Click 'Read Original' for details. Middle-class consumption upgrade drives rebound in China's FMCG market in 2017. According to the 2018 China Shopper Report Series 1, "Shopper Consumption Upgrade, Market Growth Rebounds," released today by Kantar Worldpanel (a CTR service in China) and Bain & Company, the total sales growth rate of China's consumer goods market rose from 3.6% in 2016 to 4.3% in 2017. This is the first time since the report series began tracking Chinese shopper behavior in 2012 that sales growth has exceeded the previous year. Chinese consumers are spending more on premium products, mainly because these products help them improve their health or lifestyle. At the same time, rising incomes have increased their purchasing power. The report shows that over the past six years, the compound annual growth rate of per capita disposable household income reached 8.2%. "As China's growing middle class continues to upgrade to higher-end, healthier products, we can see a clear pattern in China's dual-speed growth trajectory," said Jason Yu, General Manager of Kantar Worldpanel Greater China and co-author of the report. "Our research shows that the dual-speed growth phenomenon first identified in 2016 continues, with an increasing number of high-growth categories, driven mainly by the premiumization wave and the maturing Chinese shopper." The report finds that pleasure, health and wellness, lifestyle improvement, and gifting are the main factors driving the premiumization trend. In addition, high-growth categories such as mouthwash, pet food, and cosmetics are developing steadily, while low-growth categories like chewing gum and MSG remain weak. Key trends affecting China's FMCG market:

  • E-commerce sales continued to grow strongly, with growth exceeding 28% last year, now accounting for about 10% of total market sales, doubling in two years.
  • The growth engine of e-commerce penetration is shifting from higher-tier to lower-tier cities. In first-tier cities, e-commerce penetration is 73%, still ranking first. But lower-tier cities are catching up: third- and fourth-tier cities saw annual growth rates of 18% and 17% respectively, while fifth-tier cities even reached 21%.
  • China's O2O market continued to grow, with growth of around 30% in 2017, with O2O delivery services (such as food delivery and courier services) growing by as much as 76%.
  • Convenience stores and grocery stores continue to shift focus to out-of-home consumption, with the top 10 FMCG categories contributing about 85% of sales. Out-of-home consumption in convenience stores grew by 6.8%, while in-home consumption only grew by 1.9%.
  • Hypermarkets continued to lose foot traffic, leading to a 2.5% decline in channel sales in 2017.
  • Local brands achieved 7.7% sales growth in 2017, contributing 98% of the growth in China's FMCG market, compared to foreign brands which only grew by 0.4%. Overall, foreign brands again lost market share to local brands in 2017. "This is the sixth consecutive year we have observed local brands outperforming foreign brands," said Bruno Lannes, Global Partner at Bain & Company, leader of the Greater China Consumer Products and Retail practice, and co-author of the report. "There are multiple reasons behind this, but one major factor is that local companies have faster speed and agile operating models, which are crucial in China's rapidly changing consumer goods market." Companies and brands can win in the transformation by:
  1. Leveraging channel dynamics and predicting future retail consolidation.
  2. Developing high-value, personalized products to fully capitalize on the premiumization trend.
  3. Transforming into data-driven, consumer-centric enterprises. By generating proprietary consumer data and working closely with platforms, they can conduct more centralized sales and marketing activities and achieve more efficient operations. Retailers can take the following key actions to win:
  4. Prepare for "New Retail" by following the example of the recent alliance between RT-Mart and Alibaba.
  5. Integrate inventory and supply chain management with e-commerce retail or solution platforms.
  6. Redesign store portfolios and formats to more comprehensively capture customer needs.
  7. Make the in-store experience attractive again. Kantar Worldpanel and Bain & Company track the actual shopping behavior of Chinese consumers and have established a valuable long-term observation of 106 FMCG categories purchased by Chinese households. As in the past six years, Kantar Worldpanel and Bain & Company have again conducted in-depth analysis of 26 categories across the four major consumer goods sectors: packaged food, beverages, personal care, and home care. This year, they also looked at an additional 24 categories to form a more complete view of the market. These 50 categories account for about 80% of all FMCG categories. Reply with "2018 Consumer Report" in the background to view and download the full PDF report. From August 22-24, the "2018 China Digital Innovation Conference (2018FDIC)" with the theme "Finding New Growth Engines" will be held in Shanghai, hosted by the China FMCG Industry Association and organized by New Distribution. The three-day conference will focus on two main themes: marketing and supply chain, with six parallel forums on brand, channel, communication, B2B, intra-city logistics, and innovative retail. We will invite industry experts, CEOs, and brand executives to deeply interpret the trends and drivers of digital transformation in the FMCG industry. We will invite over 500 executives from FMCG companies, 200+ CEOs from the B2B industry, and 1000+ major FMCG distributors to gather together to discuss how the FMCG industry can use digital tools to achieve its own rapid growth again in the context of the digital era. This conference will build a bridge for brand owners, distributors, retail enterprises, and marketing agencies, helping FMCG manufacturers obtain the latest information, understand best practices, and master more practical transformation skills. Invited Companies (list) Conference Time: August 22-24, 2018 Conference Venue: Shanghai Baohua Marriott Hotel Conference Content:
  • August 22: Full-day registration; 14:00-17:30 Parallel forum on distributor intra-city logistics; 18:30-21:00 New Distribution Night Gala Dinner.
  • August 23: Theme: Marketing Digital Innovation; 9:00-12:00 Main forum on marketing digital innovation; 14:00-17:30 Parallel forums on brand, channel, and communication.
  • August 24: Theme: FMCG Supply Chain Digital Upgrade; All day: FMCG Supply Chain Conference. Registration: Registration is now open. Long press the QR code below or click "Read Original" to register. Only 50 early-bird tickets remain at half price, available while supplies last! Registration Consultation: For ticket inquiries: [contact]. For media cooperation inquiries: [contact]. Highlights from previous New Distribution conferences: Click the links below to review the first, second, third, and fourth FMCG + Internet conferences. -END-