China's FMCG channel structure is changing on several fronts at once. Consumer demand is becoming more polarized between premium and value offers. Retail formats are becoming more specialized. Online and offline commerce are converging. Snack discount chains have used low prices to open a new market, while instant retail has trained consumers to expect delivery within minutes.
New Distribution surveyed 85 leading consumer brands and presented the findings in its 56-page 2024–2025 China FMCG Channel Transformation Research and Insights Report. The research examined what these changes mean for brands, distributors, and retailers.
The central conclusion is that channel expansion alone is not enough. Companies must learn how different channels work, assign the right partner to each one, and coordinate products, pricing, supply, and data across the system.
Offline Distribution Is Becoming More Layered
The surveyed brands reported broad offline coverage, but the role of each channel differed.
Traditional mass channels remained foundational. More than 90% of respondents were present in hypermarkets, supermarkets, and convenience stores.
Newer formats were important sources of incremental growth. Brand participation reached 84.7% in fresh-food supermarkets, 80% in full-category discount supermarkets, 77.7% in warehouse clubs, and 75.3% in snack discount stores.
Digitalized offline channels—including B2B ordering and unmanned retail—were growing quickly and remained areas of active experimentation.
Specialist channels also became more valuable for differentiation. Participation reached 90.6% in special channels, 83.5% in wholesale, 41.2% in foodservice outlets, and 29.4% in mother-and-baby stores. The right specialist channel varied by category, but its role was increasingly strategic.
Online Channels Are at Different Stages of Maturity
General e-commerce and community group buying were already standard channels, used by 96.5% and 92.9% of surveyed brands.
Livestream commerce, online-to-offline home delivery, and social or community commerce were major growth priorities, with participation of 90.6%, 88.2%, and 80%, respectively.
Fresh-food e-commerce reached 84.7%. Brand-owned direct-to-consumer operations were less mature at 43.5%, but they retained long-term value because they provide a direct customer relationship and first-party operating data.
Brands were also increasing direct cooperation with representative retailers in emerging channels. These relationships can simplify distribution and enable joint investment, but they require precise channel management to avoid unnecessary conflict with existing partners.
Discount Stores Are Both Threat and Opportunity
Snack discount chains illustrate the industry's tension. Among surveyed brands, 35.3% identified them as the emerging channel causing the greatest negative impact on traditional business. At the same time, 48.2% named them as the most significant source of incremental sales among new channels.
Warehouse clubs were viewed as a strong growth driver by 41.2% of respondents, followed by livestream commerce at 36.5% and home-delivery platforms at 24.7%.
Discount retail can expand share quickly when household budgets are constrained, but it can also create channel conflict, margin pressure, product-positioning problems, operational complexity, and brand dilution.
Brands without a clear product strategy or strong supply chain should cooperate cautiously. Brands with channel-specific products, disciplined price architecture, capable operations, and reliable supply can use direct management to build a mutually beneficial relationship with discount retailers.
Resistance does not reverse the channel shift. Adaptation must be deliberate rather than passive.
Supermarket Restructuring Changes the Supplier Relationship
Regional supermarket groups are restructuring stores to improve assortment, customer experience, and membership operations. For suppliers, the process creates both access and pressure.
Price competition was a concern for 58.8% of surveyed brands, while 35.3% cited shrinking channel margins. Store restructuring can limit new-product listings, increase the use of direct supply, and weaken the position of existing distributors. It also raises the standard for differentiation, putting smaller brands at a disadvantage.
The report found several ways brands were responding:
- 68.2% adjusted product lines to fit market and retailer needs.
- 35.3% used joint business planning.
- 30.6% strengthened supply-chain management.
- 22.4% invested more heavily in consumer experience.
The shared objective is faster response to local demand. A standard national assortment and inflexible price policy cannot support every regional retailer's transformation.
Brand–Distributor Coordination Is Still Too Shallow
Most brands continue to rely on distributors to operate regional markets, but many are dissatisfied with the speed and quality of the response to channel change.
Among surveyed brands, 68.2% cited insufficient distributor capability, 57.7% cited limited willingness to change, and 27.1% cited weak motivation to cooperate. Distributors faced their own constraints: 22.4% reported limited financial capacity, while 30.6% pointed to insufficient policy and resource support from brands.
Nearly half of brands rated distributors' market response as merely average.
The relationship is not uniformly weak. The report found that 64.7% of partnerships involved close communication and benefit sharing. Yet disagreement remained common.
Price control and channel margin were the largest sources of conflict, cited by 55.3% of respondents. Market-investment sharing followed at 35.3%, channel development at 29.4%, data sharing at 23.5%, and profit allocation at 22.4%.
Only 8.2% of brand–distributor relationships were described as strategic partnerships, while 25.9% remained at a basic level. Disagreements over store-execution standards and promotions were lower, at 9.4% each, but this also suggests that many partnerships focus on routine execution rather than market innovation.
The depth of cooperation increased with brand scale. Larger brands were more likely to have strategic distributor relationships, while smaller brands often operated in less balanced arrangements.
Future channel systems need a more specialized division of labor. New channels should be assigned to distributors with the appropriate capabilities. Brand and distributor should align on strategy, complement one another's skills, and create incentives that reward profitable sell-through instead of shipment alone.
The Production–Distribution–Retail Ecosystem Must Be Rebuilt
Channel transformation changes the role of every participant.
Brands Become Ecosystem Leaders
A brand can no longer act only as a supplier that manufactures products and ships inventory. It must help define fair operating rules, coordinate value distribution, integrate resources, and connect logistics, information, digital tools, and channel knowledge.
This does not mean controlling every transaction. It means designing a system in which different channels can operate efficiently without destroying one another's economics.
Distributors Become Regional Operating Partners
Distributors need to move beyond selling, storing, and delivering goods. Digital capability, operating efficiency, market activation, and data analysis should allow them to provide regional solutions to brands and retailers.
Their value lies in connecting upstream strategy with downstream execution and closing the loop between products, stores, consumers, and market feedback.
Retailers Become Demand and Supply-Chain Operators
Retailers must evolve from owners of shelf space into operators of consumer demand and supply-chain efficiency. Physical stores need experiences and services that online commerce cannot fully reproduce. Assortment, fulfillment, membership, and collaboration with suppliers all become part of the proposition.
Three Rules for the Next Stage
The report's recommendations can be summarized in three operating rules.
First, test new channels one step earlier than competitors. Second, go one level deeper in channel operations rather than merely adding accounts. Third, build reciprocal relationships across the ecosystem so that brands, distributors, and retailers can share data and coordinate decisions.
No single channel can provide permanent incremental growth. Sustainable performance comes from the interaction among channels and from a closed operating loop that aligns products, supply, partners, and consumer demand.