---
title: "2023: Consumption Recovery, Resilient Growth"
description: "On April 7, at the 2023 (8th) China FMCG Innovation Conference, NeilsonIQ's Chief Business Growth Officer Zheng Ye attended as a guest and delivered a speech titled \"Consumption Recovery, Resilient Growth.\" With 20 years of FMCG experience, Zheng Ye discussed trends in the Chinese consumer market from the perspectives of consumers, products, and channels, analyzing future opportunities for businesses."
author: "郑冶"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2023-04-17"
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# 2023: Consumption Recovery, Resilient Growth

> On April 7, at the 2023 (8th) China FMCG Innovation Conference, NeilsonIQ's Chief Business Growth Officer Zheng Ye attended as a guest and delivered a speech titled "Consumption Recovery, Resilient Growth." With 20 years of FMCG experience, Zheng Ye discussed trends in the Chinese consumer market from the perspectives of consumers, products, and channels, analyzing future opportunities for businesses.

On April 7, at the 2023 (8th) China FMCG Innovation Conference, NeilsonIQ's Chief Business Growth Officer Zheng Ye attended as a guest and delivered a speech titled "Consumption Recovery, Resilient Growth."
_Zheng Ye has 20 years of FMCG experience, having worked in marketing at well-known domestic and international FMCG companies. After joining NeilsonIQ in 2014, he has been responsible for market research and consulting projects for FMCG clients._
_Leveraging his years of experience on the corporate side and integrating NeilsonIQ's various research methods, Zheng Ye excels at helping companies solve issues such as marketing strategy formulation, regional expansion, creating hit products, and identifying new tracks. He has accompanied dozens of emerging companies in breaking through traditional management models, using data to drive sustainable business growth._
From a global perspective, the prospects for China's consumer market in 2023 are highly anticipated, but there are also many uncertainties. At the forum, Zheng Ye explored the trends in China's consumer market in 2023 from the perspectives of **consumers, consumer goods, and consumption channels**, analyzing where future opportunities lie for businesses.
The following is an excerpt from Zheng Ye's speech (partially abridged):
**Chinese Consumers Are Optimistic About the Future**
First, let's look from the consumer perspective, because all retail changes in people, goods, and places originate from people. Currently, consumers worldwide face multiple pressures such as unemployment, economic environment, and inflation, which were common concerns found in our global consumer survey conducted in November last year. Now let's look at the global economic situation. According to OECD forecasts, China ranks fourth in GDP growth among countries in 2023 and 2024, with the top four all being Asian countries. Global recovery depends on Asia, and Asia's recovery depends on China. China's economic growth is expected to rise from 3.3% in 2022 to 4.6% by 2024. Next, let's see which countries are expected to grow faster in 2023 than in 2022. Countries like India and Indonesia have growth expectations almost lower than in 2022. However, according to China's government work report, the GDP growth target is 5%, which is quite impressive from a global perspective. Additionally, China has the best inflation control, and from a broader environment, global capital will gradually flow to China to varying degrees. **From a macro perspective**, China's economic performance in 2023 and 2024 is positive and optimistic. **From the consumer level**, in the post-pandemic era, we conducted a survey on consumer expectations in different countries. We can see that consumers with positive expectations for the future are willing to spend even if their income is not high, while those with negative expectations are more cautious. Notably, last year consumers were relatively pessimistic about the future, so even those with money were reluctant to spend. But by the end of last year, nearly half of Chinese consumers had become positive about the future, with only 16% holding negative or pessimistic views. **Comparing globally**, only 26% of consumers worldwide believe the future will improve, while 39% or more think it will worsen. Even in the Asia-Pacific region, a large proportion believe things will get worse, showing severe polarization. Only in China, both top-tier and bottom-tier consumers hold positive attitudes in large proportions, and those with truly negative expectations are a minority. In this context, we need to further explore **the most concerning factors. There are three main ones:**
**First, the prediction of the overall external economic environment.** Despite national policy support, distributors and manufacturers still feel confused because consumer confidence is affected by the macroeconomic situation, and sales have not recovered as expected, not even reaching pre-pandemic levels.
**Second, high cost pressure.** Considering raw materials, logistics, labor, factory rent, and other aspects, all costs are rising. This cost pressure eventually passes on to consumers' actual purchases, leading to varying degrees of price increases. Many companies ask NeilsonIQ whether price increases have a positive or negative impact on sales when costs rise. Over the past two years, such inquiries have increased. Companies face cost pressures and worry that price increases in a sluggish market will lead to sales declines. Therefore, cost pressure is also a major factor that could lead to negative trends in the future.
**Third, the pandemic.** Although we have lowered the risk level of the pandemic, with the impact of influenza A in the first quarter, people still have some concerns about the pandemic. So these three points are the main factors influencing Chinese consumers' negative expectations for the future.
**Consumption Upgrades Affect Price Increases of Consumer Goods**
Even so, half of Chinese consumers remain positive about the future. **So in this positive consumption environment, what are consumers' consumption concepts?** First, let's look at prices. Last year, due to cost pressures, we adopted different measures, including launching new products and raising prices. We divided the FMCG products monitored by NeilsonIQ into seven categories to understand price changes. In the bubble chart, bubble size represents category scale, the horizontal axis shows the price increase in 2022 compared to 2021, and the vertical axis shows the price increase in 2021 compared to 2020. Thus, the upper right corner indicates categories with price increases for two consecutive years, while the lower right corner indicates price declines for two consecutive years. In the entire chart, the most obvious price increases are in alcoholic beverages, followed by dairy products. These two categories are special: one is alcohol related to socializing and entertainment, and the other is dairy, a daily necessity; both have seen varying degrees of price increases in the past. Further analysis shows that **price increases are influenced by three different dimensions.**
**First, price increases of original products by companies**, for example, a bottle of beer that previously sold for 5 yuan now sells for 6 yuan;
**Second, consumption upgrades**, such as what Shen from Yanjing mentioned yesterday: previously drinking Putin, now drinking U8. This kind of consumption upgrade leads to price increases;
**Third, the launch of premium new products.** NeilsonIQ can use mathematical models to break down these three factors. Taking beer as an example, compared to the previous year, beer prices rose by 6.8%. Through decomposition, the price increase of existing products contributed 1.3%, but more importantly, the consumption upgrade of old products brought the main price increase. Looking at all categories with price increases, almost all are driven by consumption upgrades and premium new products. What does this tell us? Although cost pressures are rising and the macro environment seems sluggish, Chinese consumers' consumption upgrades are still continuing. Consumers may be more cautious with spending, but when actually purchasing, **they are willing to buy products with new concepts, higher added value, and healthier and safer options.** The only difference is that consumers are now smarter, choosing to buy online, during store anniversaries or festivals, and even opting for large packages or multi-packs. So consumption upgrades are continuing, but consumers will choose platforms and times when prices are cheapest to buy. Based on this, we can see consumers' attitudes toward the future environment and consumption status. About 59% of consumers believe their current income is sufficient to support their consumption, meaning they think their current life is very comfortable. About 27% believe they can fully achieve consumption freedom, while only 14% say they are financially constrained and can only choose the cheapest products. Compared with the entire Asia-Pacific region, Chinese consumers' income can support them in upgrading consumption in the FMCG sector, although they may not buy expensive cars or houses, nor care about expensive cosmetics. Looking further at where consumers are willing to invest in the future, we find that among categories they are reducing, travel and vacations are the main ones. For healthy, high-quality fresh vegetables and meat, they are willing to invest. Next, let's talk about specific shopping behaviors, exploring e-commerce shopping behavior. We can find that Chinese consumers tend to buy high-quality products when shopping online, but they are also willing to compare prices and find the cheapest products at the moment. According to data, Chinese consumers perform far above the Asia-Pacific and global levels in this regard.
**Changes in Consumption Channels**
Next, let's look at changes in China's consumption channels. Currently, e-commerce traffic dividends have peaked, and this is similar globally. In China, e-commerce channels account for about 30% of the entire FMCG market. Although e-commerce shares differ in other countries, growth rates have also approached bottlenecks, with growth rates of only a few percentage points except for South Korea, which is slightly higher. In any country, the efficiency of online traffic dividends is decreasing, and the challenges faced by FMCG channels are similar. Where is the future direction for FMCG? We need to think about how to address this. NeilsonIQ monitors 65 FMCG categories, tracking their growth rates each month compared to the same period last year over the past three years. From the growth data, we can see that in 2020 and 2021, the online growth rate of the FMCG industry was almost flat. By 2022, both online and offline growth rates were declining. This trend has led to an overall weakening of the FMCG market. In this environment, there are still different opportunities in sub-categories. Among them, alcoholic beverages, beverages, staple foods, rice, flour, oil, and frozen foods have been among the better-performing categories in the past two years. These categories mainly drove positive growth in the FMCG industry, while personal care, household cleaning, and maternal and infant products saw negative growth to some extent due to declining birth rates. So from a category perspective, food and beverages remain the positive categories in the industry. From a channel perspective, we can find that consumer characteristics, such as localization and the home economy, have influenced the future trend of the entire channel to some extent. How exactly? **From NeilsonIQ's perspective, the two most promising channels for the future are O2O and community e-commerce.** Among them, O2O achieved an overall growth rate of 20% in 2022, far above the industry average, and it brought additional increments, not just transferring online and offline consumption through traffic, but also adding extra sales and purchases through analysis of consumer purchase categories, brands, and purchase times. Additionally, it brought varying degrees of growth and premium benefits, so we believe **O2O is one of the channels to look forward to in the future.** Second, we can also see that live-streaming e-commerce had the fastest growth among all channels in 2022. NeilsonIQ's monitored FMCG share also shows that live-streaming e-commerce's share in the FMCG market has risen from 7% to 11%. Therefore, live-streaming e-commerce will still have good growth potential in the future. Overall, offline retail channels monitored by NeilsonIQ, including supermarkets, hypermarkets, and mom-and-pop stores, will still occupy a relatively large market share. We can find that over 60% of sales still come from offline. Therefore, partners doing offline business need not worry; the big "pie" is still offline, but how to promote products through O2O or new retail channels is the issue at hand.
In this regard, traditional e-commerce platforms have seen their traffic bottom out, and new e-commerce channels have begun to rise. We need to consider what kind of brands to use to better adapt to the needs of social e-commerce.
_PS: For those interested in the on-site speech content, please follow the recent posts on the WeChat public account of New Distribution. We will compile and publish all guest speeches for readers._
_Click **Read Original** to see more highlights of the 8th China FMCG Innovation Conference..._


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