China's FMCG Market Maintained Stable Growth in H1 2025
China's FMCG Market Maintained Stable Growth in H1 2025, Diversified Offline and Online Formats Reshaped the Consumption Landscape (Click to view original)
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 2nd 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.