.

Moreover, there is quite a number of kids age 3+ who still have IMF Stage 3 meant for babies less than 3 years.

Thus, manufacturers need to establish a clear positioning for IMF Stage 4 and its unique benefits with effective communications and emphasize its nutritional value, advantages vs. other categories.

 Adapt to Omni channel activation strategy

The main channel of IMF S1-S3 are e-commerce and baby stores.In terms of IMF S4, besides those two, hypermarkets and supermarkets are of high importance. Manufacturers need to develop an agile and flexible Omni channel strategy based on segment characteristics.

In order to best answer these questions Kantar Worldpanel has revisited over 70 Consumer Media Measure studies within the FMCG market. This is a consumer-focused solution that involves measuring the impact on buyers purchasing based on their historical buying behavior and multi-media ad exposures. 

To make every dollar spend on media worthwhile, maximizing reach is still an important first step. Unsurprisingly, digital has now overtaken TV’s role as the main reach builder. Reach of cross media campaigns that were contributed by ‘digital only’ was on the rise year on year. However, TV is still important in communicating with greater audience. For total FMCG, without TV, around 1/3 of communication opportunities are lost.

Within digital, halo effect across different media can maximize media impact, especially OTV & Short Video plus Social advertising work in best synergy. A combination of the three can bump up media effectiveness by 13-29% than just OTV itself.

From shoppers’ perspective, for brands big and small, established or emerging, driving new recruits always stays on the priority list no matter how successful they manage customer data to maintain loyalty. A highly dynamic buying system requires continuous media investment to recruit new shoppers for brand. An average of 56% of sales contribution driven by media was coming from new shoppers, which is significantly higher than the global average. 

When we breakdown by different media vehicles, they can all drive new shoppers, especially OTV and social which have a stronger role in attracting new shoppers in general.

The next questions to ask are: “who are my potential new buyers?” and “how can we reach them?”, which are often outside the scope of many big data solutions as locating them needs continuous understanding of consumers’ purchase behavior across different purchase channels. Kantar Worldpanel’s Activate solution can help to precisely target audiences which are most important to your business growth based on cross channel purchase behavior in your DMP.

In order to measure how effective a campaign is we will isolate the impact of media using regression modelling. This allows us to quantify the proportion of a brand sales (i.e. sales uplift) directly coming from people who have been exposed to the campaign. When we compare with campaigns evaluated in other countries, we found that is more challenging in China to drive sales uplift due to the complexity and sheer scale of the market. 

Among Kantar Worldpanel’s Consumer Media Measure (CMM) projects in the past 3 three years the average sales uplift was 3.6% with only 21% of campaigns delivering above 5% sales uplift. Campaigns that were able to deliver stronger value contribution than those with similar reach level were more likely to communicate with consumers with relevant content (resonance of copies / IP coops with brand message/ TA), on new occasions (utilization of specific media resources) and at right timings (CNY, peak season and special events).

Kantar Worldpanel’s Consumer Media Measure works best in understanding how much incremental sales and penetration uplift your media campaign has brought, while at the same time will bring you an in-depth analysis of touchpoint effectiveness and ROI to help you optimize media investment.

The out of home FMCG market* rapidly grew by 38.9% year-on-year in the first quarter, with an increase of 0.4% compared to the same period of 2019. This indicates that China's out of home consumption market has also seen a strong recovery. As a result of the increase in people's outdoor activities, skin care and facial cosmetics categories quickly resumed their growth at a double-digit rate. Meanwhile, consumers are now choosing to cook less at home, which has led to a decline in some food categories like instant noodles and frozen products.

Modern Trade

Modern trade (including hypermarkets, supermarkets, and convenience stores) has recovered and slightly increased by 1.4% compared to last year, but still decreased by 2.6% compared with the same period in 2019. Among them, the sales from small supermarkets and convenience stores increased steadily by 6.5% and 8.7% respectively. The value sales of hypermarkets saw a similar performance to last year with a slight increase of 0.3%, while that of large supermarkets kept falling by 1.3% year-on-year. This implies that many consumers are still used to buy fast-moving consumer goods near their homes and communities.

Among the top players, Sun Art Group maintained its first place with a market share of 9.2% which increased by 0.9pt compared to last year, driven by both an increase in the number of consumers and the expansion of shopping baskets. In order to meet consumers' digital and near-field shopping needs, Sun Art Group is investing heavily in setting up its small and medium-sized stores and O2O channels as they continue to build their omni-channel presence. It is noted that Wu-Mart Group has entered the top 5 ranking of retailers in China for the first time, with its strong performance in the northern and western regions. The market share of Wu-Mart Group reached 3.2%, growing by 0.2pt year-on-year, which is likely attributed to its highly developed digital retail system, Dmall. The “Wu-Mart + Dmall” model has realized the integrated development of online and offline retailing, attracting more consumers who have strong purchasing power and pursuit of convenience. For local retailers, both Better Life Group and SPAR Group performed well, achieving double-digit growth of their sales value compared to the same quarter last year. The growth of Better Life Group is mainly driven by the expansion of consumer shopping baskets with the help of its digital transformation. The growth of SPAR Group mainly comes from the outstanding performance of its corporate member Jiajiayue. In addition to cultivating the market in Shandong, Jiajiayue began a national expansion, accelerating the expansion of North and East China, and further improving the layout of the surrounding areas.

E-Commerce

Online shopping channels maintained a strong growth, with an increase of 33.4% over the first quarter of 2020. It can be seen that online shopping is still favoured by consumers even in the post-Covid era, as it represents 22.8% of total FMCG value sales in China. The latest data reveals that e-commerce continues to attract new customers (especially in lower-tier cities3 with 10.7pt of the penetration growth, year on year), and is seeing people increasing their number of shopping trips, both of which drove the growth of online sales.

Among the top e-commerce platforms, Alibaba Group holds its leading position with over 40% of the total online market value. Nearly half of Chinese urban households have purchased FMCG on Alibaba’s platforms during this quarter. JD Group’s market share dropped slightly compared to last year, while Pinduoduo continues to see phenomenal growth, increasing its market share by 5.7pt and almost reaching 10% of the total share. In addition, there are more than a quarter of urban families (25.3%) who made at least one FMCG purchase on Pinduoduo in this quarter. It is worth noting that this number increased fivefold in the last two years, surpassing JD Group and directly driving its strong growth. We can see that Pinduoduo is growing particularly fast in lower-tier cities, as its consumers have tripled there compared to the same period last year. The annual report of Pinduoduo shows that its number of active buyers has reached 778.4 million by the end of 2020. Pinduoduo is aiming to build a logistics infrastructure platform focusing on agriculture, where consumers can get fresher and healthier fresh food at lower prices.

Notes:

*Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing).

*Kantar Out-of-Home Panel tracks 8,000 individuals covering Key & A cities.

*Lower city tiers include prefecture level cities and county-level cities & counties.

*Suning Group includes Carrefour and Suning CVS; Wumart Group includes Metro, Wumart, and New Century; Better Life Group includes BBG Department Stores, Nancheng Department Stores, and Jiarunduo.

Jennifer Chan, Insight Director at Kantar, Worldpanel Division comments “Of reported markets, iOS has the greatest share growth in Germany; reaching 29.8% sales share, up 8.5% pts YoY, iPhone was 3 of the Top 5 selling models (iPhone 11, iPhone 12 and iPhone 12 Pro Max). An impressive outcome when compared to the same quarter last year, with just iPhone 11 making it into the Top 5 models sold.

iOS also demonstrates strong growth in USA at 45.6% sales share, up 4.9% pts YoY. All Top 5 models sold are iPhone; iPhone 12, iPhone 11, iPhone SE (2^nd generation) and the two iPhone 12 Pro models. This demonstrates the breadth of iPhone’s portfolio across price bands to broaden consumer appeal.

Chan continues, “despite challenges in Android’s overall performance in Q1 2021, there is strong sales share growth among individual brands. Samsung YoY sales share is up in Great Britain (+4.7% pts), Italy (+3.6% pts), France (+2.3% pts), and Spain (+1.6% pts). Performance is supported by the launches of Galaxy S20 series in March 2020, followed by the prompt launch of Galaxy S21 series in January 2021. In Great Britain, Australia and USA there are more Samsung premium/super premium tier models in the Top 10 models sold than the same quarter in the previous year.

In Q1 2021, Chinese brands continue to perform well locally and in European markets; at least 1 in 4 smartphones sold in Italy are Xiaomi (up 4% pts YoY) and it is also 36.7% of smartphone sales in Spain, near flat performance YoY. Oppo continues to grow in China with 11% sales share (+2.7% pts. YoY) and demonstrates its expansion into more markets reaching 5% of sales share in Spain, Italy and Japan.

In Japan, 57.4% of smartphones sold are Android (+6.2% pts YoY), performance being driven by the launch of Sharp’s Aquos Sense 4 series. iPhone SE (2^nd generation) still proves to be the most popular model; although having launched a year ago (April 2020) it will be interesting to see whether the position as number 1 model sold will continue to be held.

Chan continues, “So what device specific features drive consumers to buy? We’ve long been talking about “screen size” (although still the case in France and Japan) and “quality of the camera” (although still the case in Germany) being the highest-ranking driver. However, there have been some shifts in the rankings with “Battery life” being the highest-ranking feature for buying smartphones in Australia, Great Britain, Italy, Spain and the USA. More specifically, the growth of “battery life” as a driver across EU5 is the “speed of charging” and in China the “length of battery life”.

While “camera quality” hasn’t grown as a reason YoY, it still ranks in the Top 3 across EU5 and Australia. More specifically, “Dual/Multi lens camera”, “Quality of the rear camera” and “Quality of photos in low light”. Unlike other markets, “Selfie camera” ranks higher in China than in other markets. In the USA, “camera quality” moves from ranking 3^rd to 4^th, overtaken by “Features of OS” (more specifically, the features of the OS that have grown YoY was “in built voice assistant” and “organizing apps/folders”. It appears USA is not the only market to see an increase in the proportion of people buying for “Features of OS” with 5 other of the 9 reported markets and narrowing in on these OS features “OS Cloud/Back up storage” sees an uptick in most markets. The on-going buzz and rising availability of 5G enabled smartphones/tariff plans continues to translate across all reported markets with a higher proportion of smartphones being purchased for its “5G Capability” vs. this time last year.

Chan continues, “thinking about the future purchasing outlook for the rest of the year, over the next 6 months between 13% to 20% of smartphone owners intend to purchase a smartphone; the lower share being France and the higher share being Italy. iPhone is the number 1 preferred brand in USA, Australia, Japan and Great Britain. In the EU5 markets, with the exception of Great Britain, Samsung is the most preferred brand and it’s Huawei in China.

Manufacturers should be driving online as a means to build consumer touchpoints before they purchase. Consumers are researching online to prepare for their smartphone purchase. In all reported markets, except in France, consumers visit manufacturer websites to get information. The importance of cost is also demonstrated through the use of price comparison websites in 6 of the 9 reported markets.

Network carriers are still important in the USA, with purchasers using both website and in-store as a means to research. Finally, we cannot underestimate the influence of Earned touch points with asking friends/customer reviews appearing in the top 3 pre-purchase research methods in 7 of the 9 markets reported.

The report finds:

• Food purchases increased 11.4% as households catered for more meals at home.
• Homecare products sales increased by 9.8% as we increased our focus on hygiene and cleanliness to stay safe.
• With the lack of social interaction, the Health & Beauty sector declined by 0.1% year on year compared to being the fastest growing sector in 2019. With the importance of hand washing, Hand & Body Wash sales accelerated from 6% to 16% growth.
• Ecommerce sales increased by 45.5% as more households pivoted towards online grocery shopping. Ecommerce now accounts for 6.5% of grocery sales globally.
• The US was the fastest growing market (14%), followed by Western Europe (11.2%), Latam (10.1%), Eastern Europe (6.6%) and Asia (3.1%).
• Despite In-Home FMCG sales hitting 10% in 2020, combining sales for both Out-of-Home (OOH) and In-Home, shows a decline of between 2-5% for the food and beverages (excluding alcohol) sectors.

Beverages, Dairy & Food, which accounted for 74% of FMCG value in 2019, grew at 8.6%, 10.3% and 11.4%, respectively, with out-of-home consumption moving in-home throughout most of 2020. Fifteen of the top 20 categories most positively impacted by COVID-19 came from these sectors. Growth in Sugar & Sweeteners, Herbs & Seasonings, and Olive Oil sales showcases the increase in scratch cooking and home baking seen in 2020.

As 2020 forced us out of bars and restaurants, alcohol sales saw an uplift, growing 11% compared to 2% growth in 2019 (Latam, Western Europe and Asia). Western Europe and Latin America had growth of 25% and 20% respectively, while Asians were more sober in their approach to the pandemic with sales falling 10% in 2020 compared to 2019.
“2020 has been a transformational year for FMCG. When we calculated our early forecasts in 2019 – before COVID-19 existed we expected a continuation of FMCG growth close to 2.5%”, explains Stéphane Roger, Global Retail & Shopper Director at Kantar, Worldpanel Division. “From the stockpiling in Q1 to the continued shift of out-of-home consumption to in-home through the rest of the year and the lack of face-to-face social interactions, the impacts were felt across regions, countries, channels, sectors and categories. This environment has highlighted the importance of adapting to the unknown to find new growth opportunities. Whilst FMCG has benefited from the pandemic, no growth is ever constantly reliable, highlighting the importance of understanding evolving consumer trends and behaviours and adapting to them.”

Ecommerce doubled its growth 

The pandemic has accelerated ecommerce growth in almost all markets. An additional 5% of global households bought their grocery shopping online at least once online in 2020 – which is equal to an additional 67m households. In 2019, ecommerce represented a 4.9% share of grocery shopping, in 2020 with growth of 45.5% this increased to 6.5% of global grocery sales. 

For comparison, ecommerce growth in 2019 was 18.9%. The strongest growth was seen in Asian markets; 25% of grocery shopping in China and South Korea happened online, with increases of 6.4% points and 3.3% points, respectively. The UK is the western market with the highest rate of ecommerce in the FMCG sector at 11.4%. In every other western market ecommerce is in the single digits, including just 4.1% in the US, illustrating the enormous headroom for growth in the western ecommerce markets.  

Skin Care consumption continues to upgrade

For the skin care and make-up categories, Model Moms are a strategically important group. Their spending power is comparable to that of Urban White Collars, and they have been the drivers of the beauty market recovery. 

Source: Kantar Worldpanel Beauty Panel, Key Contributor=Annual cost of cosmetics per capita.

In the beginning of 2020, the beauty category consumption was severely hit by the cut-down of social activities and wide-spread mask-wearing habits as a result of COVID-19.
In the 2nd half of the year, the skin care consumption started to recover ahead of makeup, which depends more heavily on social occasions.  As one of the biggest spenders in the beauty market, Model Moms pay extra attention to and invest to improve their appearance. In fact, their spending on skin care products in 2020 exceeded the average by 60%.

Show them your love

Kantar Worldpanel data indicates that Model Moms prefer e-Commerce and personal care store when shopping for skin care products. Online shopping provides a way to balance their family and career at a greater convenience and help them save time. Personal care store, a channel traditional popular for specialized product shopping, is also chosen more frequently by Model Moms.

In 2020, only one among four moms received skin care products as gift.  Not only has this number decreased from the year ago, but falls well below the level of Urban White Collar. Moms have been devoting so much time and effort in taking care of the family, and why don’t you take this opportunity to appreciate their beauty and show them your love with a nice skin care gift.

High efficacy regimen of Anti-Age benefit: No.1 need of Model Mom

Model Moms are moving in line with the overall skin care market trend where there is a continuous growth of Anti-aging products, unscathed by COVID-19.

Source: Kantar Worldpanel Beauty Panel.

More and more ladies are choosing high efficacy regimen products such as eye cream and facial serum, especially those claiming anti-aging benefit through keywords like “Repair” and “Rejuvenating.”  Further tapping into the needs of Modern Moms, skin care heavy spenders, by helping them erase the traces of time in both their mind and face will become one of the most important growth opportunity for beauty brands.

Kantar Worldpanel Beauty Panel has recently underwent the consumer profile granularity enhancement to include basic demographic information, occupation, family type, consumption power, children’s age, profession, education background, height/weight/BMI, etc, to better help our client understand the ever-growing complexity of the Chinese consumers and market. We are now also able to further leverage it to provide precise insights into the 8 strategic shopper segments, frequently used by brands in planning and executing their online shoppers.

Although there were fewer social gatherings over the Spring Festival this year compared to normal, due to advise from the government to ‘stay put’, the overall market remained unabated. Many categories have resumed their growth trend, driven by the rising needs for quality and enjoyment from the people who did not travel. For example, beverage and dairy products have achieved double-digit growth in the past 12 weeks.

Fewer people travelling to their hometowns during the Spring Festival meant that the population outflow from Key & A cities decreased and this resulted in the value of the FMCG market in Key & A Cities increasing by 7.7% in the past 12 weeks.

Retailer Performance

The sales value of modern trade (including hypermarkets, supermarkets and convenience stores) in the last 12 weeks was very stable compared to last year with an increase of 0.1%, and has decreased by 2.6% compared with the same period in 2019. Among them, the sales of hypermarkets and large supermarkets fell by 2.4% year-on-year, while small supermarkets and convenience stores continued to grow at 7.3% and 10.7% respectively. The habits of shopping close to home, which many consumers formed during the pandemic, have continued this year.

Among the top retailers, Sun Art Group still ranks the first with a market share of 9.0%. Driven by the dual growth of traffic and trip spend, its market share in the past 12 weeks has increased by 0.6pt. compared to last year.

Data source: Kantar Worldpanel China.

 In addition to transforming its offline stores, RT-Mart's online business also contributed significantly to its sales growth. According to the announcement issued by Sun Art Group in February this year, starting from May 2020, the average daily orders of its online platform exceeded 1,000.

On the other hand, Yonghui Group has also grown rapidly. In the past 12 weeks, its share has increased by 0.5pt. year-on-year. The group has accelerated its pace of expansion, consolidating its lead position in the western region with a growth of 1.5pt.

Among the regional retailers, Wu-mart group, Bubugao group, and SPAR Group continued to grow their share, all achieving double-digit growth.

 E-commerce Dynamics

E-commerce has continued to maintain a rapid growth of 35.4% in the past 12 weeks, and the habit of online shopping did not diminish even with the pandemic under control. In lower-tier cities in China, 71% of households have now purchased FMCG through e-commerce during the past 12 weeks, which is a significant increase in the scale of this channel.

Among the top e-commerce platforms, Alibaba (Taobao+Tmall) is still the largest platform with a market share of 44.6% (a year-on-year increase of 1.1pt.).

It is also worth highlighting the penetration of Pinduoduo in the last 12 weeks which has reached 25.5%, which means that just over a quarter of urban households in China have purchased FMCG on Pinduoduo, demonstrating strong growth momentum. According to the 2020 financial report just published by Pinduoduo, by the end of 2020, the number of annual active buyers of Pinduoduo has reached 788.4 million, a year-on-year increase of 35%, meaning that is has become the e-commerce platform with the largest user base in China.

Jennifer Chan, Insight Director at Kantar, Worldpanel Division comments “In Q4 2020 Android grew YoY in Japan (+3.3% pts) and China (+4.7% pts.). A closer look at China shows local brands driving sales growth in the latest quarter; Huawei took 46.5% share (+2.3% pts.) and Xiaomi 11.7% share (+1.5% pts.). Chinese brands continue to expand their global footprint with Xiaomi making up almost 1 in 5 sales across the EU5, with an impressive growth of 5% pts. YoY, largely driven by Italy and Spain. Oppo, although still relatively small, also grew in all reported markets. Global brands that track smaller sales share experienced some successes relative to their market size; Motorola was up by more than 1.5 share points YoY in each Germany and the USA. Google grew in Japan by +2.1% pts. YoY.

Samsung, meanwhile, have held their fort across all reported markets in Q4’20 with sales share up by 2.3% pts. YoY across the EU5, driven by France and Germany.

Chan continues, “While still in the early stages of launch, iPhone 12 models are tracking well. The iPhone 12 model proves popular and is already the 2nd most sold smartphone in Q4’20 in the USA, China and Australia. iPhone 11 continues to attract buyers and is the number one model sold across the EU5, USA and Australia. In Japan, smaller form factors are most desired with iPhone SE (2nd generation) topping the sales list, making up almost 1 in 5 devices sold and was followed by iPhone 12 Mini in 2nd place.

Interestingly, when comparing the specific features driving sales of each iPhone 12 model, the iPhone 12 Pro Max skews heaviest among consumers looking for “quality of the camera” across the EU5 and USA. Prior to purchasing, they attained their main source of information direct from Apple.com and across the EU5 skew higher to have ‘watched new product launch event’. Other specific features to also rank in the top 3 for buyers of iPhone 12 models were “Reliability and durability” across EU5 and China, and “size of the screen” across EU5, Japan and Australia.

With much noise around 5G, iPhone 12 certainly stands out for driving sales through this capability. In all reported markets, at least 25% of iPhone 12 models were bought for ‘5G capability’, the most being 51% of buyers in the USA. Compared to average smartphones sold, iPhone 12 models indexed by at least 117, the highest index being 367across EU5.

In Q4’20, the share of smartphone owners connected to a 5G network was higher YoY in Great Britain, Italy, Spain, Urban China and Australia. Across all reported markets, at least 50% of smartphone owners intending to buy in the next 6 months, intend to buy a 5G enabled smartphone; and compared to intenders of last year, this is up in all markets except in France and Japan.

Chan continues: “Over half of smartphones were sold online in the latest quarter, across all report markets. Online smartphone sales were up in EU5 (+8.7% pts), USA (+7.3% pts) and AU (+11.0% pts.) where the top source of information prior to buying was through websites; highlighting the continued need to develop and deploy digital marketing strategies to respond to the aggressive channel growth of the category.

Also, not to be underestimated is the power of influence through friends and family. This touchpoint finds itself in the Top 5 purchase touchpoints across all reported markets and is number one in China, with 20% of smartphone buyers going to their friends and family as the main source of information prior to purchasing.

Chan continues: “Some final thoughts…It’s not new news that smartphone sales slowed through 2020, as a result of the pandemic, with many consumers delaying their smartphone purchases and some even cancelling their plans completely; this will certainly push out replacement cycles further. Almost 1/3rd of smartphone owners have held their current device for 2.5+ years and these figures have increased YoY. With many consumers being repressed by current environmental and economic challenges, this year is set to be extremely interesting as we monitor and anticipate returning consumers to market.

Within the report, we provide a quarterly update of FMCG market across Asia, including a variety of categories across China Mainland, Indonesia, Korea, Taiwan, Vietnam, Malaysia, Thailand, Philippines, India, Saudi Arabia and United Arab Emirates.

In this latest report covering the period Q4, 2020 we capture the highlights as follows:

• China Mainland: With the stable recovery of China Mainland‘s economy, China Mainland’s GDP increased by 2.3% year-on-year; Dispensable income of urban residents increased by 3.5%, and the FMCG market gradually recovered from the COVID-19 epidemic.

• Taiwan: Taiwanese shoppers spent more time at home with more home cooking or party occasions that “cooking necessity” as new keyword in FMCG.

• South Korea: Online continues to grow in Korea, with fiercer competition as Hypermarkets entering the online market. Many online platforms are now marketing themselves for one stop shopping destination.

• Indonesia: FMCG has grown in 2020 as households have re-prioritized their spends resulting in FMCG growing at a higher rate compared to 2019. The driver of this growth coming from the food sector which grew significantly compared to other sectors.

• Malaysia: Malaysian economy contracted by -5.6% in Q4, this is largely due to the Covid-19 forcing strict semi lockdowns which weighted on economic activity. FMCG has grown +12% in Q4, a 10.3 percentage point increase from last year driven by measures of staying and working from home.

• Thailand: Number of shopping trips have been declining for past 7 years, while basket size gradually increased. Stocking up at the begging of first lockdown in Q1 contributed to the trend. In Q4 when there was government subsidy program, spend per trip showed growth in both Urban and Rural.

• Philippines: Among the top 10 categories, instant noodles and family/adult milk are best performing. After recovery in Q3, the Non-Food sector slows down for Q4.

• Vietnam: FMCG in 2020 showed a stronger growth, mainly driven by the impact of COVID-19. Almost all sectors grew at a faster pace with Packaged Food sector being the biggest winner.

In-Home FMCG Market

Kantar Worldpanel predicts that if the impact of COVID remains minimal and there continues to be no resurgence of the virus the in-home FMCG market will grow by 4.8% in 2021. If existing measures on travel restrictions are removed quicker than anticipated and consumers quickly return to life as it was before COVID then the market could grow as rapidly as 7.1%. However, this is unlikely to happen in the short term as many families will still want to be cautious with their movements and spending. In the worst case scenario, where new cases of COVID emerge and more restrictions are placed on people’s movements, then the growth rate could drop to 2.7%. Regardless of what the future holds in terms of the pandemic situation we would still expect to see a higher growth rate than 2021 given that the government and citizens are now more familiar with now to handle the situation and will find ways to acquire products safely even if they are in lockdown.

Source: Kantar Worldpanel National Urban China, National Bureau of Statistics China & Baidu Mobility Index.

Beverage and Dairy categories saw the largest decline during 2020 (-4.1%), largely driven by alcohol and yoghurt but in 2021 we expect these categories to rebound and are forecasting a growth of 3.8% which is higher than the growth rate seen in 2019. Alcohol was impacted in 2020 both due to its negative effects on immunity and less family gatherings both of which will become less of an issue in 2021. The Packaged Food sector was more resilient during 2020 reporting a growth of 2.2% (vs. 1.5% in 2019) with categories which offer convenient meal solutions, such as instant noodles and quick soup performing well, and confectionary categories seeing a strong decline due to less family gatherings. During 2021 we will expect a similar growth rate as the strong growing and declining categories returning to pre-COVID performance as people feel more comfortable to eat out of home again and have more mixing of households.

The Homecare sector weathered the COVID storm better than the other sectors with a growth rate of 7.7% in 2020. People spending more time at home and the strong need for sanitizing products meant that many homecare categories saw stronger growth than in previous years. In 2021 we expect to see a lower growth rate of around 5% as although the need to protect against viruses will still be there we are unlikely to see a strong bulk buying and stock up behaviour like we witnessed during the lockdown in Q1 last year.

Personal Care was the most heavily impacted FMCG sector during 2020 seeing a drop in growth from 11.1% in 2019 to just 1.1% in 2020. During lockdown there was less of a need for people to fulfill their full personal care regime as they could not go to work or socialize with their friends and many consumers were less willing to pay for more expensive personal care products due to financial concerns. Beauty categories* (skincare & makeup) were the most heavily affected, experiencing a decline of 4% in 2020 (vs 10% growth in 2019). However, we have seen these markets recover well over the last few months and in 2021 we expect to see a growth rate of around 8% for the personal care sector, so almost returning to the pre-COVID levels. There will still be restrictions on being able to purchase overseas products which will limit the value growth as these products tend to be more premium, but overall people’s daily routines are already back to normal and if no further lockdowns are put in place the 8% growth definitely seems feasible.

Out-of-Home* Beverage & Snacking

On-the-go products were hit hard during the lockdown period and have been slow to recover as many families continued to restrict the time they spent outdoors. This resulted in a decline of 7% with on premise purchases down by 10%. However, with travel restrictions easing and the warmer weather coming we expect to see this market recover rapidly and are forecasting the market to grow by 6% in 2021.

What Does this Mean for Manufacturers and Retailers?

2021 holds a lot of opportunity for FMCG manufacturers and retails and we expect to the majority of markets to return, or even exceed, pre-COVID growth levels. But the path to growth and how to engage consumers will be different. Below are our thoughts on how to best capture growth in 2021: 

• Understanding how consumers needs and preferences have changed. New needs, such as safety, health and convenience, which were formed during COVID may be permanent changes or consumers may return to their previous habits and lifestyles. Understanding this within your category and then tailoring your innovation and your messaging to meet different consumers’ needs will be essential for growth in 2021

• Channel landscape evolution. COVID-19 has accelerated the growth of channels such as O2O, livestreaming and community buying. Ensuring that you are able to leverage these channels to get your products in the hands of consumers quickly, safely and in an engaging way will help you to stay ahead of the competition.

• Anticipate demand and understand the role of marketing levers play growing penetration. Capturing new shoppers will still be essential for brand growth. By understanding the forecast for you category and the role that pricing, promotions, distribution and media play in driving penetration will help you to optimize your marketing spend throughout the year.

 Kantar Worldpanel is uniquely placed to help you understand how consumers needs and the way they shop has changed. Through advanced machine learning techniques we can help you forecast demand for your categories and brands in 2021 and advise how you should invest your marketing spend to capture more new shoppers and maximize growth.

Notes:

*Data source for ‘In-Home FMCG market’is from the 40,000 household panel covering National Urban China. Categorys cope is 118 FMCG categories within Beverage & Dairy, Packaged Food, Homecare and Personal Care sectors (excludes Pet Food).*Data source for Beauty categories is from the 40,000 individual panel covering National Urban China and Skincare& Makeup categories.*Data source for ‘Out-of-Home’ categories is from the 8,000 individual panel coveringKey& A Cities in China and Snacking & Beverage categories including onpremise.

The household cleaning category enjoyed the fastest growth with an increase of 7.9% in 2020, thanks to the outstanding performance of disinfection and cleaning products. Food increased by 2.7% driven by the explosive growth of instant noodles and frozen foods as many consumers spent more time at home. Beauty and beverage categories were seriously disrupted by the pandemic but started to recover during the second half of 2020.

From the perspective of channels, overseas purchase and gifting suffered a significant decline in sales of 59% and 19% respectively as travelling abroad and family gatherings were restricted. At the same time, the pandemic has expedited the shift from larger offline formats (hypermarkets declined by -7% and large supermarket by -6%) to E-commerce, growth of 35%, and small formats, which grew by 9%.

Data source: Kantar Worldpanel, SuningGroup includes Carrefour and Suning CVS.

Yonghui Group has surpassed Wal-Mart Group and is now ranked third in terms of value share, reaching a high in 20Q4. Yonghui has maintained it’s strength in higher tier cities in core regions whilst expanding to other provinces and lower tier cities, which has allowed the group to rapidly grow its shopper base. Sun Art has maintained its leading position and saw a small share gain through digital transformation and new format development. Among the regional retailers, Wumart, SPAR and Bubugao have achieved share growth in 2020 due to efforts to accelerate their online business, enhance their operation systems and continue to expand into the national market.

Faced with the potential of a second wave of COVID-19 and ever-changing consumer behavior, the retail world will continue to evolve in 2021. “Home Consumption”, “Live Streaming”, “Community Commerce”, “O2O”, and “National Expansion” are becoming the key words for this year.

What is ahead for 2021?

01. In-home occasion is still the growth engine

The catering industry was severely hit by the COVID-19 pandemic. According to National Bureau of Statistics, the revenue of China’s catering sector dropped by 16.6% in 2020. Kantar Worldpanel also found that nearly 90% consumers are more willing to eat at home after the pandemic. In-home consumption is expected to continue as new cases of infection are emerging in early 2021. This year, consumers have been more accustomed to home life and are pursuing a better quality of life. Therefore, goods and services that could satisfy family members’ needs for various in-home occasions will have huge growth potential.

02. Experience is key to E-commerce

In spite of rapid growth, the E-commerce landscape has become more complicated and competitive. Top players such as Alibaba and JD.com are facing challenges from rising social commerce, which have forced them to explore innovative ways to enhance the shopping experience. For example, they have realized the importance of a more simple shopping process and are trying to optimize the promotion mechanism in order to better satisfy consumers' shopping needs.

Propelled by COVID lockdowns, the new model of “live streaming + e-commerce” which has experienced explosive growth in 2020, helping many manufacturers to improve the conversion rate of their brands in an interactive way. Short video platforms such as Douyin are also growing their e-commerce footprint through shoppable livestreams within the app. Apart from selling goods through influencers, many brands are jumping in with their own shows. In the long run, stronger commodity supply and after-sales service will enable live streaming e-commerce to develop in a more sustainable way.

03. Building up a comprehensive community ecosystem

As residents are now looking for more convenient shopping after the pandemic, community commerce is riding on this trend to meet short-distance needs for daily necessities. Thus, more near-field formats are booming, for example small supermarket, convenient store and group buying. Since 2020, many retail enterprises have invested a lot into community commerce, including top retailers whose business focus was previously focused on hypermarkets. For example, RT-Mart launched their first small supermarket "RT-Mart mini" in July last year and will expand to a larger scale in 2021.

Community group buying was undoubtedly a hot topic in 2020. The latest study from Kantar Worldpanel indicates that the monthly penetration of community group buying among users over 25 years old in China's 1-3 tier cities reached over 20% in December last year. This new model is more established in lower-tier cities, where tight neighborhood communities are prevalent and mutual trust between community leaders and residents is easier to build. Last year, many Internet giants entered this battlefield. According to Kantar Consulting, the market size of community group buying will exceed 100 billion this year. Under the control of new policies, community group buying will move towards a more standardized and orderly model.

It’s foreseeable that the future of community commerce will be a wider ecosystem that could not only meet residents’ daily shopping needs, but also provide more comprehensive community services.

04. Further Growth of O2O

O2O delivery services was another hot topic in 2020 and has achieved a larger scale than community group buying. According to Kantar Worldpanel, the penetration of O2O has reached 60% across urban China in 2020. Lots of new users were recruited amid the outbreak of the pandemic. The penetration reached a peak of more than 40% in 20Q1, and the retention rate of O2O is over 50%. Unlike community group buying, which mainly focus on lower price, O2O exists to satisfy consumers' immediate needs. The target audience is less price-sensitive but require very fast delivery.

In 2020, Internet platforms such as Tmall, Ele.me and Meituan have put more efforts in developing O2O. Meanwhile, traditional retailers like RT-Mart, Yonghui and Wal-Mart have also accelerated their online business by means of building their own platforms or cooperating with third-party delivery platforms. In 2021, O2O will keep prospering and serve consumers more efficiently with the mutual support of ample supply from physical retailers and strong logistics offered by the delivery platforms.

05. Retailers are expanding nationwide cautiously

In 2020 many brick and mortar retailers cut down the number of new store openings due to the challenges brought by the pandemic. However, some retailers have still achieved substantial growth through either opening new stores or mergers/acquisitions. Yonghui has succeeded in entering Yunnan, Jiangxi and Guangxi province since 2020 and its stores now cover a total of 29 provinces in China. Jiajiayue, a leading banner in Shandong province, also expanded its business to Hebei, Anhui, Jiangsu, and Inner Mongolia through acquisitions.

It is indispensable to have solid supply chain system and high efficiency of operations when it comes to national expansion. Besides, the players should understand the consumption habits in different regions thoroughly, and adjust the business models or store formats accordingly to better meet the local needs. Cooperating with local retailers may be a shortcut for the giants to exploit regional markets, just like the 7FRESH case.

2017 to 2019: fragrance market initially showed potential

Before the pandemic, personal care market was booming, and fragrance was one of the fastest-growing categories.

In 2018 and 2019, both sales value and penetration achieved double-digit growth for the two consecutive years. Although the penetration rate was still low, fragrance products quickly made their way into consumers’ everyday life.

In addition to numerical growth, two trends pointed to the potential of fragrance-related products.

Outside the fragrance market, the love for "fragrance" became apparent in other categories. In categories like shower gel, shampoo and laundry, products that highlighted their fragrance appeal or of scent booster function are continuously outperforming the total category.  These products are anchored around the consumers’ need for sensorial stimulation in daily life, which is the fundamental cornerstone of the fragrance category.

Within the fragrance market, consumers' brand choice have been concentrated to top, well-known brands for a long time. The top 10 brands accounted for more than 60% of the market share in 2019, which is much higher than that in the skin care and makeup market; and naturally, most of the consumer education about the category is dominated by these brands. Most of the category new buyers pick their first bottle from a top brand. However, niche brands, both imported and local, started to expand its presence, primarily through online channel in 2019.  This diversification of the market is an indication of growing consumer sophistication.

Through 2020, "fragrance" demand remains strong despite the macroeconomic challenges

In 2020, the fragrance market sales and penetration dropped significantly compared to the year ago, and this is due to its usage relying very much on going-out occasions and acquisition on gifting /oversea travel purchases. Nevertheless, we are still optimistic about the prospects of the fragrance market. In the long-run, the compound annual growth rate for the three-year period from 2018 to 2020 is still positive. Moreover, by the third and fourth quarters of 2020, the market performance has improved significantly, once again, surpassing the level from 2018.

In addition, the trends we observed in previous years have stayed, and even accelerated. Consumers' demand for a variety of "fragrance" products still exits. The big brands in the fragrance market continue to lead, while a number of local brands are catching up faster, especially through their strong voice in the online channel.

In the new year of 2021, what are the concerns?

For manufacturers, fragrance it is still a category worth investing in despite of the market stagnation in 2020. And its growth primarily relies on capturing the attention of and attracting more new consumers by tapping into their needs for sensorial “dress-up.” Contact us at Kantar Worldpanel to learn more about what new trends have emerged amid the post COVID-19 new normal and who might be the highest potential consumers for you to tap into.

Note:

Definition of fragrance: It includes liquid and solid products that are used on human body and hair, and are used for adding fragrance, such as cologne, eau de toilette, eau de parfum, and solid perfume. It does not include products for the environment and objects, such as fragranced incent, scented candle, fragrance for cars, home, and clothing; nor does it include products for the human body but are not used primarily for adding fragrance, such as Insect Repellent

Definition of mass fragrance: Excluding international high-end brands, and product price less than RMB 200 per 50ml.

Across the first half of 2020 (to mid-June) OOH food consumption fell. As countries emerged from the first wave of lockdowns, the transition to home working restricted the recovery in OOH spending. The fall in OOH food spending was not completely compensated for by the rise in grocery sales we have seen around the world.

Key findings from the study include:

• While non-alcoholic drinks consumption grew by 10% in 2020, spending is down by an average of 36% vs. 2019 as a result of the pandemic.
• OOH coffee sales in the UK dropped from $484 million in March to $68 million in April – a fall of 86%. By the end of August, the highest coffee sales volumes were still 50% lower than average 2019 volumes at just under $250 million per month – while coffee purchases for in-home use had risen by 17% to just over $109m per month.
• In urban environments in France, just 55% of consumers have used a home meal delivery service in the last year – and only 8% are using those services once a week, highlighting a clear opportunity for growth and recovery.
• The countries that have seen the least damage to their OOH sales seem to be those that have highest penetration of meal delivery services.

The European OOH food market has been more heavily affected than Latin American and Asian countries. One major driver of this is the high penetration of meal delivery apps and services in Asia and Latin America compared to European cities. Penetration of meal delivery services (among consumers aged under 50) in cities in South Korea is at 99%; it is 84% in China, and 80% in Brazil. This is compared to much lower penetration of 36% in the UK, 37% in Spain and 44% in France. Across the world, ‘enjoyment’ is cited by 59% of users (compared to 41% citing convenience) as the motivation for using home delivery apps, suggesting that food delivery is fast becoming a ‘small treat’ strategy for people in difficult economic times.

Home meal delivery has smoothed the economic impact of COVID-19 for some countries, creating an incremental opportunity as people seek small treats in difficult times. The industry is very established in Asia and Latin America and presents a good growth and recovery strategy in Europe. Investing in increasing the use of food delivery apps could help claw back lost revenue for cafes, takeaways and restaurants.

And we see lots of other opportunities for innovation: home delivery services have space to widen their offerings, especially in the drinks market and for traditional OOH brands to find ways to create opportunities for their brands to be consumed in the home.

Key highlights for this issue:

• FMCG in Asia sustains a positive growth by 3.1% in Q3 2020, yet seeing a slight slowdown compared to 4.8% in Q3 2019, particularly in North Asia and Southeast Asia.

• Food sector is leading the FMCG market, achieving an appetizing growth of 5.2% as compared to 3.4% in the same period last year, attributed to more cooking and eating occasions at home during COVID-19 time across almost all markets.

   

• Home care maintains its growth momentum at a growth of 7.6% for this quarter, which could be explained by consumer preference towards hygiene and cleanliness to defend themselves against      COVID-19 viruses.

• The beverage and personal care sector experience a certain impact of the pandemic. Beverage suffers a decline of 3.0%, mainly driven by China Mainland.  Meanwhile, personal care still grows yet at slower pace of 2.6% from 8.4% in Q3 2019, due to the negative performance in the top beauty markets in North Asia like Korea, Taiwan, and China Mainland. 

   

• Online shopping for FMCG products is thriving everywhere. Ecommerce is the fastest growing channel and gaining more ground in total retail landscape across markets from North Asia to Southeast Asia.

• Across  the region, each market displays a different growth rate in total FMCG and across sectors. This is in line with the impact of COVID-19 had on movement, market trade structures (e.g. role of E-commerce) and the purchasing power of consumers in respective markets.

• FMCG growth is set to reach 10% by the end of Q1 2021. It is unlikely we are ever going to see double-digit take-home FMCG growth again.

• Ecommerce share of FMCG is set to reach 12% by the end of Q1: that’s the equivalent of two years share growth in one year. However, looking specifically at Europe, ecommerce is set to reach 9% share of FMCG sales, making it the most accelerated retail trend of the year.

• The Health & Beauty sector has gone from the fastest growing (in 2019) to the slowest during the pandemic. The opposite is true for the Food sector (not including food for consumption Out-of-Home).

• Everywhere, people shopped less and bought more per trip. Europe again saw the most dramatic changes in shopping behaviour.

“We all knew that Covid-19 would have a significant impact on the China FMCG market.  What came further into focus is the massive change in consumer sentiment, with a lot more caution and promotion hunting” said Bruno Lannes, partner in Bain’s Greater China Consumer Products practice and co-author of the report.  “It is clear that this “2-speed” will continue, with both premiumization and flight to value.”

The research showed that while volume growth remained steady at the same 2 percent level of 2019, the biggest contributing factor to the flat sales performance was a major decline in average selling prices (ASP). Those prices dropped by an average 2.1 percent in the first three quarters, with consumers buying more mass-market products and making more of their purchases online, where products typically are sold at promotional rates. The ASP loss represents more than a 5 percent drop, considering the 3.4 percent increase in 2019. Indeed, after years in which selling prices outpaced inflation, the long run of premiumization?or the ability to increase ASP above the rate of inflation?ended this year, another victim of Covid-19.

It was not all bad news this year. Home care categories enjoyed a healthy 9 percent value growth as consumers stocked up on necessities. Also, innovative healthy alternatives and increased home consumption boosted sales of carbonated soft drinks, which achieved 16 percent volume growth. Despite this success, the research highlighted the divergent performance in various sectors such as packaged foods and beverages. Both sectors dealt with deflated prices, which declined 3.4 percent for packaged foods and 4.1 percent for beverages, however, the volume of packaged foods grew 7.2 percent in the first nine months, as consumers stocked up on instant noodles, frozen food and other staples to get them through lockdown and a tentative recovery. The volume gains for packaged foods represent a more than threefold increase over the same period in 2019. Yet, as package food sales boomed, beverage volumes fell by 1.6 percent, the result of a hiatus on social occasions.

Source: 2020 China Shopper Report Vol.2.

“2020 has been a landmark year for the China consumer sector as both companies and consumers have been adapting to the impact of Covid.” said Jason Yu, General Manager of Kantar Worldpanel Greater China. “Those emerging formats are playing an increasing important role in retail ecosystem and will bring new growth opportunities.”

Livestreaming, which provides immersive experiences, personalized recommendations and, as the country locked down during Covid-19, an entertaining alternative to physical shopping trips, accounted for as much as 7 percent of total FMCG, apparel and electronics sales.  Online channels also continued to attract China’s shoppers during the early months of the pandemic and the recovery that followed, representing 26.7 percent of all FMCG sales in the first three quarters of 2020.  That’s up from 21.9 percent in 2019, largely at the expense of hypermarkets and groceries.

Source: 2020 China Shopper Report Vol.2.

2020 has also been the first year where we looked at FMCG through the lens of 8 consumer segments, the same 8 segments developed in 2019 with TMall. To help brands more clearly understand the consumer segments that are buying their products?and the potential for boosting sales?this year’s report analyzes Kantar Worldpanel consumer purchases for both online and offline sales of these eight segments.

What to expect in 2021?

Occasions and needs.

The out-of-home category, a victim of Covid-19, will gradually recover. Even as it does, there still will be room for growth in categories for at-home     consumption as well as for health- and wellness-related categories. Chinese consumers will continue to make purchases that will improve their  well-being.

Digitalization. 

Consumers are expected to continue increasing their spending in online and online-to-offline channels. China’s FMCG market will maintain its dynamic tradition.  Consumers will become more demanding in their need for anywhere, anytime shopping and a seamlessly integrated omnichannel shopping experience.

Value proposition and price

As e-commerce steadily grows, so will the rate of heavy promotions. This will  continue to serve as a challenge for most brands. The polarization trend of steady and simultaneous growth in both premium and mass categories will  continue, making it critical for brands to compete with the right value  proposition and price.

Organization

Rapid  and unexpected shifts like the Covid-19 pandemic shake up industries. The  best consumer goods companies will become prepared with nimble organizations that will enable them to address changing needs faster and  better than their competitors.

“The impact of the recent pandemic on Chinese consumers can’t be understated. Even though China has recovered better than other markets, the entire ecosystem has suffered a massive shock so it is essential that companies truly understand what it will take to win in this new normal,” said Derek Deng, Bain & Company partner and report co-author. “By analyzing and embracing the trends with a consumer-centric mentality and data-driven insights, companies should be able to remain connected to their customers and take the lead as we move past the impact of Covid.”

Among customers who plan to purchase a smartphone in the next six months, at least 45% across all markets intend to buy 5G; the highest being in China at 89%, followed by the US (68%), Italy (67%) and Australia (66%).

Commercially, the benefits of 5G are being marketed as delivering high speeds and uninterrupted connectivity to support activities such as gaming, streaming video on demand and video calling. Jennifer Chan, Insight Director at Kantar, Worldpanel Division comments?“5G can offer support to improve consumer experiences in the day-to-day activities they use their smartphones for. That said, how consumers value this is an area we will understand better as the market evolves.”

Chan continues: “In the latest quarter, based on how smartphone owners used their devices daily to every few days, we observed quarterly increase of GPS usages in EU5 (Germany, France, Great Britain, Italy and Spain), Japan and China during the period when many countries opened up more businesses and relaxed lockdown rules.”

“With many announcements and upcoming releases, such as the Samsung S20 FE, Google Pixel 5 and the launch of iPhone 12 flagship range, Q4 2020 is set to be a very exciting quarter”, Chan continues.

“Apple’s offering of four models in this year’s line-up is a very interesting strategy, particularly in the premium-tier price range (one tier below super-premium) with iPhone 12 mini. Unlike previous flagships, iPhone 12 mini gives customers all of the latest specifications and 5G capability, but in a smaller form factor at lower cost, in-line with many areas of market growth.”

“While share growth over the last couple of years has been for larger screen sizes, Apple is tackling both ends of the spectrum with this launch, as at least a third of smartphones owned in all markets except China have a screen size less than 5.5” and over 12% of buyers chose their model specifically for ‘how it fits in my hand/pocket’.”

There has been an increase in smartphone volume sales in EU5, USA and Australia by at least 4.4% vs the second quarter 2020, while sales in China and Japan declined, with at least one in five smartphones purchased being a mid-tier model.

In Q3 2020 iOS grew by +6 points YoY and Android grew in China (+5.0 pts.) and Japan (+3.7 pts.). In all other reported markets OS shares are stable. However, beneath the surface of stability, while iPhone holds flat, shares among Android brands are shifting. Mid-tier manufacturers Xiaomi and Oppo are gaining in EU5 markets and Japan while Huawei declines YoY. That said, Huawei continues to experience strong growth locally in China by 5.7 pts. Samsung too, has not escaped the growing popularity of Xiaomi and Oppo, gaining share only in Japan (+5.4 pts.).

FMCG Companies Ranking by Consumer Base (million households)

© 2020 CTR Market Research                                     Source: Kantar Worldpanel China

“Despite challenges with COVID-19, 19 out of the top 22 companies in China grew their shopper base, demonstrating there are ample growth opportunities for even the biggest players.” said Jason Yu, General Manager of Kantar Worldpanel Greater China.  “The disruption caused by the pandemic has impacted different sectors, yet successful players have managed to respond rapidly to changes in consumption needs and shopping behaviour.”

Riding the new waves of opportunities

COVID-19, the most unexpected factor in 2020, transformed the FMCG market dramatically. Dairy players, such as Yili and Mengniu group, have won more consumers because their products are well placed to take advantage of the increased importance people have put on health and immunity. With restriction on travelling and more time spent at home, consumers in China enjoy more moments of home-cooking. This has enabled seasoning and cooking aids category leaders, such as Haday and Wilmar to thrive and obtain faster growth. Driven consumers’ need for pantry stock up and convenience, Shuanghui, Master Kong and Uni-President grew their customer base through packaged sausage/meat and instant noodles. On the non-food side, hygiene conscious consumers are buying more cleaning related products such as hand wash and anti-bacteria wipes to protect them from the virus. This trend also helped to boost buyers of P&G, Unilever and Hengan etc.

O2O – a game change in offline retail

As the footfalls to offline stores fell during and after the pandemic outbreak, 41% of Chinese families ordered FMCG through delivery platforms and retailers’ own APPs and mini-programs. Despite the decrease in penetration in Q3, O2O (online to offline delivery) still attracted 31% of the families in China. O2O has played a critical role in recouping lost traffic in offline stores and tapping into the new growth ‘moment’. All major players are rallying to work with retailers to build their presence in the last 12 months, with Yili, Mengniu and P&G leading the pack.

© 2020 CTR Market Research                                     Source: Kantar Worldpanel China

Ecommerce channel instrumental to bringing new shoppers

Pure-play Ecommerce (excluding O2O) remained a major driver of FMCG growth in China. In the last 12 months, 85% of Chinese families bought FMCG through the Ecommerce channel, almost 20pt higher than previous year. Kantar Worldpanel reveals that leading players can only sustain growth through wider and deeper Ecommerce deployment. Yet there is still opportunities for expansion of in the offline world. Shuanghui, a traditional food brand, attracted 4.6 million new buyers through e-commerce, but 8.9 million is coming from offline. In total, Shuanghui increased its consumer base by 10.1 million.  This shows that shopper growth from offline channels is far from reaching its ceiling yet.

Market leaders such as P&G, Yili and Mengniu are all enjoying strong shopper growth through online channels, as they try to make their products more accessible to Chinese consumers. Yet all of them enjoyed incremental shopper gains, indicating that manufacturers will have to build an effective omni-channel strategy in order to maximize their growth.

© 2020 CTR Market Research                                     Source: Kantar Worldpanel China

Unlash growth opportunities among lower city tier consumers

Lower tier cities in China reported even higher importance as the overall FMCG market was hit by COVID-19. As consumers in lower tier cities start to embrace short video and mobile commerce, more and more growth opportunities are emerging. Tier 3-5 cities saw a faster growth by 2.7% in comparison to the smaller growth of tier 1-2 cities in 52 weeks ending October 9th 2020. Across the top 22 companies, consumer gains in lower tier cities accounted for 75% of their total buyer base expansion. 

Master Kong, with over 80% penetration in total, still found room to grow its shopper base in lower cities to strengthen its position post the COVID-19 outbreak. Overall the company added 9.1 million more consumers, especially in counties. Similarly, Shuanghui also added 7.4 million households from lower tier cities in the latest 52 weeks.

Notes:

1. Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing).
2. International retailers refer to retailers originated outside Mainland China, Taiwan, Macau, and Hong Kong.
3. Mengniu includes Yashili,Biyou from Danone                                        
4. Nestle includes Yinlu, Hsu Fu Ch, Wyeth and Totole                                     
5. Mars includes Mars and Wrigley                                        
6. Colgate includes Colgate and Darlie
7. Lower city tiers include prefecture level cities and county-level cities & counties.
8. China Resources exclude Vanguard and Pacific Coffee.

Actually, as early as Oct. 19th, JD.com also initiated its warmup campaign for 11.11 with livestreaming. It collaborated with Rock&Roast, one of Q3’s most popular reality shows, to livestream a 3.5 season with JD’s 11.11 selling points ingeniously imbedded into the talk show content.

DataSource: Kantar Worldpanel Media Survey K-C; n=7774; October 2020

Short video and social APPs have pulled out all the stops this year when it comes to livestreaming. It seems to have taken more courage NOT to be part of this national spree. One reason behind every stakeholder’s confidence of hooking up with livestreaming is that livestreaming is more than just a fleeting buzz. The huge potential lies not just with the size of the audience but also the considerable amount of user time.

From a recent study conducted by Kantar Worldpanel China in the past 12 months, around a quarter of our surveyed respondents have watched livestreaming at least once a week. Fighting for consumers’ share of eyeballs is as important for livestreaming platforms as it is for any digital publisher.

Our data collected till October also suggest that Douyin has leveled the playing field with Taobao, both enjoying over 80% of livestreamers. As 11.11 further rolls out, Taobao may have the edge over if livestreaming remains its major battlefield throughout the prolonged shopping season.

DataSource: Kantar Worldpanel Media Survey K-C; n=7774; October 2020

Unlike platforms, viewers’ choices of livestreaming content is more fragmented. Besides the top two most often watched-life sharing (eg. Mukbang) and live commerce streaming, each selected by 53% and 51% of viewers, the list of hot shows that enjoy over 30% loyal followers also extent to music, talents, celebrities, teaching related and outdoor experiences. 

The popularity of livestreaming has also enabled the platforms to promote positive energy which has been especially important in a year when many people have experienced challenges due to the global pandemic.

Diversified steams of content also suggest that livestreaming, with its flexibility of communication and high level of engagement can be quite efficient in building relationships with specific target audience. For example, The Fair (???), a We Media that successfully incubated several content IP, achieved 6.7 million sales with just one livestreaming show featuring Han clothing. The revenue might not be comparable with other KOLs, but considering its small size of only 10,000 followers, the result is still quite remarkable when we look at per capita spend, indicating how accurately targeted this stream of content has been created and distributed.

If we further drill down live commerce streaming to see what shoppers buy from these platforms, enthusiastic audience also have as diverse a catalogue of merchandise as they shop in traditional ecommerce platform. Not to mention even rockets and real estate had made their names on the menu. 

Among our household panel, around half of surveyed livesteaming viewers have bought apparel when watching live commerce in the past 12 months, followed by home cleaning (44%) and personal care (40%).

DataSource: Kantar Worldpanel Media Survey K-C; n=7774; October 2010

It seems that for the beauty master Li Jiaqi to beat omni-sellable Weiya, apparel and home care products are to be added to his shelves.

But shopping carts of different households can vary a lot. Life essentials of different stages as well as diverse inspirational needs both contributed to their heterogenous preferences. 

Young Single & Couple bought more confectionery, beverage, luxury and beauty products. For manufacturers who have concern that livestreaming equals discount equals diminishing the brand image, it’s an important reminder that there are such shopper groups who don’t just go after discount on live commerce streaming but also seek indulgence.

It’s also interesting to look at shoppers’ other purchases outside livesteaming. Would live commerce streaming bring up or down shoppers purchase elsewhere? Our data found that actually those heavy live streaming viewers (watching livestreaming at least more than six times a week) spend more from omni-channel, especially on products that helps bring up quality of life like dog food, makeup, fragrance, tampon and peanut butter, etc.

Kantar Worldpanel can help you to understand livestreaming viewers profiles, their shopping behaviour and how they shop across different channels, in order to support your brand strategy and help you gain a bonus when entering livestreaming rooms.

The reason for consuming beverages has gradually shifted from satisfying basic needs, such as thirst quenching, to physiological and psychological satisfaction such as function, taste and differentiation. Changes in demand are stimulating changes in supply. From 2018, beverage retailers have sped up research and development with major brands constantly launching new products with functions such as bubbles, probiotics, and slimming which quickly fulfilled rich taste and blending functions. Meanwhile, the market share of mixed-taste drinks has been increasing. This combination of changing preferences and the ability of manufacturers to quickly respond with new innovations to meet these needs has transformed the beverage industry and allowed manufacturers to upgrade their shoppers to multi-functional products which they are prepared to pay a higher price for. The above findings are from the 2020 White Paper on China's Diet Service Industry (Drinks), jointly published by Kantar Worldpanel and Hosen Capital.

As GDP increases, more premium categories have seen consumers change their behaviour from being a category they occasionally brought to one which they consume on a much more regular basis. As the most basic function, the importance of thirst quenching needs has increased in recent years. From 2016 to 2019, ready-made tea shops increased rapidly nationwide and achieved nearly 100% growth over the 3 years. Under the fierce competition of major brands, new brands such as Modern China Tea Shop and Ancient Tea achieved rapid expansion.

On the other hand, with the flourish of ready-made drinks, packaged drinks retailers are facing increased competition but also new opportunities which they have captured by launching more new tastes and multi-functional drinks. We have also witnessed ready-made drinks and packaged drinks brands extending their brand into the other field. Relying on the brands influence, some ready-made drinks players are eager to launch packaged drinks, hoping to cover more consumption occasions and improve the penetration, whilst some packaged drinks players are also trying to enter the ready-made drink industry by opening new shops, to interact with consumers directly.

According to the booming development in recent years, the report summarizes some beverage industry trends and insights

• Thirst quenching, awaken and flavour preference are important reasons for consumption, while self-satisfaction and social satisfaction are options with higher conversion rate.
• The well-known beverage brands pay attention to the complete consumer experience. Facing the omni-experience needs of consumers, how to satisfy the consumers from taste, health, interest and enjoyment will become the key to success.
• Now, ready-made drinks have basically completed the overall upgrade of the supply chain. Compared with the powder tea in the first stage and the street tea in the second stage, the current ready-made tea has better raw materials, richer blending and more convenient delivery.
• From the cases of HEYTEA and Mixue, we can find that the products with seemingly different experiences and price bands are essentially in line with the upgrade trend of the consumers’ lifestyle.
• With the accelerated penetration of home delivery and e-commerce channels, the demand for drinks has further increased, and the scene of drinks delivery has changed greatly. At the same time, the trend of "near-field" has also put forward higher requirements for the selection of existing tea shops.

Jason Yu, General Manager of Kantar WorldpanelGreater China, said?“With the rapid rise of a new generation consumers and improvement of their income, consumers' needs have been obviously upgraded, and their concerns and value composition have become more delicate and diverse. From functions and low prices to richer cost performance, higher quality, personalization, sharing and interaction, and recognition. All of these put forward higher requirements for practitioners in the food consumption industry. Facing consumers' omni-experience demand and building omni-experience, will become a common issue for the whole food service industrial chain.”

Although ready-made drinks and packaged drinks are competitors in the same category for consumers, Hosen Capital believes that they are essentially two different industrial chain logics, and the core driving factors of their supply chains are quite different. Zhang Tianli, founding partner of Hosen Capital, said: "From the price of per liter and the cost, ready-made drinks will always be higher than packaged drinks. In addition, the two business models have different capabilities in supply chain and sales. The two players enter each other's field, need to carefully consider the core business elements in this field and comprehensively evaluate their own abilities.”

Non-food continued to be the growth engine, with home care products reporting strong growth of 7.1% in sales value. Food and beverage categories saw a mixed performance with packaged food’s growth slowing down in the recent quarter but dairy continued to do well. Modern trade (including hypermarkets, supermarkets, and convenience stores) continued to decline, falling by 2.9% in the latest 12 weeks compared with last year.  In contrast to the weak performance of hypermarkets, small/mini supermarkets continued their growth momentum by attracting more shoppers, recording a sales uplift of 6.3%.  E-commerce on the other hand continued its soaring trend with rapid value growth of 41.3% in Q3, reporting an even higher level of acceleration compared to last year. In Q3 2020, E-commerce accounted for 25.8% of total FMCG spending in China.

Top retailer performance in Q3

In the past 12 weeks major retailers reported a lukewarm performance.
Among the top players, Sun Art maintained its leading position thanks to RT-Mart’s performance, which recorded a market share of 7.3% (+0.1 ppts vs last year). RT-mart was able to drive shopping frequency by tapping into both O2O infrastructure and diverse store formats. Earlier this year, Sun Art Group planned to open 30 small-format community stores to meet the proximity needs in China.  Despite the huge challenges to big-format stores, the reformed RT-mart hypermarkets aims to attract younger consumers by providing ready-to-cook food and imported products, on the back of an efficient delivery service. Local hero Yonghui maintained a robust growth of 9.4% in Q3, achieving an historic market share high of 5.0%. Since March, Yonghui entered the battlefield of live-streaming which is now playing a more crucial role in conversations with shoppers.  Relying on its strong fresh food supply chain, Yonghui focuses more on showing consumers the sources of production and building a closer connection with consumers.

O2O continues to grow the market

In Q3 2020, 31% of Chinese urban households purchased through O2O platforms, lower than the level during the peak of the pandemic. However, in the post-Covid era, O2O traffic has been continuously growing, especially in northern cities and provincial capital cities, indicating that Chinese consumers are more accustomed to purchase via O2O. Categories such as CSD, packaged water and juice have led the O2O market traffic growth over the summer months. Among the top players, RT-mart, Wal-Mart and Yonghui contributed the most, while Vanguard and Wu-Mart (with Dmall) grew traffic. Kantar Worldpanel also observed that retailers with a higher contribution from O2O are more likely to have a stronger competitive advantage in their current shopping environment.

Online kept growing penetration but sales growth slower than Q2

In the latest 12 weeks ending 11h September 2020, 72% of Chinese household bought FMCG online. In current months, lower tier cities enjoyed the fastest penetration growth caused by the strong performance of Alibaba group and Pinduoduo.
Alibaba continued to lead the market growth, with a significant penetration uplift of 13.4 ppts versus the same period last year. It worth noting that in the current months, Taobao has been accelerating its progress in attracting new buyers. Since this March, Taobao launched a special version to directly compete with value players, like Pinduoduo, while tapping into the strong manufacturing capacity in China.  On the other side, Pinduoduo sped up their recruitment of buyers. Its penetration reached 16.5% in Q2, up by 9.6 points vs last year, further narrowing the gap with JD.com.

We know how important ecommerce is for FMCG retailers and brands. One of the fastest-growing channels, it has accelerated even faster during the pandemic as people shift from in-store to online.

While online has seen a huge uptick, the out-of-home (OOH) sector has suffered. Prior to lockdown it accounted for over 40% of snacking and beverage spend, but a collapse in OOH has resulted in spend in these categories falling by between 10% and 30% in major markets.

But how does a brand know if it’s currently winning online or suffering from reduced OOH consumption? Following the launch of Kantar’s global Brand Footprint report in May, we have launched two new rankings on our Marketplace platform looking at the top online and OOH brands to help companies understand how important these channels are to a brand’s true performance.

Heinz tops Online brand ranking

According to our online ranking, Heinz is the most chosen FMCG brand online, based on analysis across six key ecommerce markets: Chinese Mainland, South Korea, Taiwan, France, Spain and the UK.

It’s no surprise that Heinz takes the top spot, given the nature of its products; heavy and with a long shelf life, it’s the ideal choice for those shopping online. The brand, however, saw a slight fall in its online Consumer Reach Points (CRPs) , whilst most other brands grew with many seeing growth of +20%.

The standout brand is L’Oréal Paris with 25% growth and with the joint-highest proportion of its CRPs from the online channel (14%, the same as Kleenex).

Five of the top 10 in the online ranking – Coca-Cola, Nescafé, Colgate, Pepsi and Lay’s – are the same brands we see in our main Brand Footprint report (which combines both online and offline purchasing).

The average proportion of CRPs coming from online is 8%, with a high of 14% and a low of 4% (Coca-Cola, Lay’s, Oreo and Activia). But as online grocery shopping continues to grow during the pandemic, especially among older shoppers, it will be interesting to see how much this changes next year.

Source: Kantar, Worldpanel FMCG take-home purchase panels
Countries: Chinese Mainland, South Korea, Taiwan, France, Spain, UK
Time period: 12 months ending October 2019 vs year ago
Sectors: Beverages, Food, Dairy, Homecare, Health & Beauty

Coca-Cola and Lay’s dominate Out-of-Home brand rankings

For the two OOH rankings, looking at Non-Alcoholic Beverages and Snacking Foods, we analysed CRPs from our OOH panels in Brazil, Chinese Mainland, France, Indonesia, Mexico, Portugal, Spain, Thailand and the UK. The CRPs collected through these panels are totally incremental to the CRPs from our take-home panels and give brands in these categories a holistic view of how often they are chosen.

Coca-Cola, which also tops the main Brand Footprint report this year, is the clear winner in OOH beverages, registering a +2% growth, mirroring its in-home CRP performance where the brand saw slight growth for the first time in many years. Pepsi remains at #2 and gets over half (56%) of its CRPs from the OOH channel, whilst Coca-Cola gets 46% from OOH.

Source: Kantar, Worldpanel Out-of-Home purchase panels
Countries: Brazil, Chinese Mainland, France, Indonesia, Mexico, Portugal, Spain, Thailand, UK
Time period: 12 months ending October 2019 vs year ago
Sectors: Non-Alcoholic Beverages

In the Snacks ranking it’s little surprise that potato chips dominate with four brands in the top 10, including Lay’s at #1 (along with Cheetos, Doritos and Ruffles). It’s worth noting that all four of these brands get less than half of their CRPs from OOH outlets, indicating that they have been less affected by the decline in OOH during the lockdown.

While many OOH outlets are opening up, this sector faces an uncertain future. The grocery sector is unlikely to replace the lost value from the OOH channel, driven in part by a large difference in price. Brands with a high proportion of sales in OOH will need to establish other routes to market to recoup losses, such as direct-to-consumer or takeaway services.

Source: Kantar, Worldpanel Out-of-Home purchase panels
Countries: Brazil, Chinese Mainland, France, Indonesia, Mexico, Portugal, Spain, Thailand, UK
Time period: 12 months ending October 2019 vs year ago
Sectors: Snacking Foods (including ice-cream)

As consumers continue to adjust to new and different ways of shopping and purchasing, brands will need to understand where this FMCG spend is going, how much of it comes from online and how much from OOH, and ultimately, how important these two channels are for the overall health of a brand.

• FMCG shopping via ecommerce grew a massive 41%; from 8.8% of value in 2019 to 12.4% in the second quarter of the year.
• The collapse in out-of-home (OOH) spending resulted in Snacking and Non-Alcoholic Beverages spend falling by between 10% and 30% in major markets
• The transfer of OOH eating to in-home increased in-home eating occasions by 21% - generating new category opportunities for brands.
• A new era of ‘Liquid Retail’; where the lines between home delivery, ecommerce, in-home and OOH are fluid and will make FMCG market competition fiercer than ever.

Trend 1: Holistic view of well-being

The pandemic has directly impacted consumer’s view of well-being, pushing them to pay more attention to the quality, nutritional and immunity benefits of food. Milk witnessed an outstanding growth since it has been recommended by the most famous disease experts.

Due to many stores having to close temporarily combined with a lack of supply, milk sales decreased for a short time during the pandemic, but the category started to boom from March to May. The growth was maintained in May, which should have been an off-season for milk, largely thanks to the benefit lactoferrion brings to consumers, which can help with immunity. Aside from milk, many other dairy products are also benefiting from consumers’ growing pursuit for nutrition. A number of plant-based products were mentioned in the forum yesterday and plant protein is also beneficial for immune system. Given this perspective, this industry will continue to benefit from the pandemic.

Meanwhile, low or zero sugar beverage products are accelerating their growth, leading to the popularity of notions like sugar-free fiber. Many new star brands, represented by Yuanqisenlin, are promoting the concept of zero sugar and fat for zero burden. In addition, classic brands like Coca Cola and Sprite are also promoting fiber+ for health, contributing to an evident improvement in sales growth. All of these brands are gaining popularity among young consumers. Therefore, in the post-pandemic era the concept of low/zero sugar will continue to be welcomed.

What’s more, we used to talk more about physical health meaning not getting sick or having a strong immune system. But this pandemic has led our society and consumers to think more about mental and spiritual health. Consumers are now concerned about not only physical health, but more about life well-being. They are likely to try more new things, to pursue beauty, a quality life and to improve their sense of national pride. According to our survey, Chinese consumers have developed a more holistic view about well-being so in this sense brands should communicate more about mental and spiritual health instead of focusing solely on the physical aspect.

After the pandemic, brands should introduce products with relevant health and protective benefits while continuing to monitor how consumer purchase behaviors evolve to meet their holistic needs on wellness.

Trend 2 : New habits and back to normal

Second, consumers have formed new habits. Many people have become a chef or baker in home cooking due to the pandemic. Interestingly, many home-cooking relative categories grew well in February and March and maintained their growth momentum even when the situation was better in April and May. Condiments including seasoning products, soy sauce and oyster sauce all maintained a two-digit growth after the pandemic.

This interesting trend has also been observed in carbonated drinks. During the pandemic we needed drinks like Coca-Cola as ‘happiness water’ to deal with stress but even after the peak of the outbreak this category still soared by more than 20% because people needed soda beverage to alleviate their anxiety. In this sense, this category is a necessity for consumers at any time.

We also found Chinese consumers using more cheese and butter products to cook a variety of delicious food. This category saw an astonishing year-on-year surge by 60% .

What’s more, we have mentioned that sales of ice cream also increased during the lockdown period and kept growing in April and May even though summer had not yet come. Home-purchasing of these categories are likely to become a trend this year. We used to talk more about 2B channels, the peak season or outdoor channels for many categories, but in 2020 home shopping will play a more important role in these categories.

We can also see some consumers chose to stockpile different categories of goods during the pandemic, i.e. bread, instant noodles and frozen food, and they maintained their stock afterwards because no one knew whether the pandemic would see another wave, so these categories are still enjoying positive growth.

But at the same time, some F&B brands suffered greatly due to habit changes. For these brands, they saw an evident recovery in the post-pandemic era, especially alcohol, coffee and Chinese pastry, which indicates that consumers are desperate to resume ‘normal’ life. Many experts are talking about the new normal but consumers actually aspire to go back to normal life although they have formed some new habits. It’s important for brands to capitalize and lead the development of the new habits while understanding the ‘old needs’ that remain.

Trend 3: Revive the OOH consumption

Out-of-Home consumption is an important market especially for the F&B industry. OOH refers to all occasions that consumers purchase outdoor. Disappointing news is that until May, few brands have recovered from the negative impact of COVID-19 with only milk, ice-cream and CSD seeing positive growth.

Here I’d like to point out three bright points of OOH occasions. First, people had less outdoor activities but they still have to go to work, so strong snacking demands between meals during work have led to an evident recovery in workplace. Second, as I have noticed during my commute or lunchtime, tea, coffee and ice cream shops as well as street vendors and the night market economy were recovering quickly in April and May, which went in line with the street economy promotion by the government. Third, consumption amongst the young, especially those between 20 to 29, bounced back quickly. With relatively higher income, these young consumers are more desperate to revive normal life, whose social gatherings and self-indulgence bring more opportunities for OOH occasions. Therefore, we have seen a lot of brands taking actions. For example, Coca Cola is enhancing the communications of drinking occasions in workplace. The brand used to promote large-sized cola for family gatherings, but now it wisely seizes the workplace occasion to encourage drinking after working hard.

Soda beverage started to emerge last year and will enjoy accelerated growth this year because consumers are in great need of such stimulus and joyful taste in the post-pandemic era to counter the anxiety they are facing in their daily life. I believe you have your own perspectives on whether soda beverage will become the next ‘happiness water’,

It’s key to capture heavy buyers in OOH market. We find that 73% of OOH heavy buyers in 2019 still remain heavy buyers in 2020 and they accounted for 40-60% in categories ranging from on-premise beverage to packaged beverage. They are the key group for any category to keep in touch with and to transform.

According to Kantar’s data from a survey about outdoor heavy buyers last week, there are three occasions for these heavy buyers to purchase more F&B products: workplace, family gatherings and outdoor shopping, especially from April to June. These are the key occasions for us to capture consumers. And we also find a decrease in consumption in another three occasions, including where they buy products, consumption along the street, on their commute to work and after dinner. We interviewed these buyers about what kind of products would attract them and the answers could be summarized into two key words: Health and Self-indulgence.

For health, they are paying growing attention to the ingredients and raw materials of products, for example, whether there’s additive or sweetener. In addition, they want the product to be beneficial for keeping fit.

Second, they still want these products to be self-indulgent and that’s why we believe outdoor activities will become even more essential to them and will be a key area for recovery.

What’s more, safety also matters so contactless delivery services and travelling by private cars have become their top choices. For these buyers health and self-indulgence are key marketing tools in brand communication.

To summarize, the OOH market is still far from a full recovery, so we need to improve the situation step-by-step in different occasions. Here are three occasions:

First, how to capture occasions in the workplace to increase buying.

Second, how to utilize social gatherings to remind young consumers of our product.

Third, although the entertaining industry will not recover fully until the pandemic is totally confronted, it’s still important to get well prepared for the moment in advance.

Trend 4: O2O service upgrade

The growing popularity of O2O service is a vital phenomenon in 2020. It has been emerging for a few years, but this year O2O service will definitely achieve a disruptive growth in the FMCG sector. In 2019 we observed that O2O accounted for 4.3% of value in the FMCG market and the figure was certainly higher in within F&B. Similarly, this year’s Chinese consumer report also analyzed the two strongest driving forces in O2O development. First, convenience. Consumers hope to get what they want as soon as they have the need. That is what O2O was born for. Second, different from foreign consumers, consumers in China can realize one-stop shopping on Chinese platforms, buying whatever they need for a week with full options of brands and categories to satisfy all their needs. This pandemic also boosted the demand and efficiency in the logistics of O2O platforms and has helped to ensure the profitability of O2O business models.

How many consumers are using O2O services in China? In 2019, 57% urban families bought FMCG via O2O, with 5.5 trips on average a year and 107 yuan per trip. Therefore, many of them were having one stop shopping instead of fragmented shopping. On average, people are willing to pay 30% more compared to the trip size made at stores, with 76 yuan for every offline trip versus 107 yuan online. Compared with last year, FMCG consumption in this Q1 has largely improved in both penetration and frequency and the data was even higher in food sector, with a rise of 4.5 percentage points in penetration compared with Q1 last year.

What categories will consumers purchase through O2O service? Among all the F&B categories we listed, O2O is more suitable for dairy, alcohol, seasoning and liquid beverages. More categories are enhancing their presence in O2O by starting partnerships with ecommerce platforms to provide joint promotions to boost their sales. I believe for many categories and brands, how to leverage O2O for their business will be a valuable topic this year.

For example, white collar workers may feel in need of some snacks when they are hungry or sleepy during work. Yili tagged this right moment and cooperated with ELEME to promote their Danish cheese yogurt in the workplace, encouraging the targeted group to purchase their yogurt when feeling a little hungry.

The customized package of this yogurt is designed for two purposes. By scanning the QR code on the bottle, consumers can not only get exclusive coupons on ELEME, but also join the membership of Yili, which achieves the closed-loop traffic direction between the brand and the platform. What’s more, this marketing strategy closely ties the product to the marketing occasions of ELEME as well as the product demand.

Here I also want to share with you the channel development in China. Until 2025, it is estimated that e-commerce will account for 38% of the Chinese FMCG market and O2O will take at least a share of 12%, and 13% in the F&B market. The pandemic will positively impact the overall O2O service especially the offline retailing business.

Apart from enhancing communication of occasions of the product itself, it’s more important to guide consumers to think of targeted products at right moment and make the products accessible in O2O communication.

Trend 5: Money and Lipstick effect

Fifth, what kind of product portfolios should we promote in the post-pandemic environment?

According to our analysis, in Q1 this year the shift to online was accelerated compared with the same period of last year. Meanwhile, although the growth speed of high-end products had been faster than that of mass products in the past three years, it experienced a drop in Q1 during the pandemic. The 618 shopping festival helped grow big brands at unprecedented level, but these sales records were made at the cost of high discount provided by brands. E-commerce festivals indeed enable consumers to buy the big brand’s products at a lower price.

Recently Tmall.com published the top 10 beverage brands this year and they shared a common feature: relatively higher price with attractive packages to be welcomed by the young. These brands captured the new lipstick effect in the F&B market. Although they are not cheap, they can still quickly go viral on the back of e-commerce and social media to attract more consumers. Therefore, in the post COVID-19 world cost performance and the lipstick effect will co-exist, providing a great chance for development as long as brands find a suitable positioning.

As the Covid-19 pandemic continues to put a focus on the environment, Kantar finds:

• Plastic waste is the second biggest environmental concern in the world
• Eco-Actives, the group Kantar identifies as consistently working to reduce their plastic waste, has grown in number from 16% to 20% of global shoppers since 2019
• One in five shoppers say that since the pandemic began, they have acquired more environmentally friendly habits, and 16% are focusing on more environmental initiatives.¹

“Our data continues to suggest that innovation to reduce plastic remains an opportunity,” comments Natalie Babbage, Global Link Q Director at Worldpanel Division, Kantar. “We’ve observed that shoppers are highly conscious of the packaging they buy weekly, and it is top of mind when they consider how they can personally reduce their environmental impact. While shoppers have been checking fewer aspects of food during the Covid-19 pandemic, recycled pack (+4% points) and quality assurance (+3% points) labels are being checked more than before, demonstrating the demand for a green alternative to waste plastic.”

Environmental concern is personal

The survey of 80,000 consumers across 19 countries finds nearly half (46%) feel personally affected by environmental problems, however, it is other people rather than brand or media influencers encouraging them to be greener. 38% feel that those whose opinions are important to them are driving them to change, with children the most likely (50%) to impact behaviour towards the environment followed by friends (43%) and partners (41%).

Gaps still remain between caring and doing when it comes to supporting green initiatives; 87.5% say buying products with reduced packaging is important to them², but just 20% are segmented as Eco-Actives, taking regular day-to-day actions to reduce their packaging waste.

“We see Eco Actives favouring products that are natural, or have health benefits, so winning their $382 billion wallet in will require brands to appeal to consumers’ lifestyles,” explains Babbage. “37% see manufacturers as the most important stakeholder to limit environmental damage (retailers were considered the least important at 4.2%), but just 22% of the population can name a manufacturer doing a good job when it comes to sustainable initiatives.”

“For brand owners, the study highlights the need to consider what the green shopper sees on the shelf and how truly reusable or recyclable that material is.”

-End-

About Who Cares, Who Does: The report is based on the results of a survey covering more than 80,000 respondents from 19 countries across Europe, Latam, US and Asia, and explores how manufacturers and retailers look to meet their environmental commitments and bring more consumers with them. Who Cares, Who Does is a global survey in partnership with GfK and Europanel on Kantar’s household purchase panels. Countries that are covered: US, France, Germany, Great Britain, Italy, Spain, Portugal, Ireland, Czech Republic, Poland, Slovakia, China, Indonesia, Vietnam, Argentina, Brazil, Costa Rica, Chile, Colombia, Mexico, Peru. The full report is available from www.kantar.com/whocareswhodoes

About Kantar: Kantar is the world’s leading evidence-based insights and consulting company. We have a complete, unique and rounded understanding of how people think, feel and act; globally and locally in over 90 markets. By combining the deep expertise of our people, our data resources and benchmarks, our innovative analytics and technology, we help our clients understand people and inspire growth. 

Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by -2.9% in the latest 12 weeks compared with last year. Small supermarkets continued their onward march with rapid growth of 7.3%, while hypermarkets suffered a more serious challenge with value decline of -7.1%.

Among the top players, RT-Mart maintained its leading position with 7.2% value share, recording a share uplift of 0.1 ppts versus last year, driven by both enlarged basked size and shopping frequency. Lower tier cities was their strong growth engine with a value growth of +4.7%. Besides the strong expansion of proximity stores, we have recently seen the first medium-size store: RT-Mart Super which was opened in Changzhou, showing a progression of their multi format strategy. Different from the traditional stores, RT-Mart Super is aiming to deliver more daily fresh products and offer an improved shopping experience, such as free cooking recipes and a service bell on the shelf. Besides, Younghui maintained its double digit growth in the past 3 months. According to the latest financial report, Yonghui’s revenue increased by 22.7% in the first half of 2020. Among the regional players, the Spar group showed the most outstanding growth, reaching 17.9%.

E-commerce continued its prominent value growth of 43.5%, as Chinese consumers have become even more accustomed to shopping online since lockdown. 72.3% of households in urban China purchased FMCG online over the last 12 weeks, which is a significant uplift in the shopper base. Alibaba remained on the front foot with 45.8% online market share (+1.7 ppts), while JD showing slightly decline in market share of -0.2 ppts. Among the top players, Alibaba group showed the strongest penetration uplift of 13.9 ppts, followed by Pinduoduo of 8.8 ppts. Pinduoduo recently launched its new community group-buying project, Duoduo Maicai, the aim of which is to increase MAU (monthly active users) through fresh food, which has high demand paired with high consumption frequency.

Kantar Comtech today revealed its smartphone OS data for the second quarter of 2020. A full quarter under the “stay-at-home” and social distancing measures, to manage the COVID-19 pandemic, has resulted in significant Smartphone sales volume decline. As consumers adjust to a new environment, Smartphone purchasing shifts to online in most reported markets, accounting for nearly two-thirds of sales in the latest quarter (up by at least 11% points in EU5, USA and Japan versus last year).

Jennifer Chan, Insight Director for Kantar Comtech comments “iOS displays strong year-on-year sales share performance in Q220; the launch of iPhone SE (2nd generation) hits the right spot with consumers and the popularity of iPhone 11 continues. Both iPhone SE and iPhone 11 interchangeably take the top 1 and 2 model seller spots in EU5, USA, Australia, Japan and even in China, where Huawei is almost half of smartphone sales, iPhone 11 is the number 1 model sold. Samsung A series sales performance continues in positive strides, with 2019 A series out-performing sales of A series 2020 launches. The appeal of A series has left a tough act for Samsung S20 flagship to follow; of the EU5 markets, S20 flagships only appear in the top 10 model sellers in Great Britain.

 “The desire for lower cost smartphones is a trend we have been monitoring closely for a while; from the category disruption caused by Huawei, the rise of Chinese brands, Samsung A series relaunch and now to the launch of iPhone SE. The emphasis on high quality smartphones, at a fraction of flagship prices, couldn’t be more relevant at a time when many consumers are feeling financial pressures as a result of COVID-19. In EU5, Xiaomi achieves phenomenal year-on-year sales growth this quarter, up 6 share points and overtakes Huawei to become the third most sold brand. More specifically in Italy, Xiaomi makes up 24% of sales share, just one share point shy of Samsung. In Spain, Xiaomi takes 40% sales share, leaving a gap of 18 share points to the next competitor, Samsung.”

Since Google announced it was pulling Huawei’s Android license, Huawei sales have been diminishing across Europe, Australia and Japan. Meanwhile, support for the local brand in China prevails, accounting for 48% of sales (+5% points year-on-year). Surprisingly, the distribution of brand shares has not gone in favour of Samsung as iPhone SE and Xiaomi disrupt the category. Across all markets covered, Samsung share only grew in Great Britain.

Chan continues, “As Huawei struggles to match sales performance of last year, it experiences yet another setback in Great Britain; this month, the UK government announced the ban of Huawei from its 5G network. This not only creates physical barriers for the brand’s intended future launches, but also mental barriers for consumers. Huawei’s association with being a national security concern undoubtedly will raise eyebrows; particularly with increasing publicity around data security. While not yet a top-ranking feature-specific reason for smartphone purchasing, this could change, especially with data security/privacy being heavily focused on at Apple’s developer conference.”

Already among future smartphone buyers, we see Huawei’s brand preference share declining, the recent announcement is likely to hurt brand performance further. Xiaomi, as the next competitive Chinese brand, is likely to capitalise from the situation as well as other emerging Chinese brands such as Oppo, OnePlus, RealMe and the likes.

Chan continues: “As many countries enter a second wave of the pandemic, it’s tough to visualize when the end-in-sight may be. Fortunately, only a small portion of consumers plan to cancel their plans to buy a smartphone (no more than 12% across all markets). Instead, most consumers will buy as originally planned or delay their purchase. Delayed purchasing implies that the average length of smartphone ownership will increase.

There is also a portion of consumers who plan to spend less. With Samsung focusing on A series and Apple on iPhone SE (2nd generation), it puts these giants in a desirable position for consumers seeking low/mid-tier devices (Huawei’s stomping ground), outside of Chinese brands. Although cannibalization is likely, demonstrated by Samsung A series relaunch last year, driving brand loyalty is key for manufacturers as the category becomes more brand fragmented and price tiering distinct. When consumers switch brands, manufacturers will have to wait a whole upgrade cycle (approximately 24+ months in most markets), before the opportunity to win them back arises – and a lot can happen in 2 years.”

Click here for more on Chinese brands.

 Shanghai, China (July 21^st) – Today Kantar Worldpanel (a CTR service in China) released the latest beauty market trend report. The report revealed that Covid-19 had significantly affected the personal care and beauty category landscape in the short term.  However, there are both challenges and opportunities facing the market players in the post-pandemic era. Brands need to capture the rising needs under the new norm, utilize diversified touchpoints and channels to reach and convert shoppers in order to unlock the growth.

A 2020 China Beauty Market Brand Footprint was also released by Kantar Worldpanel. It ranks the best performing beauty brands based on two metrics: the most-chosen brands by Chinese consumers and fastest-growing brands in the China market. The rankings were generated by using the CRP (Consumer Reach Point) metric which is an index that combines the number of buyers for a certain brand in one year and the number of times that the brand was chosen by these buyers. The China Beauty Market Brand Ranking tells us Chinese consumers’ real purchase choice to help brands decode brand growth in this challenging market.

1.  Most-Chosen Brands

Pechoin maintained its leadership position in the skincare market for the fourth consecutive year, and it is the only brand that was chosen more than 100 million times over the last year in China. As a local brand with a long history of promoting oriental herbal skin care, Pechoin has also continued to innovate using new technologies and ingredients and actively engaged these changes in their consumer communications. Innovative ideas for new products help drive consumer engagement and create excitement for established brands as was the case for L'Oreal Paris’s “Eye Cream for Face”. Moreover, efforts to maximize omni-channel presence and synergy has helped brands to maximize consumer reach. For example, Perfect Diary, the No.1 makeup brand in terms of consumer reach points, not only maintained its strong growth momentum online, but also increased its offline presence and successfully attracted new buyers.

Kantar Worldpanel summarized three key factors for reaching more consumers and increasing the number of times they choose a brand:

-     Effective Ingredients: Apply advanced technology and utilize trustworthy natural ingredients to enhance product efficacy

-     Product Innovation: Create innovative solutions in response to unmet consumer needs and drive trials

-     Omni-Channel Conversion: Leverage both online and offline channels to maximize touchpoints and enhance the consumer experience

2020 China Beauty Brand Footprint: Top 10 Most-Chosen Brands in Skincare and Makeup

© 2020 CTR Co.Ltd                                                       

Source: Kantar Worldpanel Beauty, 2020            

Skin Care definition: facial care and eye care, exclude hand & body, lip balm                                  Make up definition: face, eye, lip exclude lip balm, nail

2.  Disruptive Brands

Over the last year a score of emerging brands have brought new excitement to the market. Many of these fast-growing brands started with creating star products in one chosen promising segment, becoming the top-of-mind choice in that area. For example, Judydoll attracted young girls with its eye shadow, leading the trend of “playing with colours”; UNO captured male consumers’ attention through its high-quality and value-for-money facial wash and built a professional brand image in the male skincare market. Additionally, it is noteworthy that many of these rising stars were local brands fast adopting unique Chinese features in a very creative fashion. A case in point is Florasis, it launched the “Carved Lipstick” with traditional Chinese craft and used a catching melody called ‘Florasis,’ which represented the voice of oriental. Other brands are also using more creative approaches to drive more traffic: Winona invited both popular celebrities and doctors in their livestream to talk to audiences from different perspectives and Perfect Diary run its private traffic pools on WeChat to communicate with consumers directly.

In the post-Pandemic era, Kantar Worldpanel identified three key factors for brands to win in such a challenging market by looking into the practice of these disruptive brands:

-     Building expertise:  Create high-quality key products with special expertise to quickly boost reputation and sales

-     Differentiating image: Generate unique and creative ideas in product design and communication to deliver new news and a vibrant image

-     Driving Traffic: Ride on the booming trend of livestreaming and generate both public and private traffic to influence consumers.

2020 China Beauty Brand Footprint: Disruptive Growing Beauty Brands 

© 2020 CTR Co.Ltd                Source: Kantar Worldpanel Beauty, 2020

The rank is in alphabetical order      

Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by 1.4% in the latest 12 weeks compared with last year. Against a backdrop of declining share for modern trade, small/mini supermarkets bucked the trend with a value growth of 10.7%, seeing a significant uplift on both shopper base and frequency, as consumers increasingly favoured proximity formats with essential product ranges and enhanced offers in fresh foods.

E-commerce on the other hand continued its soaring trend with rapid value growth of 46.6% in Q2, reporting an even higher level of acceleration compared with last year. As COVID-19 continued to impact consumers’ visits to brick and mortar stores, e-commerce won consumers’ confidence through the benefits this channel delivers such as safety, convenience and product choice. In Q2 2020, E-commerce counted for 26% of total FMCG spend in China.

Leading Grocery Share of Modern Trade - National Urban China

 © 2020 CTR Market Research                            Source: Kantar Worldpanel China

Top retailer performance in Q2

In the past 12 weeks major retailers were reacting rapidly to the challenges from both the booming E-commerce channel and the COVID-19 pandemic through expansion of their proximity stores, strengthening of their fresh food offer and full utilization of new technologies and omni-channel deployment to enable closer engagement with their shoppers.

 Among the top players, Sun Art maintained its leading position thanks to RT-Mart’s recovery, recording a market share of 7.2%. Despite the lukewarm performance of the total market, RT-mart was able to drive shopping frequency by tapping into Alibaba O2O infrastructure and shopper traffic from Taobao.

 Yonghui maintained a robust growth of 19% in Q2, achieving an historic market share high of 4.9%. Similarly, most regional players showed equally strong performance. Bubugao group achieved remarkable growth of 10.9% in Q2, driven by an enlarged shopper base. To achieve this Bubugao has not only expanded its fresh food range, but has also offered the choice of store collection and home delivery to further attract new shoppers.

O2O continues to grow the market

In Q2 2020, nearly 30% of Chinese urban households purchased through O2O platforms, lower than the penetration rate we saw in Q1 which was the peak of the COVID-19 pandemic in China. As the market in general showed booming demand for home delivery, retailers have intensified their investment in O2O services through self-run platforms, Wechat mini-programs or closer cooperation with Ele.com, Meituan, JD.com and Dmall etc. Hema, RT-mart, Vanguard, Wal-Mart and Yonghui are the leading market players, contributing nearly one quarter of total FMCG O2O sales. It is worth noting that Hema is the only big player which was able to continuously grow shopper visits post COVID-19. In recent months Hema opened its first mini store in Beijing after its one year experiment in Shanghai. By focusing on daily consumption products e.g. fresh and ready-to-eat food, Hema Mini is able to meet the daily needs of neighbourhood shoppers at a higher investment efficiency.

Live-streaming’s surging popularity pushed E-commerce to new highs

 In the latest 12 weeks ending 12^th June 2020, over 70% of Chinese household bought FMCG online. Robust penetration and frequency growth were observed in both upper tier cities and lower tier cities. Alibaba led the market growth, with a significant penetration uplift of 14 ppts versus the same period last year. Pinduoduo was also strong in attracting new buyers. Its penetration reached 13.2% in Q2, up by 7.3 points vs LY, further narrowing the gap with JD.com.

This year’s 18-day 618 Midyear Shopping Spree continued to be a must-win battlefield for e-commerce giants. Different from last year, live streaming played a more crucial role in shopper conversion. After Alibaba’s cooperation with Douyin, JD.com made the move to partner with Kuaishou just before the 618 festival, to further capitalise on the incremental revenue that live streaming can bring as well as tapping more into lower tier cities, where Kuaishou has strong viewership. Streamers range from store clerks, influencers, government officials to company CEOs. Besides heavy promotions that are offered during livestreaming, competitors like Pinduoduo and Suning also boosted live sales by holding super shopping galas with celebrities from hot TV shows.  COVID-19 has significantly accelerated live-streaming eCommerce and it is here to stay.

Overall, 2019 was a good vintage for FMCG with growth at +5.5 percent, slightly higher than 2017 & 2018. Some interesting developments include a slowdown in premiumization and growth in the mass segments of several categories. Also, for the first time, foreign companies outpaced their domestic counterparts with foreign FMCG companies growing by 9.5 percent in 2019 compared with the Chinese company growth rate of 7 percent. However, consumers have spent less in the first quarter of 2020 because of COVID-19, with overall fast-moving consumer goods (FMCG) spending dropping by 6.7 percent, the biggest decline on record. These are the findings of Kantar Worldpanel and Bain & Company’s ninth annual 2020 China Shopper Report Vol 1.

 Since 2012, the report has tracked shopping behaviors of Chinese consumers, creating a long-term view across 106 FMGC categories purchased for home consumption in China. The report analyzes the key 26 categories that span the four largest consumer goods sectors: packaged food, beverages, personal care and home care and an additional 24 categories to form a more comprehensive view of the market. Combined, these sectors represent 80 percent of all FMCG. In 2019, packaged foods value rose by 1.9 percent, beverages grew by 2.9 percent and, in line with the two-speed pattern, personal care categories grew 11.8 percent while home care registered 9.4 percent growth.

E-commerce grew by 35.2 percent in 2019, largely at the expense of hypermarkets and groceries, which declined by 3.4 percent and 7.2 percent, respectively. Convenience has been a big reason for the shift to online retailing in China. This is reflected in the widespread adoption of online to offline retail (O2O), which now represents 4.3 percent of total FMCG value share and is playing an increasing role in offline channels. Online channels experienced 19 percent year-over-year growth during the COVID-19 pandemic in the first quarter of 2020, while offline sales dropped by 13 percent.

“The pandemic has hastened the flight to value brands that we identified in 2019 and accelerated the shift to online channels,” said Bruno Lannes, Bain & Company partner and report co-author. “Consumers, quarantined at home because of the COVID-19 pandemic, had no choice but to buy online, with many opting to continue even after stores opened.”

Virtually non-existent three years ago, live streaming sales also more than tripled in 2019 and now account for 4 percent of total online retail sales and about 1 percent of total retail sales. The increasing number of online festivals and the steady shift to online also contributed to higher promotion rates for most categories in 2019. This is especially true in the case of personal care, home care and baby categories. Overall, online sales on promotion grew from 40 percent to 43 percent in 2019. Meanwhile, offline sales on promotion remained much lower, at 23 percent, in the same period.

“Brands and retailers will have to learn to navigate through the uncertainties presented by a Post COVID-19 world as growth will be more difficult to attain for the rest of the year and beyond,” said Jason Yu, Managing Director of Kantar Worldpanel and report co-author. “The path to recovery will be different for every brand as it depends on how the category has been impacted by the Covid-19 outbreak but also how consumers needs will change in the future. It is vital to keep monitoring how consumers’ purchase behaviors evolve to form a strategy of how to grow in the time of ‘new normal’.”

We have seen FMCG categories react to the ongoing COVID-19 pandemic in various ways with recovery taking a different shape across individual categories. FMCG segments reacted to the pandemic in the following ways:

• A first group of categories, including personal wash and soy sauce, boomed during the pandemic and have continued expanding in the recovery. These were widely used in stay-at-home situations.  Once restrictions eased, consumers remained focused on health and a desire to pursue at-home activities which continues to strengthen sales. 
• A second group of categories – frozen food, packaged water and household cleansers boomed during the lockdown but have since stabilized. Consumers stocked up for the pandemic and had enough on hand after it ended.
• A third group endured a V-shaped recovery, with sales of beer, skin care and pet food dropping dramatically during the pandemic, only to recover quickly, as consumers felt the need to re-purchase.
• The final group, non-essential categories such as makeup and impulse categories such as candy, declined but are slowly improving in an L/U-shaped recovery.

“Facing an uncertain future, brands need to retool,” said Derek Deng, Bain & Company partner and report co-author. “Those that closely monitor and re-evaluate the market, industry and consumers spending patterns in the post-COVID economy are better positioned to build a product portfolio with the right value propositions and pricing.”

Successful brands must also review their innovation pipeline to accelerate new products relevant in a post-COVID-19 environment and ensure they cover both premium and value segments. Additionally, brands should implement a 4-D approach to win in the right channels, in particular online, O2O, live streaming and continue to build trust and local relevance with China’s consumers: Design for China, Decide in China, Deliver at China speed and Digitalize the China business.

Brands Ensure Growth Using Key Levers Based on Evolving Consumer Needs

Kantar announces the launch of the 2020 Asia Brand Footprint. The key findings of the report include the five emerging consumer trends across Asia that influenced buyer behaviour. Based on these new consumer needs, Kantar uncovered five key levers for brand growth. Throughout the region, the brands that utilised one or more of these levers emerged as the winners from 2019 across various categories.

This annual ranking includes a special analysis of how brands have navigated during the COVID-19 pandemic and how brands are showing signs of growth during such uncertainty.

Key findings include:

The five emerging consumer trends that drove buyer behaviour across Asia include: Health and wellness, convenience, digitalization, value for money, and diversification.

There are five key levers for brand growth based on the emerging consumer trends:

• New needs: The ultimate lever for brand growth is recognising new consumer needs and proceeding to establish a new category.
• More moments: Brands can create more moments or shopping occasions by making their products available and relevant for consumers.
• More categories: Brands can stretch across different categories to attract buyers whose needs are not currently met by the existing functions of the brand.
• More targets: Brands can create new variants that they know will appeal to a wider range of individual needs in order to attract new targets.
• More presence: Brands can increase the number of geographical locations in which a shopper can see and choose their brand.

Some of the brands that demonstrated success in 2019 for each market include:

• Mainland China: Yili remained China’s most chosen brand for the fifth year running. Together with Mengniu, these two dairy brands were chosen over 1 billion times by Chinese consumers in 2019.
• Indonesia: Indomie continues to be the number one most chosen FMCG brand by consumers in 2019, with a key strategy of playing in several categories. The brand had a 7.0% CRP (Consumer Reach Points) growth for the year.
• Korea: Chungjungone ranked number two, having successfully pioneered snacks for the drink HMR market and widening its portfolio.
• Malaysia: Due to its strong performance in both instant noodles and culinary aids categories, Maggi sustained its number one position in 2019, with a penetration of 85.4%.
• Philippines: Local noodle brand Lucky Me remains the most chosen consumer brand in the Philippines, having reached nearly all Filipino homes. The brand continues to improve its existing products by adding new formats.
• Taiwan: Local brands continue to occupy the top five ranking, with I Mei as the number one chosen brand (over 7.7 million households in Taiwan purchased the brand in 2019).
• Thailand: Hygiene ranked in the top chosen brands list with a CRP growth of 11%. The brand was chosen more than 116 million times during 2019.
• Vietnam: Dairy manufacturer Vinamilk was chosen the most in Vietnam (urban 4 cities and rural) in part due to its massive coverage in terms of consumer base.

After conducting a special analysis of how brands are faring during the pandemic, we discovered the following:

• There are four clusters across Asia regarding how consumers shopped before the lockdown versus after: “overly cautious”, “challenged”, “undeterred”, “road to recovery”.
• Based on these four clusters, some markets experienced a drastic shift in shopping patterns, while other reactions were muted.
• Categories like hygiene, cooking aids and essentials, convenience foods, and nutrition and immune-boosting products are thriving.
• Across these categories, the biggest brands across Asia are winning by riding on one or more of the five key levers for brand growth.

Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by -1% in the latest 12 weeks compared with last year. RT-mart maintained its leading position, posting a market share of 7.2%. Despite a loss of shoppers over the past year, Wal-Mart started to show steady recovery on the back of opening of more smaller community stores which are more focused on fresh produce and delivery services. With a reduced range of 3,000 SKUS, Wal-Mart’s community stores expanded the share of pre-packaged fresh food to 50% across all ranges. Amongst the regional players, the Bubugao group achieved an unprecedented growth rate of 8.7% in the latest 12 weeks, driven by enlarging their buyer base. The retail group also fully leveraged their mini programs to attract more online traffic to help build their omni-channel offer.

E-commerce maintained its strong performance with a value growth rate of 42.0% in the last 12 weeks. The strong growth was contributed by consumers in both upper tier and lower tier cities.

Among the top E-commerce players, Alibaba and JD consolidated their leading position with more shoppers using their services. In the past 12 weeks, Alibaba reached a national penetration of 44.6%, 43% higher than last year. E-commerce players are gearing up for the 618 shopping festival and will be hoping to maximize their sales through aggressive promotions and livestreaming events which started at the beginning of June. It is worth noting that the penetration gap between JD and Pinduoduo has been continuously narrowing. Pinduoduo’s penetration in FMCG more than doubled in the last year, with more brands setting up stores on the platform to allow consumers to make group purchases at a discounted price.

 Forecasting analysis conducted by the Expert Solutions team at Kantar Worldpanel shows that without Covid-19 during the 17 weeks to 17^th April 2020 the FMCG market would have grown at 5.5%. Instead the market declined by -3.9% over this period and meant that 45 billion RMB of sales were lost that we would have expected to happen without the pandemic.

This loss represents 9% of sales and is driven mainly by those categories which are experiencing a U-Shape recovery where consumers are being slower to return to their previous purchasing levels. In more severe cases consumers may have permanently changed their behaviour which will mean that overall consumption will be lower in the future.

 However,there are other categories that have grown more than expected as a result of Covid-19, and these ‘growth’ categories have driven an incremental 11.6 billion RMB to FMCG. While some of these categories have done well as they met specific needs during the pandemic (such as sanitisation and more home cooking), many consumers are likely to stick with these new habits post pandemic which will mean continued growth.

Understanding what will happen to a category for the rest of this year and beyond is vital for any FMCG manufacturer and retailer. By combining the strength of consumer behaviour data and the latest machine learning techniques, Kantar Worldpanel is uniquely placed to forecast the future sales for FMCG categories based on different scenarios. This will allow manufacturers to estimate the total loss (or gain) that Covid-19 will generate and, more importantly, help to build a plan for the future based on recovering lost consumption.

Over the last couple of weeks, we have often been asked, “what learnings can we take from markets in recovery i.e. China and Korea?”. I guess this is a just and fair question to delve into.

Whilst there are some very key and strong things other markets can consider; the reality is that, we can’t average Asia.

“What works in ‘A’ market DOES NOT ALWAYS necessarily work in another market”.

For this particular edition, we will examine if at all, if markets are reacting similar/differently to one another – and hopefully this is a good start point for us to hold the right benchmarks on what we could consider doing (and more realistically). We have identified 6 core factors that we believe shaped and impacted how the Asian consumer/shoppers shopped in market. Obviously, these factors are non-exhaustive; but we do see a clear pattern of how these factors come together to help paint a picture.

As the Stay-At-Home Economy flourishes during this time of pandemic (almost all markets); what is happening to the Out of Home (OOH) Economy? We have slotted in a small section which hopefully will help trigger some ideas and thoughts as well.

We hope you will find our latest whitepaper not only informative but interesting as well. Remember, we can only get better at answering your needs if you continue to challenge and put your questions forward.

According to Kantar Worldpanel’s Baby Panel, the IMF market recorded a year-on-year growth of 6% in the 4 weeks after the outbreak (January 25th to February 21st) in total Urban China. Although slower than its full-year growth of 8% in 2019, when compared to overall FMCG sales post-outbreak the impact on IMF sales is more limited. Driven by stockpiling, trip volume increased by 9% which was the key driver of IMF growth during this period.

• Neighbourhood delivery becomes a new favourite

After the Covid-19 outbreak, consumers have reduced their shopping frequency. Baby Panel data indicates that in store transactions declined in both Hyper and Supermarket by 17%. The call for “no visits, no gathering” caused the gifting channel to decrease by 19%. Moreover, due to safety considerations and travel restrictions across borders, most families have delayed or cancelled overseas trips. As a result, purchases from overseas fell by 52% year-on-year.

Although the ecommerce channel increased by 4% year-on-year, the stagnation of logistics transportation in some regions stopped families from purchasing IMF to meet their hurried demand.

Many baby stores saw growth during this time, with shoppers taking advantage of their geographic position (many stores are spread across the city and close to communities). Besides their physical stores, more sales were shifting from offline to online. 

Consumers can join the WeChat groups organized by baby store to order IMF, or directly purchase IMF through the baby store public account or via WeChat mini program.

As baby stores offer a large coverage, the delivery services in the same city is convenient and make it simple for consumers to buy IMF without leaving their home. This efficiency relieves consumers’ anxiety and also successfully helped baby stores to gain a large number of new followers.

Besides more active sales from baby stores, many community purchasing groups also attracted more baby families to complete their IMF purchase using WeChat. As a result of those different factors, the overall WeChat channel increased by 33% year-on-year during the epidemic.

• Win in the Pandemic stage

Many IMF manufacturers responded quickly after the COVID-19 outbreak, actively adopting a series of measures in various social platforms, such as live lecture, expert consultation, and health counselling, to keep in touch with parents and help to relieve their stress. In the next 2-3 months, capturing consumers who have ran out of stock is more critical.

Internally, the recovery of the raw material supply chain, production and logistics will determine if there will be a competitive offer to fulfil the demand. Domestic production is gradually resuming now, while at the same time, overseas is becoming the main battlefield of the pandemic. How to ensure the production and transportation of imported materials while not disrupting the market will be a question that many IMF manufacturers should pay attention to.

Externally, the resource allocation to different channels would determine whether the battlefield is correctly selected. Baby stores, who established good communication with consumers through WeChat during the epidemic, are expected to maintain their good growth momentum. On the other hand, with the gradual recovery of logistics, many consumers will return to purchase through ecommerce platforms thanks to its advantage of a diversified offer without regional restrictions as well as its convenience. Furthermore, the potential of social e-commerce, represented by WeChat, should not be under-estimated.

What’s more, consumers’ health awareness is constantly evolving since the epidemic. Topics related to scientific prevention of disease or immunity strengthening will continue to be popular for various baby families.

With Omni channel shoppers playing an increasingly important role in both manufacturers and retailers business, it’s essential to focus on these shoppers for future brand growth.

According to Kantar Worldpanel’s FMCG household panel data in 2019Omni shoppers have higher spending power, accounting for 61% of all buyers and 67% of the total value ofthe FMCG market, with a year on year growth of 25%.

To help brands and manufacturers target this group more precisely, here are 3 key trends we have witnessed from monitoring the purchase behavior and preferences of Omni shoppers:

01.Omni shoppers are Aspirational looking for a better quality of life and convenience 

They are looking for convenience, health and as well as an indulgent lifestyle. They care about their image and appearance, spending heavily on categories like skin care,make-up and fragrances. Health related categories such as nutrient supplements and hygiene are also of high importance to them in order to lead a better quality of life.

02.Omni shoppers are rapidly adopting the emerging channels

The rapid growth of E-Commerce continues in China, but the landscape has evolved compared toseveral years ago. Social commerce, including WeChat, Redbook and PinDuoDuo is now the growth engine of the E-commerce market with a 59% uplift in sales versus a year ago.

Meanwhile, the O2O channel (which consists of a retailer’s own delivery platform) and pure delivery platforms, like Eleme, are becoming more and more popular. There is no doubt that this channel will boom faster after the epidemic and penetrate an even larger number of consumers as they satisfy the increased demand for home delivery and convenience.

In the context of these emerging channels popping up, Omni shoppers, as mature multi-channel adopters, are at the core of this retail evolution. Omni shoppers are fast adopters of Social commerce and O2O and are driving a strong premiumisation trend in these channels.

03.Not all Omni Shoppers behave in the same way 

We can divide Omni Shoppers into 3 groups based on their profile and purchase.

• High City Luxury Aspirationalist

• Convenience Family Buyer

•  Lower Tier Value Seeker

Considering the booming prospect of Omni shoppers, winning them is critical in order to drive growth in the background of continued modernization of retail in China.

Manufacturers need to increase their share among Omni shoppers through optimizing their portfolio sold through social commerce and O2O. They need to capitalize on their needs for a more diversified basket which caters to their convenience and lifestyle needs by applying smart communication and pricing strategies which can attract the 3 different groups of Omni shoppers.

Note:

Omni Buyer: Offline and Online Shoppers at least twice a year, and at least once online outside of D11, 618 shopping festivals

Previous insights from Kantar Worldpanel (Pathto Recovery for FMCG post COVID-19) showed there are 4 types of category based on their performance during the peak of the outbreak and their recovery progression. 

For ‘Growth’ categories, such as hand wash and disinfectant, there is less of a need to promote because demand has been stimulated as a result of the virus itself. 95% of these categories have reduced promotion levels in the 6 weeks to 17^th April 2020 compared to the equivalent period last year. 

However, for U-Shape categories, such as hair care and skincare, more than half of them are increasing volume on deal levels in order to stimulate more demand and help accelerate the recovery.

Knowing whether to promote more or less is just the first question to address.Manufacturers will also need to know which promotions will drive the most incrementality and bring back the reduced volume that resulted from the epidemic.

Kantar Worldpanel is uniquely placed to help manufacturers plan a promotion strategy based on how consumers respond to different type of promotions based on the product, pack size, promotion mechanic, channel and length of promotion

Looking deeper into the specific number 1 brands that grew share we saw that almost two thirds of the growing brands were local brands. The switch from foreign to local brands has been a growing trend in China for several years now and it seems has though Covid-19 has helped to accelerate this trend as people opted for homegrown brands in times of uncertainty.

Homecare brands accounted for 38% of the decliners (vs just 7% for the growers). This was driven by the move to more niche products in categories like hand wash and bleach where shoppers were looking for specific benefits to help protect against the virus. Plus these categories may have been in shorter supply so people may have had to switch to whatever was available in their local store.

Understanding how a brand performed vs competitors during Covid-19 and more importantly, how to grow share as we come out of the epidemic, will be on all brand owners minds. Kantar Worldpanel is uniquely placed to help FMCG manufacturers plan their future marketing strategy based on the consumer behaviour changes we are witnessing in China post Covid-19.

The annual ranking, which focuses on the long term performance of brands, includes a special analysis on how the biggest brands are faring during the current pandemic, with early signs showing that they are winning in relative terms.

Key findings include:

A shift in favour to the top 25 global FMCG brands

• 424 billion brand choices were made throughout the year, representing a 2.6% increase in CRPs (Consumer Reach Points) compared to 2018.
• Global brands grew CRPs by 2% in 2019 compared to zero% growth in 2018, but this wasn’t enough to beat out local brands which grew CRPs by 3.1% around the world.
• Global brands now account for one in three (34.1%) brand choices around the world, while local/regional brands account for two in three (65.9%) of the brands placed in shopping baskets.
• The biggest global brands responded best to the challenge posed by local brands in the past few years, showing their most successful growth rate than in any previous Brand Footprint. 20 of the top 25 (80%) ranked brands achieved growth in 2019, compared to 48% in 2018.
• The top 50 Global brands accounted for 15.5% of all brand choices made in 2019 and accounted for 24% of the growth in items purchased.
• Three top 50 brands (Pond’s, Vim and Brooke Bond) achieved a global penetration gain of 1% or more – meaning an additional 14 million new customers each. Every 0.1% penetration gain globally is an extra 1.4m shoppers.

Top 10 most chosen brands globally 

Source: Kantar’s Brand Footprint report 

More brands than ever chosen over 1 billion times

• There are now 40 brands around the world that are placed in consumers’ shopping baskets more than one billion times per year. In addition to the 22 Global ‘billionaire brands’, the number of local billionaire brands has grown from 14 to 18. All 18 are either Indian or Chinese.
• Five global brands joined the billionaires club: Brooke Bond, Head & Shoulders, Kinder, Heinz and Oreo.
• Coca-Cola remains the world’s most chosen brand on the planet, picked from the shelves over 6bn times during the year; followed by Colgate in second place (chosen 4bn times) and Maggi in third (3bn times).

India a key lever of growth

• In the latest ranking India was the country that contributed the most growth for 13 of the top 25 ranked brands. This compares to 8 of the top 25 in 2018, demonstrating the nation’s increasing importance to brand success.
• The unique shopping habits of Indian consumers become more evident in 2019, with FMCG brands being bought more often across the country and in smaller quantities.
• Homegrown brands like Patanjali and Dabur increased their nationwide penetration in 2019, challenging the dominance and growth of leading market players and underlining the global popularity of natural and ayurvedic beauty products

Sector winners and losers

• Across all FMCG sectors competition got tougher. Overall just 46% of brands achieved CRP growth in 2019 compared to 47% of brands in 2018, 49% in 2017 and 52% in 2016.
• CRPs in the dairy sector grew by 0.7%, with global brands losing market share to local brands for the second successive year.
• The food sector grew by 2.7% during the year while market share between global brands and local brands remained unchanged at 27.6%/72.4%.
• In the Beverage sector growth by global brands outperformed growth by local brands. As a result global players increased their market share to 38.4%
• Coca-Cola gained momentum for the first time since 2013, now picked from the shelves over 6.0 bn times in a year, with a much-improved performance.
• The health and beauty sector was the fastest growing category by CRP growth with an increase of 6.1%. Local brands benefited slightly more from the growth compared to global brands. Global brands now account for 59.6% of brand choices down 0.6% vs 2018, a second successive loss of share. 

 

Find out more

To learn more about Kantar’s Brand Footprint, explore the data and request more information, please visit www.kantar.com/brandfootprint.

Watch the webinar here.

 

 

Notes for editors

About Kantar Brand Footprint: Kantar’s annual Brand Footprint study is based on research from 74% of the global population; a total of one billion households in 52 countries across five continents—covering 85% of the global GDP. As part of the study, Worldpanel tracks more than 22,900 brands across beverages, food, dairy, health and beauty and homecare.

• The impact of COVID-19 on brand choice
• 2019 in numbers
• The ranking of the Most Chosen Brands globally
• The success of bigger brands
• Success stories from global and local brands around the world

Sign up for the webinar on 20th May and get a closer view on growth opportunities for your brand in the FMCG market.

10 am (UK time)

4 pm (UK time)

Hubei province has an urban household population of 8.1 million households which represents 4.5% of the Chinese urban population and contributes to 4.7% of FMCG sales. Prior to the pandemic the FMCG market in Hubei was performing well growing at 7.4% in 2019 vs 2018, which is ahead of the 5.3% seen for National Urban China.

During the Covid-19 outbreak sales took a significant hit seeing a low point of 66% weekly decline in the week after CNY. This drop in sales was mainly contributed by both a decline in the number of shopping trips and a smaller basket per trip, in terms of both value and volume, during the months of February and March. The lockdown imposed strong restrictions on many communities meaning that there were limits on how many people in the household could leave to shop for groceries as well as how often they could make these trips. As the situation started to improve during March the decline in FMCG sales reduced but Hubei is still some way from the growth it was experiencing prior to the pandemic.

During this unique and challenging period the types of FMCG categories Hubei shoppers purchased, when they were able to leave their home, changed drastically compared to the equivalent 2 month period last year. Categories which really felt the impact of the coronavirus were those that were more likely to be consumed for enjoyment, such as alcohol and soft drinks, or non-essential for life in quarantine, for example cosmetics. Categories which saw the fastest growth in Hubei were those which became essential during the lockdown period. Sanitising products, such as hand wash and disinfectant, grew by over 150% showing that shoppers were able to obtain these much needed products. Many shoppers were left with little choice but to cook from home so the seasoning sector posted double digit growth during the lock down and snacks also performed well as shoppers looked to relieve their boredom. As restrictions started to ease in some areas of Hubei some categories, such as laundry detergent and paper products (e.g. toilet tissues), witnessed a strong rebound as the pent-up demand was released.

The retail channel households in Hubei used during lockdown also saw significant changes. All major channels experienced sales decline in the 2 months to the end of March compared to last year but some channels were able to weather the storm better than others as shoppers switched their spend. Similar to the national picture, eCommerce grew in share even gaining more shoppers compared to last year and the portion of households who used Wechat more than tripled. Other channels, however, saw significant sales losses with gifting seeing a large drop in household numbers. Due to the cancellation of most CNY plans in Hubei it meant many households did not receive gifts during this period, which is by far the biggest gifting season of the year with CNY occurring at the beginning of the outbreak.

Looking forward the Covid-19 outbreak will undoubtedly leave its mark on Hubei province, more than any other in China. Manufacturers and retailers should work together to ensure its citizens are able to obtain the necessary products to help them return to their daily lives whilst meeting their new demands. People from Hubei are likely to have an increased demand for products that can protect them from viruses whether this be sanitizing products or food and beverage products that can keep their bodies healthy and increase their level of immunity.

Conclusion

The path to recovery will be the most challenging in Hubei. Manufacturers will need to look at how reliant the category and brands are on this province and whether targeted actions need to be taken. Alcohol, for example, is more dependent on Hubei compared to other FMCG categories and this category was severely impacted by the pandemic. Therefore, alcohol brands will need to have a clear plan on how to recover the lost sales in this province with targeted promotions and communication to consumers in Hubei. In order to build this plan FMCG manufacturers will need to understand the following areas:

• Regular Update on Shopper Metrics – weekly or monthly read of how shopper behaviour is changing as the situation improves.
• Demand Forecasting – understanding of future demand in Hubei post Covid-19 and how to compensate for lost usage occasions.
• Marketing Growth Drivers – what elements of the marketing mix will help to drive more incremental sales in Hubei after the epidemic: advertising, promotions, in-store activities and distribution are likely to have different weights of importance post epidemic.
• Usage occasions – identifying new usage occasions amongst Hubei consumers that have arisen as a result of the coronavirus will be critical in helping to capture future demand and developing new products to meet these new needs.
• Media Investment – how to optimize your media investment will be more crucial than ever. Knowing who to reach and how to reach them in the most cost effective way will help to improve the return on investment.
• Channel Dynamics – online and O2O will be even more important channels in Hubei post epidemic so understanding how people’s behaviour changes when shopping via these channels will help to identify new growth opportunities.

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 20^th 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.

However, from the second week in March FMCG sales returned to growth. Now that China has started to return to normal across most of the country a key question that many FMCG manufacturers and retailers have is how long will it take for the FMCG market to fully recover and what can be done to help accelerate this rate.

The speed of the recovery very much depends on the nature of the category and how impacted the category was during the peak of the outbreak. Some categories will show a ‘V-shaped’ recovery where there is a quick recovery whereas other categories will have more of a ‘U-shaped’ curve, taking longer to recover. Also, there are a handful of categories that were not negatively impact with some even experiencing stronger than expected growth during the epidemic.

Through analysis conducted by the Expert Solutions team at Kantar Worldpanel China, 98 FCMG categories were classified into one of four segments based on the performance they experienced both during the peak of the outbreak and whether they have experienced a fast or slow recovery during recent weeks as the Covid-19 situation improved. These are shown in the diagram above.

Growth Categories: Increased or New Demand Generated as a Result of Covid-19

The categories appearing here fall into two main groups. Unsurprisingly one group consists of products which can kill germs and protect you from the coronavirus such as hand wash, disinfectant and wet tissues. During the peak disinfectant saw phenomenal weekly growth of over 600% and hand wash reported over 200% growth in some weeks during February. 

The second group are products which can be used for home cooking such as bouillon, MSG, herbs and spices and tomato ketchup. Also convenient in-home meals, such as instant noodles and quick soup, experienced growth, catering to consumers whose might not be as willing or able to cook from scratch.

Categories falling into this segment have a real potential to leverage this unexpected growth momentum by ensuring the consumers maintain the new habits they may have established during the epidemic. Sanitizing and keeping yourself protected from viruses will undoubtedly be a much greater concern for shoppers in the future so brands which have these benefits or have the potential to extend brands into these benefits should put more focus and media investment here.

Cooking at home is likely to see a resurgence with many people learning to cook and improving their skills during the self-isolation. Also many families will feel safer preparing and cooking their own meals rather than ordering take-away or going to a restaurant where there is a higher risk of infection. Consumers will be keen to continue these habits once the epidemic is over so for food brands it’s important to link the brand to in-home meal occasions, food safety and spending time with the family.

Limited Impact Categories: Essential Categories that were Unaffected by the Outbreak

Categories falling into this segment includedog food, cat food, toilet tissues, infant milk powder, packaged water and sanitary protection all appear here. These are categories which many households simply cannot live without but at the same time you do not need to use more of during an epidemic. The panic buying behaviour of toilet paper that has recently been seen in some countries, such as Australia and the US, was not witnessed in China.

Another characteristic of the ‘limited impact’ categories is that they are more likely to be purchased online compared to the other segments. 25% of the spending on the ‘limited impact’ categories came from online versus just 19% for an average FMCG category. Online deliveries played an instrumental role in not only ensuring households received essential products during the epidemic but also meant people could safely self-isolate and not have to visit their local offline store.

Looking ahead to the rest of the year a key consideration for these categories is how many consumers the online channel has won as a result of the outbreak.We know that this channel performed very well during the epidemic, winning new consumers and additional trips. Many consumers will continue this behaviour for many of these type of categories so working with online retailer do ensure your brand can capture this increased demand will be critical to growth.

V-Shape Categories: Loss of Consumption but Quick to Recover

Categories here experienced a significant drop in sales during the last week of January and first week of February but have been relatively quick to recover with many returning to expected weekly growth rates within 6 weeks from the week of the strongest decline. These categories include cooking oil, UHT milk, yoghurt, biscuits, nutrient supplements and laundry detergent. The reason these categories are likely to have experienced a sharp decline is either due to limited availability during the peak of the outbreak in shopper’s local stores or many households deemed them unessential for a week or two during the peak. Also, many shoppers will have had excess stock already resulting from bulk purchases made in the run up to CNY which is often the trend seen for many categories, such as cooking oil and biscuits.

However, these categories were quick to recover once shoppers felt it was safer to shop and/or the excess stock in their home had been used. One of the main concerns for these categories is that the lost or reduced consumption is unlikely to be compensated for later in the year. CNY is an incredibly important time for many FMCG categories and as a result of many household cancelling their family gatherings during this time, it meant this period of excess consumption simply did not happen and that extra stock in shoppers homes was consumed in the weeks after CNY. However, the fact that many of these categories have returned to their usual weekly growth levels shows that the demand is still there. Manufacturers will need to find ways to encourage additional usage occasions in-home to help compensate for the loss experienced during the peak of the outbreak. This can be done by capitalizing on holidays later in the year, such as Golden Week in October or through multi-buy promotions especially for those categories which are more expandable in their nature (i.e. if you encourage shoppers to buy more they will consume more, such as biscuits or soft drinks).

U-Shape Categories: Loss of Consumption and Yet to Recover

These categories are ones which have experienced the worst impact as a result of the Covid-19 outbreak as they experienced a significant decline during the peak (generally worse than the decline seen for V-Shape categories) and 6 weeks later they are yet to show signs of a full recovery. Categories here include skincare, make-up, shampoo, Chinese spirits, wine, beer, chocolate and candy. Many personal care markets have been hit hard by the coronavirus as people had to self-isolate during the epidemic reducing the demand for make-up and other beautification products. Many households self-isolated for almost 2-months and with China only just now returning to normal we are yet to see these markets recover. The reason for seeing alcohol and snacking products here is that people are more concerned with their health during the outbreak and want to keep their bodies fit and healthy in case they need to fight off infection. This coupled with the fact that many CNY celebrations were cancelled, as mentioned above, has meant a significant loss of consumption as well as the potential for lower future demand. The key for brands operating in those categories is to ensure that they can capture demand for these categories by emphasizing the benefits their brands can offer in the new era. Consumers will be more concerned with health but will also be looking to savor family occasions and social gatherings even more than before, given that they have been unable to do this for almost 2 months. Therefore, capturing these moments of happiness and time together can benefit both snacking and alcohol.   The perception of beauty will become more care driven than before, and products that stabilize skin condition and provide extra nourishment will recover faster.

Conclusion

The path to recovery will be different for every brand and category as it depends on how the category has been impacted by the Covid-19 outbreak but also how consumers needs will change in the future. Below are areas that manufactures will need to understand in order to find the fastest path the recovery:

• Demand Forecasting – understanding of future demand post Covid-19 and how to compensate for lost usage occasions
• Marketing Growth Drivers – what elements of the marketing mix will help to drive sales after the epidemic: advertising, promotions, in-store activities and distribution are likely to have different weights of importance post epidemic.
• Usage occasions – identifying new usage occasions that have arisen as a result of the coronavirus will be critical in helping to capture future demand and developing new products to meet these new needs.
• Media Investment – how to optimize your media investment will be more crucial than ever especially in the event of reduced budgets. Knowing who to reach and how to reach them in the most cost effective way will help to improve the return on investment.
• Channel Dynamics – online and O2O will be even more important channels post epidemic so understanding how people’s behaviour changes when shopping via these channels will help to identify new growth opportunities.

Observation 1. Strict Quarantine Policy leading to more spare time for in-home cooking

According to Kantar Consulting’s nationwide survey in February, 75% of respondents claimed that they followed the quarantine policy and cancelled social activities during the pandemic. In the meantime, from Kantar Worldpanel’s survey conducted in North China, we found out that nearly half of respondents claimed that they are buying more fresh food than before. The high year-on-year growth of seasoning products after the Chinese New Year also implies that consumers spend more time in the kitchen preparing meals.

In addition, quarantine makes in-home cooking a fun activity to kill time. Shown in our data, top growing sauces are broth, curry and cheese due to people’s interests for new cooking recipes. On Weibo, “homemade dish challenge” became a trending topic with over 2,260 million views. Also, an increase in the number of searches for new cooking machines like rice cookers, barbecue grills, and blenders on e-commerce platforms further proved that new occasions of cooking are getting more popular in China.

Implication 1

In short term, the “revenge-consumption” caused by COVID-19 will raise people’s interest in cooking and demand for new cooking recipes and ingredients. With more time spent with families and close friends at home, consumers will possibly keep the habit of in-home cooking, which implies that they will maintain their high demand and requirements for fresh ingredients. More importantly, “convenience” is a key consideration for in-home cooking due to people’s shortage of time. Curry, ketchup and other easy-to-cook sauces will be optimal choices for consumers.

Observation 2. Fresh food’s nutrition properties fits with people’s concern of health

There’s no doubt that the outbreak of COVID-19 has increased people’s attention on health. The search number of keywords like “health” and “immunization” increased by over 1000% after the outbreak. Mainstream media like CCTV also reported that nutrition like protein and vitamins in fresh diary and vegetables can boost your immune system. Moreover, more young people started to share their in-home cooking of veggie smoothies, healthy diets along with in-home workouts through vlogs, which further incentivize more people to adopt a healthier lifestyle. The Silver generation also claimed that they would spend more on fresh food than before to keep in good health.

In addition, many live-poultry markets are permanently shutting down and being replaced by industrial processes, such as large scale poultry farms and cold-chain transportation, due to authority’s strict enforcements to butcheries. Nevertheless, fresh meat, live fresh water fishes and seafood are still popular with consumers since their perception of being fresh is associated to healthy, high-quality products.

Implication 2

People’s increased attention on health will not decline as pandemic goes away. On the contrary, ¾ of Kantar Health’s survey respondents said that they will be more concerned about health after the COVID-19 pandemic. It will bring new opportunities for manufacturers to add “nutritious” and “healthy” to their messaging to follow this consumer trend and promote public healtheducation. Healthy fruit/vegetable snacks also have some market potential. On the other hand, fresh retailers should not overlook the importance of poultry and meat products’ freshness and nutrition to attract consumers.

Observation 3. Outbreak acts as the catalyst for digital purchase behavior

Driven by the rapid development of mobile e-commerce and delivery, fresh delivery is sky-rocketing since 2018. Traditional channels like free-marts will continue to lose share. In 2019, the average number of channels shoppers buy fresh food from reached 5 channels. As expected, consumers demand for fresh delivery surged during the COVID-19 period. Many O2O and E-commerce platforms like Miss Fresh also introduced “contactless” delivery to avoid direct contact. In January 2020, O2O and online penetration for fresh food reached 20% and 22% respectively in Urban China. The online penetration shows a fast-moving trend toward less developed areas: tier 2 and 3 cities; and the silver generation with their increased mobile usage. Wechat is another popular channel for community or neighborhood purchases of fresh food. A Kantar Consulting survey research found that 35% of respondents used Wechat for fresh food purchases in February nationwide.

 Implication 3

With the arrival of O2O 2.0 bringing in new buyers, fresh food retailers should consider of how to retain them after COVID-19. By 2022, Online + O2O is expected to triple its market size, projected to reach 15% market share in the fresh food category. According to Kantar Consulting, 42% of online new buyers claimed that they will consider a combination of online and offline shopping after the pandemic, which means that Omni-channel is the key trend for fresh food purchasing.

On the other hand, as online limits consumers’ selection process, one of most common complaints is the consumer’s low satisfaction of fresh product quality. Therefore, especially for O2O channels, it is really important to retain consumers by providing high quality, fresh products. Meanwhile, retailers should collaborate with manufacturers to adapt their offer to new consumer needs who order from O2O or Online. For example, since convenience and health are two significant market trends, offer “convenient” combination packs, such as multi-fruit snack packs. Moreover, in view of different family sizes, fresh dish ingredients packed along with recipes to satisfy specific family needs could be more attractive. Also, the nutrition facts summary and health benefits could be added in the product page description in addition to the fresh delivery details.

For FMCG categories price increase can be one of the key drivers for value growth. Actually more than two-thirds of the fast-growing categories have seen a price increase higher than market average. 

Therefore, it is critical to understand the reason behind the price change and how shoppers react to the price increase, in order to utilize the price strategy and grow your category and brands. 
Kantar Worldpanel have developed a new solution called ‘Price Growth Response’ that can help you gaining a deeper understanding of important metric.
Basically there are two steps we can do: Price change decomposition, and Shopper reaction deep-dive:

Price Change Components

What components have driven the price change in my category? Is it purely like-for-like SKU price change, or are shoppers switching more of their purchasing to premium products? To answer these questions we decompose the price movement into 3 parts: like-for-like inflation, new launches and core product mix.

At the total grocery level in China, like-for-like inflation and the higher price of new launches have had a similar contribution to the price change. Even though the products entering the market are more premium, the existing products in the market contribute to ~80% of sales across the two time periods (this year vs last).

Price Change Components helps us

• see how inflation impacts price,

• understand the role of NPD to identify whether to launch more premium products in order to meet the consumer demand,

• know the role of core and premium products, and

• form a strategy focused on better management of pricing to feed into your pricing strategy.

Shopper Response to Price Increase

How will shoppers react when prices in a category rise rapidly? Shoppers have a number of options when they experience an increase in price. They can choose to buy more volume, shoppers in a cheaper store, buy more on promotion or move to a cheaper product in the category. Kantar Worldpanel can quantify the impact of these difference responses to show you which one is have the biggest impact on household spending.

At a grocery level we see that shoppers are not being put off by price increases. Shoppers are buying more volume, spending more through promotions and buying more expensive products. The net effect is that household spending in increasing at a faster rate than inflation.

Shoppers’ response to price increase helps us

• understand the importance of inflation,

• quantify different responses to inflation,

• know which factor is behind household spend growth, and

• form a strategy focused on growing household spending to feed into category and brand growth strategies.

Modern trade (including hypermarkets, supermarkets, and convenience stores) fell by 2.7% in the latest 12 weeks compared with last year. Against the backdrop of declining of total FMCG market, the household products sector bucked the trend with a value growth of +8.5%, mainly contributed by cleaning and disinfectant products.

During the reporting period, most modern trend retailers were affected by the epidemic. Yonghui outshone its peers and achieved a staggering growth of 11.2%, driven by its strong ability in attracting more consumers and enlarging basket size. As the demand for fresh foods surged during the outbreak of epidemic, Yonghui managed to grow with its wide store portfolio and strength in its supply chain.  

Meanwhile, E-commerce growth slowed down but maintained a high level double digit growth of 21.5%, despite challenging transportation restrictions and staff shortages amid the coronavirus outbreak. Growth of the E-commerce market was driven by an increase in penetration of 8.2ppts compared with the same period last year. Alibaba group saw a strong uplift in penetration with a jump of +7.9 ppts, followed by JD (penetration grew by 3.9 ppts).

During the epidemic period, consumers turned to online delivery as they stayed indoors. O2O platforms (including retailer’s own delivery platform, JD Daojia, Ele.me etc.) became extremely popular as they recorded a penetration of 14.6%; Hema has nearly doubled its penetration in the past 12 weeks. To meet the booming demand for home delivery and to solve staff shortage, e-commerce platforms, like Hema, as well as other grocery retailers, such as Yonghui and Walmart, have been creative in hiring thousands of temporary staff from small firms and restaurants whose operation have been severely hit by closures.

17 years ago, when SARS hit China, Packaged Ice cream struggled to maintain in home, lagging behind the development of Food and other snacking. 

However, in 2020, when negative news kept popping up after the announcement of national outbreak and consumers could not help feeling anxious, depressed and lost*, IH Ice cream enjoyed 18% growth in the first two weeks of the outbreak, and accelerated at 37% in the next fortnight, outshining FMCG Food and Snacking. 

This does not only reflect the differences in how people react to similar events under evolving macro landscape, but also proves that the ability to connect and motivate consumers emotionally during epidemic is highly appreciated.

With the willingness to support Packaged Ice cream manufacturers during and after the epidemic, Kantar Worldpanel hereby gathered updated observations from purchasing perspective to provide food for thoughts on future development of this category.

01. The emergence of In-home consumption

Compared with other countries (including neighboring Vietnam and Indonesia), eating ice cream at home is not a common activity for Chinese people. In fact, there are less than 50% of Chinese families buy ice cream for in-home indulgence and family sharing every year.

In three years of 2017-2019, volume contribution of IH during Chinese New Year month is less than 25%. Yet in 2020, this number increased to 37% under the impact of quarantine regulation. Despite the rising priority for fresh food, staples and hygiene during this time, the love for Ice cream is still there, and people are satisfying their need in home when eating out is not encouraged.

Breaking down the source of growth for this category, the development of Ice cream last year strongly relied on the increase of average price, thanks to premium trend and manufacturers’ price raising. 

However, during the first and most crucial month of Covid-19, the growth of in-home Ice cream was backed by more shoppers, more frequent purchases and bigger trip size. 

This healthy movement clearly reflected the role of Ice cream in satisfying the need of mood lifting among individuals when they study/ work from home and of family sharing when people spend more time at home.

Tips for manufacturers

• Although the sustainability of IH consumption for Packaged Ice cream is still to be seen and we cannot expect this category to maintain the growth as well as Hygiene categories could do after SARS, investments to explore in-home occasions will pay off hugely.

• In short term, it is essential for Packaged Ice cream players to redistribute media support towards indoor touchpoints, especially on online platforms, and ensure sustainable stock in brick-and-mortar stores. Small Modern trade formats and Grocery are top priority of distribution during this special period. Meanwhile, Gifting and Online are less relevant to this category due to its dependence on temperature to maintain original quality, texture and shape.

• In longer term, besides trade and marketing efforts, innovations to offer more healthy products will help brands and total categories prevail in the future, as rising health/ beauty concern could be the biggest constrains to build up Packaged Ice cream consumption.

02.  White gap for non-summer consumption when in home

Unlike other FMCG categories, Ice cream experiences the peak of consumption in summer, when hot weather triggers the need for something cool.

In 2019, 55% OOH volume and 72% IH volume of Packaged Ice cream was consumed within only 4 months of the year, from mid-June to early-September. It means during summer, Packaged Ice cream consumption increases by +80% for OOH and by +133% for IH, much higher than the uplift of Treat and Snack in their peak season. 

This comparison demonstrates the crucial role of summer to Packaged Ice cream but also shows a fact that in IH market, low season generates less than half of volume compared to peak season regardless of double time length. 

In fact, the contribution of IH in peak season is up to 43%, much higher than 28% in low season. Such a strong bias of time and consumption for IH market definitely indicates white gap for cool seasons and raise the question of the how much brands have leveraged low season to grow when IH.

Tips for manufacturers

• To capture IH occasions in low season, Packaged Ice Cream players can consider the triggers of purchase in different time of the year. When setting aside the preference of taste (the key reason for consumption of more than 30% purchases), “refreshing” is more likely to trigger purchases during summer while “want something rich” and “to treat myself” are more appealing reasons in low season. Ice cream players can customize their communication in different time of the year to capture different needs of consumers.

• Finally yet importantly, global warming is now one of the biggest trend worldwide and affecting many aspects of life. While Packaged Ice cream could be one of the industries to benefit from it (both IH and OOH, during both high and low season), actions to enhance eco-friendly image would help brands win in competition and ensure sustainable growth.

After tremendous efforts to contain the virus, China started to see a cool-down in the spread of Covid-19 by end of February. 

According to experts in medical and health care, the epidemic is forecasted to end by Q2’2020. Until then, players of Packaged Ice cream should well leverage this opportunity to convert and educate consumers about in-home pre-summer consumption, not only to compensate the loss of OOH in short term but also to open a new development area in the future.

 At the same time, we should be well prepared for the upcoming hot season when things get back to normal and OOH consumption revives. The outdoor F&B competition this summer is expected to be fiercer than ever.

Reference

https://cn-en.kantar.com/business/health/2020/health-awareness-and-behaviors-during-covid-19-epidemic/

Note

Treat and Snack = Biscuit, Crispy Snack, Confectionery (Chocolate, Gum, Mint, Fruity Candy)

This year, due to the event of Covid-19, the needs for hygiene, nutrition and meal replacement grew significantly. The quarantine practice – either forced by government policy or voluntarily taken for self-safety – has put limits on outdoor entertainment and social interaction and generated new occasions for in-home indulgence and consumption. Targeting these new in-home occasions will be key to growth for snacking brands during this special period.

17 years ago, SARS had limited impact on the development of Treats and Snacks, as quarantine regulation was not officially implemented, and the critical time of the epidemic did not fall into Chinese New Year. Now given the coincidence of time, the change of macro landscape and the evolution of retail, we can expect a big change in how people react towards snacking.

To help Treat and Snack players find a way through this tough time and prepare better for black swan events in the future, Kantar Worldpanel made a review on consumer snacking behaviors during Covid-19.

Big challenge for gifting observed

Considerably less Treats and Snacks were received as presents during Chinese New Year and Valentine’s Day, driven by less social gatherings and the change of gift choice. Fruit flavored candy and Chocolate led the decline as they are the most relevant gifting treats, followed by Crispy Snacks. On the other hand, Personal care and Hygiene categories occupied a higher share of gifting during this time. According to Meituan, the most searched gift list for Valentine's Day on its takeaway platform is masks, goggles, and alcohol disinfected cotton tablets. On social media, presents made from fresh food and hygiene products (such as surgical-mask bouquets) went viral, as people became more realistic rather than romantic during this time.

There are still potential growth areas for Gifting during both official holidays and personal occasions. Treat and Snack players should consider re-designing the gifting offers, with collaboration and communication focusing on health and wellbeing to win hearts and wallets of shoppers.

Purchasing for in-home consumption growth

Treat and Snack purchases for in-home consumption improved across channels in the two weeks of mid-February, led by young family types, especially young singles/ couples who use snacking to alleviate the boredom during the quarantine period. Confectionery still experienced a decline for take-home purchases but the recovery was much clearer than in gifting acceptance. Chocolate tended to be the first one returning to growth.

During this special time, creating more in-home snacking occasions would be the key to success. According to Kantar online survey, watching video is the most common time-killing activity when people stay at home, followed by social media, mobile/ online games, and cooking. A redistribution of media from offline to digital, with communication related to mood lifting and specifically targeting daily micro occasions, will help brands to win new shoppers and occasions. On the other hand, suggesting new cooking recipes with snacking ingredients on fan page/ live streaming can also be a good way to improve the consumption of Treat and Snack.

After the epidemic, Food safety would be what brands should focus on, as agreed from the majority of respondents to our online survey. Additionally, more than half of surveyed consumers stated that they would spend more on Personal care and Household hygiene/sterilization products (such as mask, disposable hand sanitizer, sterilizing wipes, etc.) after the virus is contained. Therefore, ensuring product quality, smart cross-border offers and close co-operation with retailers for adjacent categories will help Treat and Snack players grow further after the outbreak.

E-commerce and O2O witnessed strong growth

Despite logistic constrains, e-commerce and O2O rise as the best solutions for shopping when people are trying to reduce physical interaction. Over the 3 weeks after CNY, e-commerce enjoyed a 15% uplift led by Crispy Snack and Biscuit.

If 17 years ago, SARS played a big role in setting the foundation for thee-commerce then in 2020, Covid-19 boosted the growth of O2O. Over the 3 weeks after CNY, O2O doubled its size in Treat and Snack. Similar to E-commerce, Crispy Snack led the trend with more than 200% growth rate, followed by Biscuit and Confectionery. As outdoor activities are not encouraged, people have a higher need for in-home cooking and consumption, leading to the growth of fresh food and ready-to-serve food delivery. Cross-category activities/promotions on key O2O platforms will help Treats and Snacks leverage the huge traffic of these staples.

The critical time of the epidemic should be long enough for Chinese people to break the psychological barriers and build up the habit of shopping via O2O. After the outbreak, an on-going development of this channel could be expected, especially among shoppers aged 30-44. However, Treat and Snack manufacturers should have a fair expectation for O2O growth when things get back to normal. According to Kantar online survey, offline channels still have a bright outlook, especially among those >40y/o. 36% surveyed consumers said they would visit hypermarkets more often and 37% said they would visit supermarkets more often. Therefore, gradually balancing the support towards offline would help Treat and Snack manufacturers adapt to the upcoming changes, whilst retaining buyers after the outbreak should be top priority for O2O retailers.

The unexpected virus outbreak is still going on and how brands can respond to these challenges remains to be seen. Although in-home consumption is now the priority, Treat and Snack players should be ready for the out-of-home competition, which is expected to come by end of Q2 when the virus is well contained.

***Treat and Snack includes Biscuit, Crispy Snack and Confectionery (Chocolate, Gum, Mints, Fruity Candy)

***2019 CNY week: Feb 2^nd – 8^th / 2020 CNY week: Jan 25^th – 31^st

Kantar Worldpanel believes the current epidemic will ride on the healthy and high-quality lifestyle trend and further influence consumers’ choice and behavior in the following three aspects: category expansion, product upgrade, and new usage occasion. In terms of category expansion, categories focusing on professional degerm and health such as antiseptic wipes and disinfectant liquid are most likely to be impacted. In terms of product upgrade, traditional degerm products will achieve multi-function upgrade by adding functions such as “natural”, “gentle” and “purifying”. In terms of new usage occasion, products designed for specific (as opposed to general) usage occasion will become popular, as consumers are leading a more sophisticated life.  

According to Kantar Worldpanel’s household panel, sales of household cleaning categories soared against the overall FMCG market trend under the double impact of CNY and epidemic outbreak. Such market change was attributed from both buyer and consumption increase, indicating a real demand surge; strongest of growth trend was seen in disinfectants, toilet cleanser, and air freshener.  While consumers generally tend to wait until their home inventory is depleted or stock up the basic necessities due to restricted mobility during the epidemic period, they see the need for and purchase more types of cleaners for different usage occasions.

Further encouraging news to this growth trend is that only 28% of Chinese households purchased disinfectant liquid in past 1 year, leaving much room for additional growth when benchmarking some European countries. In addition, latest data from Kantar Worldpanel shows that disinfectant penetration grows with economic development of household. Coupled with the continuing development of Chinese economy, this is an opportunity to raise public awareness on health and hygiene care; we believe that disinfection and degerm categories will continue to grow in the long run. In terms of brands, young families show preference for multi-functional and relatively more gentle disinfectant liquid products from Dettol over traditional 84 Disinfectant Liquid preferred by older families.  Manufacturers can more actively engage with young consumers through various online/ mobile platforms to educate them on the need for and benefit of using disinfectants in regular cleaning.

In addition to the disinfection category, degerm segment in the laundry detergent category is also performing well. Many products are taking on the degerm+? benefit positioning and actively communicating their differentiation/superiority in gentleness and functional efficacy. For example, LIBY Tea Seed Degerm series and OMO Natural Enzyme Degerm Anti-mite series claim "natural" + "degerm" benefits. These two variants have so far achieved high growth in the fiercely competitive laundry detergent market on the back of winning with families with kids.  Initially given a boost by the epidemic, degerm benefit is likely to continue on the growth path, especially with the increase in households with kids (both young and teens) resulted from the two-child policy implemented in 2015.

Disinfectants and other degerm products had not been perceived as necessities by Chinese consumers as evident by low category penetration until the beginning of the epidemic. Nonetheless, people are becoming more acutely aware of the benefit of hygiene and health care, and it is likely use of such products will become more routine, further fueling the growth of relevant categories.

There's no doubt that the current epidemic outbreak has deeply influenced consumers' daily life and in addition to the impact on food and transportation, it's estimated that changes will also be witnessed in consumers' purchase behavior across personal care and beauty products.

According to Kantar Worldpanel’s beauty panel, prior to the outbreak of Covid-19, the overall traffic of personal care sector has been relatively stable. During the year, March, mid-year, and the end of the year usually gain the most obvious traffic growth driven by promotion activities from online retailers. 

Among all the subcategories, skin care has won the most traffic, while color cosmetics has gained the biggest year on year growth up to January 24th 2020.

How will personal care and beauty categories perform after the outbreak of Covid-19? 

We have the following predictions:

01.Short-term influence on hair care

During SARS outbreak in 2003 there was no official quarantine policy from government so most consumers still maintained their regular pace of daily work and life, but when they came back home, they cared more about their daily personal care routine. This boosted certain cleansing categories such as hair shampoo and body wash.

But during the recent epidemic situation of Covid-19, under the strict (semi) quarantine suggestions and policy, consumers have been staying at home for most of the time (even as long as 14 days) without going out and working from home has been widely accepted by many companies.

In this unique scenario consumers have decreased their hair washing frequency and "no hair wash" has been a popular hash tag in social media. For example, in Sina Weibo, the topic of “number of days without a hair wash” has over 65,000 discussions and over 379 million page views. 

We can foresee that in a short period, the related categories, such as hair shampoo, conditioner, will see a drop in purchasing. But in the medium to long term, with the relief of epidemic situation and people returning to work the hair care category will soon start to pick up.

02.Big impact on Color cosmetics and fragrance

While consumers are still using body wash and hair shampoo at some frequency, color cosmetics seems to be less relevant as most females are staying-indoors and the biggest influence should appear in the two weeks after China Lunar New year. 

We estimate that during the current outbreak or even some time after the outbreak finishes, the recovery of color cosmetics will be relatively slow as the protection on face will last for some time.

In spite of the huge impact, there are some encouraging signals when you consider the new life style and work style among young generations. 

The increasing popularity of video conferencing, video dating, selfies and livestreaming on Social networks mean many young consumers will still wear makeup, and some sophisticated females even invented "face mask makeup styles" which focus more on eye makeup. In Sina Weibo, "the must-haves for face mask makeup" topic has gained more than 14,000 discussions and over 8.9 million page views up to February 20th.

For fragrance, due to less socializing out of the home during the epidemic outbreak combined with the increased usage of disinfectant fluid /spray, the number of fragrance usage occasions will reduce significantly.

03.Rising awareness for body cleansing, skin care will also win more attention

Led by hand wash / sanitizer, body cleansing is surely a hero category during the epidemic outbreak. In addition, due to long periods of staying at home, the lack of exercise, and the wearing of face masks, the facial skin status will also be influenced including the problem as skin dullness, roughness due to friction, sensitivity, which will need more care. And with the increasing frequency of washing hands, there will be an increased need for hand cream. 

These factors will drive the rebound of the skin care category, especially those products with the benefits of keeping skin healthy

04.The next rising star: Environment friendly products

According to a survey on sustainability by Kantar Worldpanel in 2019, more than half of Chinese consumers pay close attention on "sustainability", which is mainly out of their concern on health. 

As the outbreak of Covid-19 is somewhat considered as the revenge from the nature, in the future, we expect consumers will show more care towards Mother Nature. This alongside the continuing education from media and brands abut sustainability means that products with environmental friendly elements will gain more preference among consumers which will likely inspire the beauty industry to integrate sustainability into brand strategy, and focus more on products with "nature" and "healthy" concepts.

Though we predict that personal care and beauty categories will be impacted greatly during the epidemic outbreak, with the increasing of health awareness among consumers, and the recovery of normal daily life and going-out frequency, different categories will start to pick up at different times.

It’s estimated that hair care will bounce back relatively quick, and then skin care; while for color cosmetics, it might take some time until consumers feel it is safe to remove their face mask.

Kantar Worldpanel will closely monitor the impact on personal care and beauty categories from Covid-19 outbreak in the first half year of 2020, and provide up-to-date information on how these categories are starting to pick up.

“The demand for household paper increased significantly

during the SARS outbreak.

Consumers were willing to choose higher quality, more expensive products." 

According to the data during the SARS period in 2003, the increased time consumers spent at home would inevitably drive a significant increase in demand for household necessities. Household paper products also benefited from this. The growth rate of paper products in the 2nd quarter, the period most affected by SARS, was higher compared to the other quarters, especially for facial tissue.

Meanwhile, during the epidemic, consumers were willing to choose higher quality products at a higher price due to safety and health considerations. We found that the price index of facial tissue purchased by consumers during the epidemic outbreak was 15% higher than the average for the whole year.

“Impact of Covid-19 on the Future

Household Paper Market in 2020”

Since 2003, the consumption of household paper products in China has seen significant development both in terms of quantity and quality. Furthermore, compared to 17 years ago, the consumer perceptions and the category structure was very different. We believed that the household paper category in the epidemic and post-epidemic era will usher in new opportunities.

In the short term, the Covid-19 epidemic in 2020 will result in a strong demand for paper products, especially for the wet tissue products with the functions of disinfection and speed clean sterilization. In addition, as consumers have spent more time on cooking and eating at home, kitchen towel and wet tissues will also perform well.

New usage occasions for the category have also arisen as a result of the epidemic; for example, placing a disposable tissue in the office/residential elevator to ensure the hygiene of the elevator buttons. In Hong Kong some savvy consumers also use tissue to make reusable masks (though this could not extend the lifespan of mask).

In the long term, we predict the following trends in the household paper category:

1.

With the improvement of national health awareness, health, environmental protection and the pursuit of safety, food-grade paper products will become more and more popular and consumers are more willing to pay for better quality products. Antiseptic wet tissue will see rapid growth and unbleached tissue, with no bleach and free additive as the main selling points, will continue to perform well.

Brands can launch higher-quality products and communicate with the interest of health, environmental protection and safety to meet the upgraded needs of consumers.

2.

As consumers’ lives become more refined and sophisticated, their demand for different scenarios of household paper will be higher and higher. They will use kitchen towel in the kitchen; use wet toilet tissue in the bathroom, take mini-tissue and antiseptic wipes to go out; use soft-pack tissue for office desk or home table, use cotton towels for beauty care or makeup.

Brand owners could communicate and interact with consumers by connecting with different usage scenarios and drive the rapid development of new market segments.

3.

Consumers are more likely to choose comprehensive e-commerce and offline retail channels supported by O2O to purchase household paper. In 2019, before the epidemic, the new Omni-channel retail mode “Wu-Mart+Dmall” enabled Wu-Mart’s O2O delivery proportion to reach 13.8% value share of the business, far exceeding the 5.5% share for the overall modern trade channel, which also helped its household paper category to achieve a rapid growth of 8% under the stagnant environment of modern trade.

During this epidemic, driven by the convenience, consumers are more likely to choose shopping in community supermarkets/CVS, O2O platforms and integrated e-commerce platforms. It is believed that in the post-epidemic era, household paper will become a necessity on the O2O platforms, and increasing the investment on these mobile APPs to enhance brand exposure and offer more usage tips can gain a winning advantage.

4.

Key players in the market will further differentiate their brands from the competition, and the concentration of top mega brands may be strengthened. In 2019, the top four groups (Vinda, Hengan, Gold Hongye, Guangdong Zhongshun Group) in household paper category, together account for about 51% of the market, and the other 49% was occupied by regional brands and local brands.

After this epidemic, the consumption tendency of some mass consumers may become more rational and they will consider to purchase lower cost products again. Meanwhile, middle-class consumers would be more willing to purchase products that can satisfy the requirements of healthy life quality, and the demand of some subcategories will develop rapidly, thus accelerating the premiumisation trend.

This change in behaviour may eliminate a number of weak small brands in the market if they are not quick enough to adapt to the changing consumer needs. Mega brands, however, which can rely on abundant production lines and superior marketing resources may see a greater benefit if they have a well-balanced portfolio which fits with well within the new environment.

In an earlier report analysing the impact to the FMCG market by SARS last week, Kantar Worldpanel already shared key findings based on historical data from 17 years ago. However, as many analysts suggested, the scale and scope of the Chinese economy in 2003 was substantially behind the level in 2020, and therefore the impact of COVID-19 is believed to be much stronger than the impact of SARS.   This impact will definitely be felt by the FMCG market but not all categories and retailers will see a negative impact.

Chinese New Year (CNY) is one of the most important sales peaks for many brands and retailers. The date of Chinese New Year is not exactly the same every year so we have realigned the reporting period based on lunar calendar to make the data comparable. Since Chinese New Year in 2019 was one week later than 2020, we re-adjusted the data period by week and after comparing consumers purchases two weeks before CNY and two weeks after Chinese New Year, we are now in a position to assess the impact.

 1.    Pre-CNY Sales Stronger Yet Considerable Decline Observed After the Virus Outbreak

The total sales two weeks before CNY grew by 15%, substantially higher than the full year FMCG growth rate of 5.3% in 2019. However, after the Wuhan lockdown was announced on January 23rd, panic started to gather. As the Chinese government appealed to everyone to avoid family and friends gatherings and all social activities (including the suspension of cinemas and entertainment facilities across major cities), the sales of the CNY week dropped by 24% on a like-for-like basis and then by 41% in the subsequent week, as people were asked to stay at home. Based on our preliminary estimation, total FMCG sales went down by 12% over the 4 weeks period compared with 2019. 

The drop of FMCG market was partly due to the decline of shoppers by 2%, but more severely impacted by the drop of spend per trip by 10% as shoppers reduced number of categories they purchased. There are two main reasons behind the changes: consumers reduced their new year celebration gathering, hence there was a lower demand of categories that were normally purchased for CNY gifts. In the meantime, consumers had to relocate their budget to critical health and protective categories, i.e. face masks, disinfectant products and fresh foods.

2.   Mixed Performance by Categories Amid the Epidemic

The sharp drop of consumer spend is a bad news to many categories, especially those relying heavily on CNY sales. Both alcoholic and non-alcoholic drinks saw their sales fall by more than 40% during the 2 weeks after CNY as most consumers cancelled their family gathering. In China, top choices for gifting occasions include liquid milk, confectionary and biscuits, all of which faced considerable challenges during CNY this year. On the contrary, categories like instant noodles, frozen foods and quick soup witnessed soaring demand as consumers flocked to supermarkets to stock up and spend more time cooking at home. Moreover, seasoning products, butter and cheese also enjoyed significant growth as consumers opted to cook more indulgent meals at home.

Non-food categories are typically less seasonal during the CNY period, however some of them were experiencing astonishing growth as anxious shoppers, desperate to protect themselves from infection, have stripped stores of hand sanitisers and disinfectants. Meanwhile, tissues and wipes gained more popularity as they were used for hand cleansing when consumers are out of home. Those categories are expected to maintain their growth momentum even in the post-epidemic era as Chinese consumers continue their sanitising habits.

“When did you wash your hair last time?” this is a top topic on social media during the period. As consumers stayed at home every day, their personal care routine tended to change. The sales of haircare products, including shampoo and conditioner, saw decline and the situation is even worse for colorant and styling products. Due to the fact people were not going out to meet friends or to the office, categories with strong social functions such as make up and fragrance also experienced disappointing sales.

3.    Offline Stores saw Considerable Shopper Loss while Small Formats and Digital Commerce Enjoyed Growth

Hypermarkets and Supermarkets all faced severe challenges of reduced footfall during the Covid-19 spread, with penetration dropping by 15% and 12% respectively.   During the festive period, gifting occasions also dropped significantly, with categories relying on nice gift packs for family/friend visits being hit particularly hard. As many consumers cancelled their overseas travel plans, purchases from other countries and duty free also saw a significant drop.

The epidemic did bring more demand to a handful of other retail channels. Small supermarkets, mainly those located in residential communities, reported strong growth during the CNY period, as they were closer to shoppers and stocked essential fresh foods and daily necessities. Ecommerce giant like Alibaba, JD and Pinduoduo, are also adapting their strategy proactively in terms of logistics and home delivery. Moreover, emerging channels riding on the popularity of Wechat enjoyed soaring demand as consumers spent far more time on social media for news and entertainment during this period.

New retail players, led by Hema, recorded stronger growth during CNY period, thanks to more shoppers and more visits as consumers opted to use delivery for their daily foods. With rapid store expansion, Hema almost doubled its footprint compared to CNY in 2019. Meanwhile, it’s the first retailer to accept redundant workers from restaurants and catering services as part-time workers for sorting and delivering merchandise. The move is a win-win solution for both industries to survive through this difficult period. Innovative solutions such as ‘contactless delivery’ was also invented to avoid physical contact between shoppers and delivery workers. Omni-channel penetration with O2O delivery is expected to be more accepted post the crisis.

The battle against COVID-19 is still on and the challenges to FMCG industry is yet to be fully observed. The wide spread epidemic will have a profound impact on FMCG categories in Q1 and possibly in Q2. Kantar Worldpanel will launch a monthly category tracker to help brands and retailers closely monitor the impact.

How about this year given the rising challenges presented by the coronavirus outbreak? A recent survey conducted by Kantar Worldpanel shows that over 60% of consumers in Tianjin have cancelled their traditional family reunion dinner for the New Year as most people choose to stay at home to help limit the spread of the virus. This would inevitably generatea significant impact on catering and the out-of-home beverage market. Many beverage manufacturers would also face severe challenges of production and sales during the first quarter.

To learn from past experience, Kantar Worldpanel reviewed the beverage purchase behavior during the SARS epidemic in 2003, totry and help brand owners find a way through this tough time.

Category Strategy: Packaged water and sweet drinks “fight” against epidemic together

Although the out-of-home beverage market would inevitably be affected by the epidemic, the demand for in-home consumption was strong. Dairy (as mentioned in our article last week) and packaged water are well placed to meet consumers’ demand during times of significant health concerns.

Kantar Worldpanel revealed that during the outbreak period of SARS in 2003, the demand for packaged water grew rapidly, especially in Beijing. Due to many families stocking up during that period, the purchase volume of packaged water increased by 21% in the three months of March to May in 2003.

This year, many doctors and health experts suggest that people should drink more water to enhance their immunity. Therefore, the search volume of the key words "drinking water" +"immunity” has greatly increased on Baidu.

17 years ago, phone ordering water to home was still the mainstream. We have observed that during SARS, the pack size of the packaged water stocked was still dominated by above 5 liters of barreled water, accounting for 90%. Now, there are more options of pack size and more diversified usage occasions for packaged water.

In recent years, the penetration rate of packaged water (5 liters and below) has reached 86% within the in-home market. It is possible that those who do not have a drinking fountain or those who did not have the habits of consuming packaged water at home before may start to choose packaging water less than 5L during the coronavirus epidemic. This could be an opportunity for manufacturers to increase production of packaged water and proactively expand their sales network to provide convenience for consumers and stimulate purchase.

In terms of sweet drinks, such as carbonated soft drink or fruit juice, they either declined or witnessed a slow down in sales during the outbreak of SARS. Although sweet drinks seem to be less relevant to defend against an epidemic fight, opportunities do still exist if manufacturers and retailers can break conventional thinking.

According to cross-category analysis, Kantar Worldpanel found that during the SARS period, consumers did not curb their desire for snacks. To some extent, sweet drinks and snacks are similar, both are attributed as 'indulgent' and 'joyful', which can bring happiness, alleviate boredom and help relieve anxiety during the epidemic. In the past two weeks 'quarantining' in the house as led to many netizens making bubble tea themselves in order to satisfy their craving for it.

Opportunities for sweet drink brands exist if they can communicate with consumers about diversified in-home drinking moments such as joyful and relaxing moments via short video and other social media during the epidemic.

Channel  Strategy: Ride on the trend of e-commerce and new retail to seize the opportunity resulting from increased demand for home delivery

Due to higher logistic transportation costs the e-commerce channel is still not a large channel for packaged beverages with only 8% of the annual sales coming from e-commerce during 2019. For most beverage manufacturers, e-commerce is more like a platform for brand building and consumer communication. The epidemic this year affected a wider area than SARS, with restrictions for residents to go out to limit the spread of the virus. This combined with the obvious health and safety concerns means many families will prefer to purchase via e-commerce or home delivery service platforms until the epidemic subsides. Many consumers will only consider a trip to their local supermarket or convenience store when the e-commerce platform runs out of stock.

Many beverage manufacturers are facing the issue that the products they have distributed to offline channels before Spring Festival may now be overstocked. They could seize the opportunity to leverage home delivery service platforms or fresh food e-commerce. On one hand, this way could help activate their inventory, on the other hand, they could create more specific usage occasions to help recruit new buyers. Packaged water can be bundled with fresh food to remind consumers to use packaged water when cooking or snaking brands can promote 'happy snack sets' to help reduce anxiety and create new occasions.

In addition, many enterprises have resumed work with employees returning to the office this week. Generally, some white-collar consumers used to go to restaurants or fast food stores around the company for lunch. Now for safety reasons, many companies suggest employees not to have meals together, hence self-made meals and food delivery will continue to be in high demand until the epidemic is over. Many large catering enterprises consider food delivery service is essential to recover their business during this tough period. Beverage players could also seize the opportunity by cooperating with catering businesses.

Note: Beverage includes packaged water, liquid beverage, on premise beverage; does not includes alcohol.

In China, dairy products are widely recognized as having health benefits, and during the outbreak shoppers put more of them into their shopping baskets, resulting in some supermarkets selling out.

The proportion of liquid dairy products in domestic food shopping baskets in 15 cities in China increased by 2.5% during the SARS period 17 years ago, which fully reflected that consumers increased their dairy products purchase during the epidemic period to improve their immunity, although China's dairy products were still at the primary stage of development in 2003.

In the past 17years, China's dairy industry has undergone significant development with many new sub brands, formats and flavours now available. Products which communicate more on inner heath and immune strengthening will do particularly well during the Coronavirus outbreak.

High-quality Protein

At present, 3.6g milk protein content has become the standard of high-end milk which  has always been an important category leading the growth of dairy products.

According to the research of Kantar Worldpanel, the average compound growth rate of high-end white milk in 2017-2019 reached 10.5% (versus overall liquid milk growth of 2.7%). Meanwhile, some high-quality protein products that are easier to absorb, such as a2b casein, are booming.

Active Probiotics

Active probiotics play an important role in low-temperature yoghurt, which is popular among consumers, especially high-income groups. According to Kantar Worldpanel, the average compound growth rate of healthy functional yoghurt in high-income families (family income greater than 12,000 RMB per month) in 2017-2019 reached 11.6%.

After the outbreak of novel coronavirus, CCTV news broad cast a German study thatlactobacillus can 'activate' the human immune system. This may reignite the development engine for the active probiotics category. Of course,what needs to be emphasized here is that there is no doubt dairy products contain many beneficial ingredients for the body, including probiotics. 

As consumers, they need to carefully screen and judge the nutritional value offood based on their own personal requirements, while dairy enterprises are deemed to shoulder more obligations on guiding consumers on how to be healthy.

Good products can stand the test of time and consumers. We hope that Chinese consumers will scientifically supplement nutrition, fight against the epidemic together and wait for the spring blossoms.

Low Temperature Fresh Milk

Low temperature fresh milk, because of its low-temperature sterilization process, retains the living bacteria and trace elements beneficial to human body, while maintaining the pure natural fresh taste.

According to the research of  Kantar Worldpanel, the penetration rate increased by more than 3% in 2017-2019, which is equivalent to 5.5 million new urban households. 

Furthermore, through selecting better quality milk source and improving the processing technology, the manufacturers are striving to provide even higher quality of healthy elements and better taste.

Low Sugar/Fat 

Fat and sugar are a key focus of people's health management and in recent years how to reduce the intake of these components has become more important. Within Dairy low sugar and low fat products are performing particularly well.

The research of Kantar Worldpanel shows that in the yoghurt and active lactobacillus beverages, the amount of low sugar / sugar free products increased by more than 20% in 2019, and the penetration rate increased by more than 5%, far higher than the category growth rate.

In normal temperature milk, the amount of low-fat defatted products increased by more than 10%, and the penetration rateincreased by 11%, which was also far higher than the category growth rate.

Plant-based Dairy Products

For the recent years, plant-based products began to come into people’s view,  from the expanding business of soymilk drinks to the recent rise of plant-based yoghurt, these products are gradually becoming a viable diary replacement for many consumers, especially for vegetarians and vegans.

The nutritional value of plant-based dairy products lies in ‘not containing certain substances’, such as some allergens, lactose, cholesterol,saturated fat, etc. Many Asians are lactose intolerance and plant-based products do not cause the same negative effects on their body. 

The major features labeled by the products are that they are suitable for people with diseases, obesity, and lactose intolerance. 

Under the novel coronavirus outbreak plant-based products are likely to see significant growth, further helping todrive the industry.

On all accounts, the people all over the country are now fighting the epidemic and it is hoped that normal life and market order are restored as soon as possible. 

For the brands in the dairy industry, those who can grasp the latest changes of consumers' needs and develop and focus investment on healthy products that meet these needs will accelerate growth and drive the industry forward.

Packaged food consumed at home continues to see a slowdown in growth, reporting 3.1% in 2019Q4 and 2.5% in 2019. However, categories with health and wellbeing benefits continue to outpace the market. Homecare categories and personal care categories maintained a strong performance, reporting 8% and 11.5% growth respectively in 2019, driven by the desire of younger consumers to upgrade their lifestyles. 

Across all regions and city tiers, the West region and prefecture level cities were up by 6.7% and 5.9% respectively. Modern trade (including hypermarkets, supermarkets, and convenience stores) grew by 1.1%, 1.2 points lower than 2018, with hypermarkets and large supermarkets driving the slowdown in growth. E-commerce continued to record a staggering 36.2% growth in FMCG, with 78% of Chinese urban families purchasing FMCG online at least once over the year with an average frequency of 14.5 times in past one year. 

The outbreak of novel coronavirus in January 2020 is set to pose severe uncertainties and challenges to the growth in 2020. With 14,489 infection cases confirmed as of Feb 1^st 2020, decline in retail traffic as well as forced store closures will negatively impact retail sales in Q1. Furthermore the epidemic will further strengthen the position of e-commerce and delivery service, especially in fresh foods, as consumer try to avoid traditional wet markets.

What’s in store for 2020?

1.  Big players expect to recover as they embrace digital transform and diversify their operation model

Despite reduced footfalls for hypermarket retailers, they are actively embracing digital transformation and adopting new store formats and operation models to grow. Both RT-mart and Walmart have remodeled their stores, adding features such as self-service facial recognition checkouts. They are also leveraging multi-format strategies to bring customers convenience and freshness aside from value. The tie-up with e-commerce players such as Alibaba and JD also helped hypermarkets to tap into a growing appetite for fresh groceries and speedy delivery service. However, it is critical for the big players to make sure they get their value proposition and fundamental offer right. The success of Costco’s opening in China suggests that Chinese shoppers are willing to shop in big box retailers if they are able to offer quality products with a strong value appeal.

2. Step up O2O service to enhance customer experience

Loss in footfall is a common challenge for brick-and-mortal stores, and as a result winning consumers’ attention and driving basket size is the key to growth. With enhanced infrastructure and technology, Chinese consumers expect to buy their groceries anytime and from anywhere.  O2O delivery service has already become an integrated part of the retail offer, regardless if they are a big or small player, hence the quality of service as well as the digital experience will differentiate winners from the rest.  The market will be increasingly dominated by a handful players, such as JD.com, Ele.me, Meituan as well as third-party players such as Dmall.  Delivery service is expected to reach new penetration high with the concern of coronavirus in Q1.  

3. More competition for small formats as the space becomes more cluttered

Continuously rising store rental and labor costs along with strong consumer demand for convenient shopping experiences have demanded that stores generate higher sales per square meter and more straightforward store layouts for their customers. In 2019 most large players have launched new small formats, such as Yonghui Mini and Walmart Huixuan to get closer to shoppers and meet their daily needs.  Yet the speed of expansion should go hand in hand with the retailer’s unique selling proposition. For example, Suning is transforming its convenience stores as one-stop shop for both daily necessities and services including coffee, printing services, utility payments etc. This helps drive traffic and gives Suning a chance to up-sell customers on higher-margin services. 

4. Regional consolidation will continue

Local retail giants have intensified their M&A activities to expand their presence across different retail formats and areas. The regional champion has Wu-mart made active acquisitions over the past two years such as to taking a controlling stake of 55% in Chongqing Department together with Bugugao in June and took over 80% of stake in Metro in October. The top 10 brick and mortar retailers in China in 2019 only took up less than 60% share of modern trade, even in the East region.  As the growth in the future is increasingly determined by operational efficiency rather than blind expansion, more M&A will help to consolidate the retail landscape and make big players even stronger at a regional level before more national players emerge.

5. China's e-commerce giants doubled down on China's lower-tier cities

 Consumers in China’s less-developed areas are driving the next wave of consumption growth in the country. Over the past three years the gap in e-commerce penetration between upper and lower tier cities has narrowed, with 75.7% of shoppers in lower tier cities using e-commerce to buy FMCG products. Alibaba has invested 10 billion yuan in its daily deals site Juhuasuan, demonstrating its commitment to stimulate further growth from lower-tier cities. This tier of cities contributed to 70% of Alibaba’s new active customers in 2019. Competing with this is JD’s newly launched Jingxi platform, and Pinduoduo, China’s original group-buying platform, which has a strong focus on lower-tier cities. As China's top tiers market have become saturated, more growth is expected to come from from lower tier cities in 2020.

The impact of this outbreak has some similarities to SARS in 2003. Kantar Worldpanel China reviewed our consumer purchase data in China 15 cities back in 2002-2003 to shed light on how consumer behaviour changes might bring new challenges and opportunities for manufacturers and retailers.

The impact on the FMCG market

The first SARS case was discovered in Guangdong province in December 2002 and the first reported case outside of Guangdong happened in Beijing in March 2003. However, the major increase of infection happened in April and May 2003 and the spread of virus was contained by June.

The impact on the FMCG market during the first half of 2003 was significant especially during April and May where we observed a sharp slowdown. However, by June the market had recovered returning to similar growth rates seen at the beginning of the year. 

Categories In High Demand During SARS

The dine-out market was heavily impacted during SARS as consumers opted to dine at home instead. Culinary and instant food categories showed a noticeable sales increase in the 12-weeks ending May 2003. During this period, consumers also increased their purchase of Household Cleaning and Personal Cleaning products. 

Handwash was a very small category in China back in 2002. This category has become more and more popular since 2003 as consumers started to purchase more handwash during SARS. Kantar Worldpanel will continue to monitor and report the latest development of categories impacted by the novel coronavirus in 2020Q1. 

The impact on retailers

With the continuous spread of SARS, consumers chose to stock up mainly from the (neighbourhood) supermarkets back in 2003. Supermarkets and Convenience Stores showed a significant increase in sales during the 12-weeks ending May 2003.

2003 was the year when E-commerce started emerging in China. In May 10 2003 Taobao was launched, followed by 17 years of continuous growth, along with many other EC platforms.

With the high transmissibility of new coronavirus coinciding with the massive migration during Chinese New Year, the government’s public measures have also evolved in 2020 since SARS, when home quarantine was less mandatory in 2003. In 2020, we expect to see a large switch of shoppers spend to omni-channel purchasing and an increased share of EC retailers during this past Chinese New Year. The “No Physical Contact” new OTO/EC delivery model fits very well with consumers’ needs when advised to stay at home.

Devoted in understanding consumer behaviour, Kantar Worldpanel will continue to monitor 2020 coronavirus’ impact on consumers’ FMCG purchasing and we expect to see some differences this year compared to 2003 as the market and policies have both evolved. We look forward to sharing more points of view and updates with you in the coming months.

Note: *From Ding Xiangyuan

Major trends uncovered by the study reveal:

• Coffee represents 80% of spend globally within the hot drinks category, with the UK accounting for 51% of that value.Coffee in China, different needs at different occasions.Hot/expensive on premise coffee to kick off the day in the busy morning; RTD coffee in grocery for relax and enjoyment at night.
• Brazil has the highest Spend per Trip growth for CSD in any country & above the Global average (+5%?.Mexico has been the largest Trip Spend growth for Salty Snacks (+8.1% vs. Global avg. +1.9%) as a result of the success of Large pack being strongly associated with Socializing/Party occasions.Sugar free RTD tea drives traffic and premiumizes the category through entering healthy drinking occasions. 
• It’s not only Manufactures that need to adapt to consumers; Retailers are fighting back
  --- Dining Areas in Hema and collaboration in Family Mart are examples to meet the increasing OOH occasions.

The Future of Convenience Stores in Taiwan and the Philippines
 
Global FMCG value share by channel indicates Convenience Stores (CVS) now account for only 4.2% with a healthy growth of 2.5%, and it’s forecasted that there will be not much change by 2025 in terms of value contribution.
 
However, we see a huge potential of growth for CVS across Asian markets. In our latest Asia Consumer Insights report we put the spotlight on Taiwan and the Philippines jointly with other topics:

• Q3 2019 Asia FMCG Overview
  • Asia FMCG maintains a stable growth of 4.7% in Q3 2019.
  • All key sectors observe positive performance with non-food sector continuously growing ahead of total FMCG market.

• The spotlight of the quarter
  • The difference in the development level of CVS retail format between Taiwan and the Philippines.
  • Identifying challenges and opportunities for future growth of CVS in Asia to acquire new shoppers.

Against a backdrop of declining share of modern trade, compact hypermarket and smaller formats bucked the trend with a value growth pf 10.1% by attracting more shoppers and increasing the number of trips shoppers make. Vanguard opened two Vanguard Marts in Hangzhou and Suzhou in November, inside which the Vanguard supermarket is more compact by scaling down the non-food sections whilst expanding the fresh food ones and providing full scan-and-go as well as O2O deliveries. Vanguard plans to open 100 Vanguard Marts in the next 3 years.

The Double 11 festival fueled the e-commerce growth and Alibaba Group announced that it generated RMB268.4 billion of gross merchandise volume (GMV) on November 11, 2019, an increase of 26% compared to 2018. Its growth is powered by lower-tier cities and livestreaming. 3 out of 10 urban households in county-level cities and county purchased FMCG in Alibaba in past 12 weeks, which is an increase of 11 ppts compared with last year. This year brands are running influencer livestreaming campaigns in order to activate viewers’ purchasing intent and transactions during Taobao Live generated nearly RMB20 billion in sales. More brands surpassed the 100 million RMB GMV mark, indicating that larger brands where accounting for a larger proportion of the sales.

It's no easy feat to cultivate a high-trust, high-performance organisation. According to Great Place to Work®, it takes the commitment of dedicated and motivated employees and leaders to achieve such a lofty goal. This year 44 companies made it to the list. We applied the survey to more than 150 companies with more than 200,000 employees in Mainland China, Hong Kong and Taiwan. This survey assesses employees' perceptions of leadership, organizational culture and trust, and is decisive for being selected for the "Best Workplaces™ in Greater China".

The core result findings of 2019

In the Trust Index© Survey to employees, we considered and collected all valid responses and this generated an average score of 87% for Greater China. We applaud the continuous efforts to build up a great culture for the associates. Great Place to Work's Best Companies to Work For® in Greater China List create cultures that are friendly, inclusive, productive and ethical. An overwhelming majority of employees at the Region's Best say they're proud of their workplaces.

Kantar Worldpanel has numerous branches around the globe participating the Great Place to Work and winning the same award every year. We believe that Greater China team winning this award will make the whole brand share the same pride and glory.

According to the Managing Director of Kantar Worldpanel Greater China, Jason Yu, 2019 has been a year of "Transform To Win" for the whole company. New ideas of digital transformation, new online learning platform and new leadership frameworks to help leaders transform are being bounced and launched in the region. Office renovation in Beijing, new form of employee activities across offices, and donating to the Special Olympics by various campaigns are undergoing with enthusiastic participation. The WITH PEOPLE strategy coupled with LEADERSHIP 2021 are being rooted more and more profoundly in our culture and leadership behaviour. Outstanding female high potential talents are put through various global and regional leadership programs to boost a diverse and flourishing career path for our talents. Kantar Worldpanel is extremely proud and for all the constant effort made around people development, humbly deserved to be one of the Best Workplace in Greater China once again and will continue on this worthy journey holding all our employees together.

About the Best Workplaces™ in Greater China List

Since 2012, Great Place to Work® has identified the top organisations that create great workplaces in Greater China in which they operate through the publication of the Best Workplaces™ in Greater China List. The objective of publishing the list is to acknowledge organisations and Great Workplaces from diverse industries and sizes that deliver and establish great culture among the colleagues and associates, so as to sustain and enhance the competitive edge of the region. To be considered eligible for the Best Workplaces™ in Greater China List, companies must score at least 70% in the overall result of the Trust Index© employee survey and Culture Audit© assessment.

About Great Place to Work®

Great Place to Work®, headquartered in San Francisco, is the global authority on high-trust, high-performance workplace cultures that provides executive advisory and culture consulting services to businesses, non-profits, and government agencies in 60 countries across five continents. Through proprietary assessment tools, benchmarks, advisory services, workplace reviews and certification programs (such as the Fortune's 100 Best Companies to Work For published on Fortune Magazine), Great Place to Work® helps its clients create great workplaces that outpace peers on key business metrics like revenue growth, profitability, retention and stock performance. Follow Great Place to Work® Greater China at www.greatplacetowork.cn / http://www.greatplacetowork.com.hk and join the community on LinkedIn, Twitter, Facebook, and on WeChat ID: greatplacetowork.

RT-Mart showed a noticeable share uplift in the latest month especially in the west and east regions. Recently it has leveraged Taoxianda and Ele.me’s delivery network to further build a seamless shopping experience if consumers want products delivered to their doorsteps within 30 minutes. Walmart saw strong fresh food performance and this sector has been key to its recovery. Recently, Walmart revealed its plan to open 500 new stores and depots (smaller warehouses) in China during the next 5 to 7 years and revamp 200 existing stores over the next 3 years. Many of the new stores will be smaller formats, serving neighbourhood as well as depot warehouses for online shoppers.

E-commerce maintained a steady growth of 33.5%, with 56.9% of urban Chinese households making FMCG shopping online at an average frequency of 4.3 times in past 12 weeks.  The second annual China International Import Expo (CIIE) in Shanghai in early November showcased thousands of imported products that are making their debut in China.  According to Kantar Worldpanel imported products are winning across city tiers through online platforms and as many as 17% of urban families in County level cities and counties have purchased imported FMCG products in the past 3 months, with milk powder and nutrient supplements being the most popular categories.

In the third quarter of 2019, China’s GDP growth rate dipped to 6 percent, the lowest level in 27 years, but this wasn’t represented in the FMCG sector. In the first three quarters of 2019, total FMCG sales roles by 2.7 percent, 6.9 percent and 5.7 percent, maintaining the same pace as 2018. But as we’ve seen in previous years, that stable growth follows a regular pattern, with the “macro” product categories accelerating at two distinct speeds: fast and slow. Food & beverage categories grew a mere 2.3 percent in the first three quarters of 2019, while personal care and homecare had stellar performance at 11 percent and 7.8 percent growth respectively. 

These are some of the key updates on the China’s FMCG industry from volume two of Kantar Worldpanel and Bain & Company’s latest annual China shopper report, DESPITE SLOWING GDP GROWTH, CHINA COMSUNERS KEEP SPENDING, released today.  

The FMCG volume growth in the first three quarters of 2019 increased from that same period in 2018, but could not offset slower growth in average selling prices – a drop from 4.6 percent last year to 3.7 percent this year, only slightly above the inflation rate. 

“Even as homegrown products dominate most of their categories in China, consumers have an enduring desire for imports,” explained Bruno Lannes, a Bain & Company partner in Shanghai and co-author of the report. “This is especially true for product categories where consumers perceive foreign goods as higher quality than those produced domestically, such as fragrance, wine and milk powder for example.” 

In the first six months of 2019, imports grew by 10 percent, close to twice the rate of overall FMCG growth. This was driven mostly by online sales of imports, which jumped by 30 percent in the first half of 2019. Imports accounted for 35 percent of all online sales in China during this time. 

For brands that have not yet penetrated China—or are just getting started—there is a path to success that emphasizes importance of digital platforms as a channel and brand-building tools. 

“By concentrating on selling online, foreign FMCG companies gain traction in China without the need to build a complex physical route to market model,” said Jason Yu, Managing Director of Kantar Worldpanel Greater China and co-author of the report. 

Larger brands that already have a significant presence in China need to adopt a different approach, one derived from the “4D” model. It is not the full “4D” model, as brands will rarely design products specifically for Chinese consumers when it comes to imports. However, the other “3D” apply fully: 

Decide in China- Local speed is more important than global scale and operating models must be adapted for more local decision making

Deliver at China speed - Use the ecosystem and micro-battles in place to keep pace with the market and through trial and error with fast learning loops

Digitize the China business - Data is the new oil and is key to breaking into market,  this is an algorithm-driven economy and closed-loop consumer engagement models are key 

This approach is gaining importance as competition intensifies from Chinese insurgents. In fact, multinationals can also boost their odds of success by taking lessons from those newly successful young companies.

“China continues to be the biggest consumer story in the world, and growing along with those consumers means making thoughtful and aggressive moves,” said Derek Deng, who leads Bain & Company’s Consumer Products practice in China and is a co-author of the report. “With so many players and so much at stake, winning here isn’t a matter of chance.”

 “Asian people believe health is almost twice as important to their happiness as having more money,” says Ashley Kang, Head of Beauty Sector at Kantar Worldpanel division. “They see what they put on their skin as a health supplement – and this has changed the products and benefits they desire. They are extremely knowledgeable too, so brands must be transparent in their communications. The wellness trend is also encouraging certain emerging formats to thrive.”

Derma-care is becoming mainstream

New sophisticated formats in skincare and makeup that provide derma-care properties are rising in popularity. Derma brands have reached almost 45% penetration in Korea, a massive influx from just over 25% in 2017. Their second highest reach is Taiwan at 40%, an increase from 37.6% in 2017.

Derma products contain sophisticated ingredients that deliver a high level of efficacy in treating specific skin issues, such as eczema, but are increasingly used to solve more general problems, such as sensitive skin and pollution protection. With consumer brands launching their own ranges, derma-care is increasingly more mainstream, when it was once a niche segment and a domain of brands with a heritage in pharmaceuticals. Developments in retail and distribution are helping to increase the footprint of these products outside drugstores.

The natural look is driving the launch of new ranges and variants

The most sought after look in Asia right now is a natural glow. Being well-hydrated is a prerequisite for this look, which has helped drive sales of serums that promise intense hydration. Penetration of serums is highest in Korea at 61%, rising from 58% in 2017. In China, penetration has increased from 18% in 2017 to nearly 26% today.

This ‘effortless’ natural look can require significant work. The specific makeup products that help people achieve the right translucent effect include liquid foundation, BB creams, and primer/concealer – all of which are soaring in popularity.

Kantar Worldpanel predicts that makeup that provides skincare or medicinal benefits will be a key growth area for the future. Various crossover products have already emerged between the skincare and makeup segments, such as toner cream that instantly brightens the skin. Positioning these products closer to skincare can be an effective strategy in China, where there remains a perception that the pigments in makeup could be harmful.

Men-only skincare is a major growth opportunity

The number of men using skincare products is also growing steadily across Asia, particularly in China, South Korea, and Thailand. They are buying in more categories as they add more steps to their beauty regime. However, most are still not buying products that have been created specifically for men. Products targeted at men contribute 10% of the total value sales for beauty in the region, but this segment is growing slower than unisex skincare brands.

“Men in their twenties are most likely to buy men-only skincare products, but as they get older they begin to use whatever products they find on the bathroom shelf,” continues Kang. “There is a substantial growth opportunity here for brands that can shift spend from unisex products to men-only variants, and prevent men from ‘lapsing’ as they get older, particularly for products promising oil control, anti-aging, whitening, and sunscreen benefits.”

Consumers crave products that are ‘just for me’

Shoppers in Asia believe that if a product is tailored to them, it will be more effective – and it also helps them to feel special. Customisation is rapidly gaining momentum in both skincare and makeup. Computer-aided diagnosis enables skincare brands to assess an individual’s skin and formulate a product that provides the benefits specific to that individual. Makeup with customised colours, textures, and finishes is also growing in popularity.

The data and insights from this report come from the Kantar Worldpanel ’s Beauty Panel in Asia. This unique Beauty Panel tracks the usage and shopper behaviour concerning beauty products.

FMCG Companies Ranking by Consumer Base (million households)

© 2019 CTR Market Research                                     Source: Kantar Worldpanel China

“Amid economic uncertainty, we continue to see big FMCG companies launch new products to win consumers who are more in favour of brands that promise to improve their health and lifestyle,” said Jason Yu, General Manager of Kantar Worldpanel Greater China.  “While penetration may be reaching its limit in some categories, there is room to grow shoppers in adjacent categories or through acquisitions.  Our data also suggests that companies can win new shoppers through premiumization.”

In 2019, out of the 22 companies reaching 100 million consumers, 13 of them are Chinese companies.   With the acquisition of Jiangzhong in 2018, China Resources entered the ranking for the first time, on the back of its strong brands Snow and C’estbon.  

Offer innovative and premium products to attract Consumers

Chinese consumers are getting more sophisticated with a vast array of brands to choose from, making innovation more difficult than ever.  With the highest mobile internet usage in the world (99.1% according to CNNIC report in June 2019) and 27.9 hours of internet usage per week, it is becoming more and more challenging to keep consumers’ attention, even with marketing campaigns that are highly engaging.  Successful leading players either chose to launch more premium products to attract young middle class shoppers or grow through expanding into new territories.

Go Premium

P&G brands were bought by 92.5% of the Chinese families in the latest year.

As the only personal care player in the top league, it managed to grow its shopper base year on year, propelled by its superior innovation and improved speed to market.  On the back of Olay and SKII’s success in 2018, P&G extended the proven product concepts to the personal cleansing category.  In additional, P&G introduced premium lifestyle products such as Downy and Tampax, aiming to attract the new generation of shoppers who are willing to pay for premium quality. Home care, personal cleansing, and female hygiene products contributed to P&G’s buyer expansion increasing by 6%, 11% and 90% respectively. 

Break the Boundary

Launching products in new categories always presents both opportunities and risks to established players.  YST, the leading beverage and nutrition player in China, has set a great track record of managing a wider portfolio of innovations across categories.  Beyond its strong grow in bottled water business through focusing on different drinking occasions, its functional drink brands Scream and Victory Vitamin water continue to grow the buyer base by 14%. In 2018, YST also launched “Yoseido” mask and facial moisturizer, aiming to capitalize on opportunities in the booming beauty sector.  In 2019, YST grew its shopper by an impressive 7%, far ahead of any other players in the rank.

Unlocking growth opportunities in lower tier cities

Lower tier cities in China remain an important source of growth for FMCG players with the population here having increased disposable income, more leisure time and improved access to digital media and eCommerce shopping.  Those cities also saw a faster rise in population due to movement from rural areas as well as people migrating from first tier cities.  The success of Pingduoduo, now a key online player, proves that the underlying demand for consumption in those smaller cities can be awakened through effective marketing strategies.  

Coca Cola, which enjoys over 80% penetration in top cities, is now advancing to lower cities to catch the wave of booming consumption. Overall the company expanded its shopper from 73% to 74.4%, adding 3.7 million new consumers. Its penetration grew the fastest in county level cities by 2.8 points, driven by its carbonated soft drink products.

Haday, a Chinese seasoning giant, saw steady expansion of its buyer base in lower tier cities, supported by its massive distribution network and affordable price.  It gained 5.3 million households from lower tier cities in the latest year.

Convergence of online and offline brought new shoppers