China's consumer goods sector continues to see recovery

By SHI JING in Shanghai |
Updated: June 27, 2024
A woman browses dairy products at a supermarket in Shanghai, Sept 22, 2023. [Photo/VCG]

China's fast moving consumer goods sector underwent a moderate recovery in the first quarter of 2024 and throughout 2023, according to a report jointly released by consulting firms Bain & Company and Kantar Worldpanel on Thursday.

In the first quarter of this year, China's FMCG sector saw its value grew by approximately 2 percent, a half percentage point higher than that in the first quarter of 2023, according to the report, which has come to the 27th edition of its kind.

While the total volume sold by FMCG companies climbed by 3.5 percent year-on-year in the three months, the market experienced a deflation of 1.5 percent in average selling prices, down from the stable pricing trend observed in 2023, said the report.

Packaged food and beverages witnessed stable value growth of 2.7 percent and 4.3 percent respectively on a yearly basis during the first quarter of the year. Most categories within packaged food experienced volume growth amid recovering social mobility and activities. Beverage growth was driven by both volume and average selling prices, which is especially noticeable among "near-water" drinks such as juice, ready-to-drink tea and packaged water, said Bain & Co experts.

Home care categories tracked by the two market research firms displayed a price deflation in Q1 2024, which can be largely attributed to brands' price cuts and promotion of larger, bulk-sized products.

Personal care products witnessed robust volume growth, but average selling prices declined 7.5 percent year-on-year as consumers remained cost-conscious. The Chinese personal care market is witnessing intensified competition from domestic brands offering more value-for-money products, according to the report.

With consumers' continued return to offline shopping venues, sales of offline channels grew by 2.4 percent in the first quarter.

Within offline channels, grocery and mini formats continued to gain share, growing at 11 percent and 7 percent respectively on a yearly basis in the first three months. The hypermarket segment continued to shrink at 6 percent year-on-year. However, within the hypermarket, club warehouses saw a year-on-year spike of 22 percent, which is driven by the expansion of the Chinese middle income group, said Yu Jian, managing director of Kantar Worldpanel in China.

E-commerce growth grew moderately at around 2 percent year-on-year in the first quarter. Notably, Douyin surpassed JD to become the second-largest e-commerce platform in China, as the former registered year-on-year sales spike of 46 percent in the first quarter. Upon this, Douyin achieved an 18 percent market share, 6 percentage points higher than that in the first quarter of 2023.

Online discounter Pinduoduo saw increased traffic driven by its value-for-money proposition, gaining a 6 percent year-on-year sales growth and a 15 percent market share.

While Taobao and Tmall, the major e-commerce platforms of technology behemoth Alibaba, remained the largest online shopping venues in China, its market share contracted by 3 percentage points on a yearly basis to 32 percent.

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

"We continue to see positive signs of recovery such as healthy GDP figures and retail sales growth. Social mobility has also reached an all-time high, and so it is only a matter of time before these positive numbers trickle down to FMCG growth," said Bruno Lannes, a partner at Bain & Company based in Shanghai.

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