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.

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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.

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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.