Editor's note: This article is based on the keynote speech by Mr. Yu Jian, General Manager of Kantar Worldpanel Greater China, at the 5th China FMCG Conference, and has been organized into this article for our readers (with some deletions and modifications). In 2023, China's consumer market continued to recover, becoming an important engine driving China's economic recovery. The booming cultural and tourism markets across the country during the recent Mid-Autumn Festival and National Day holiday demonstrated the vitality of the Chinese market. For the FMCG market, compared to the higher purchase levels of home stocking last year, overall sales remained flat year-on-year, showing a steady return trend. Behind the moderate growth of the overall market, we also observed significant divergence and uneven development. From a category perspective, nutrition products, health supplements, and functional beverages continue to maintain very good growth. Categories that benefited from the pandemic last year, such as rice, flour, and cooking oil, saw a decline in consumption. Meanwhile, with the relaxation of social distancing, beauty and hair care categories have rebounded significantly. Over the past three decades, China's consumer market has been on a tailwind trajectory, but in the future, we will need to consider how to continue developing against headwinds and adapt to change. Today, I will share six small trends we have observed, hoping to help everyone better plan their business in the new year. The Continuous Evolution of Health Needs Over the past three years, health has been an important consumer demand and has been continuously evolving. Consumers' health needs are constantly changing: In the first half of this year, consumers reduced purchases of sugar-free soda but showed increased favor for sugar-free ready-to-drink tea; demand for low-salt soy sauce still grew, but the demand for no-additive soy sauce exploded more significantly; in health nutrition products, probiotics grew far beyond multivitamins; in anti-aging skincare demand, high-efficacy anti-aging creams showed double-digit growth, and products pursuing scientific evidence and exclusive ingredients are favored by consumers. We believe that the big health track remains a competitive barrier that every enterprise needs to build and defend over the long term. In addition to physical health, consumers' demand for mental health has further increased. They hope to have enough time to accompany their families, balance work and life, and have more time for themselves. This has also driven the development of the emotional economy. Whether it's the instant happiness brought by dopamine marketing, the peace from temple meditation, or the "going crazy" of new tea brand Lelecha, all can resonate emotionally with consumers. Meeting consumers' deep mental health needs for physical and mental balance will turn emotions into big business, and also allow brands to gain growth through empathy with consumers. The "Take" and "Give" of Smart Consumption The debate over consumption downgrading and upgrading has been flooding major media platforms. Indeed, we see the daily coffee market becoming increasingly competitive, with 9.9-yuan affordable coffee/milk tea sweeping the market, but this does not represent the full picture of China's consumer market. In many categories, especially health supplements and skincare, consumers are still willing to buy higher-quality products. At the same time, consumers are also willing to pay a premium for categories that enhance the quality of life and health. To some extent, Chinese consumers are more mature and clearer about how to make trade-offs between price and quality. Different retail formats have thus gained business opportunities. On one hand, we see snack discount stores racing ahead, attracting young consumers. This model has also driven the rapid expansion of general hard discount stores like Hema Outlets. On the other hand, middle-class adult families increasingly favor membership stores with certain thresholds. Whether it's the "Yishan Price" or "Tama Price," they are competing on new consumption upgrade products. Of course, whether it's durian layer cake or Swiss rolls, they represent new lifestyles and consumer choices. New Changes in "Community" Retail China's retail market has undergone significant changes. Among offline physical formats, large supermarkets (shopping malls, hypermarkets, and large supermarkets) have been sluggish since the pandemic. However, near-field channels (small supermarkets, convenience stores, and grocery stores) achieved double-digit growth year-on-year in the first half of this year. Near-field formats provide the warmth of daily life, not only bringing consumers a quality life but also making them truly feel convenience. We also found another kind of community that adds value through values, integrating local city culture while making stores a spiritual bond connecting people. In online formats, interest e-commerce has evolved from "goods finding people" to also providing a two-wheel drive of "people finding goods." More and more consumers are directly searching on Douyin for products they need, and shelf e-commerce is beginning to take shape. In the first half of this year, nearly 30% of Chinese consumers purchased FMCG products on Douyin, with purchase frequency approaching that of JD.com. Meanwhile, Xiaohongshu, representing circle culture, has also seen very objective growth in FMCG through its UGC community-led vertical communities and the operation of professional buyer anchors. In the first half of this year, the number of households purchasing FMCG on Xiaohongshu increased by 35% year-on-year. These two very different business models may represent the growth paths of future community e-commerce. Light Outdoor Activities Are in Vogue Consumers' desire to return to normal life and free movement has also made out-of-home the most potential consumption growth window this year. Kantar Worldpanel's out-of-home consumption sample research shows that in the first half of this year, out-of-home consumption scenarios such as travel, shopping, and sports saw particularly prominent growth. The current popularity of light sports, including camping, frisbee, cycling, and skateboarding, on one hand helps consumers release emotions, and on the other hand creates new business opportunities for brands. These sports combine the social and fun elements consumers need, and related consumption needs such as sharing with friends and convenience/portability have emerged. Many brands are actively embracing these opportunities. For example, outdoor brand Jiadiao, mainly known for sun protection, is gradually expanding the boundaries of lightweight outdoor scenarios and launching lightweight share-pack electrolyte drink powder; to facilitate outdoor drinking, Nestlé Coffee launched a large cup of daily coffee; Meituan provides convenient delivery services outside camping theme parks. These innovations all indicate new growth opportunities behind light sports. Deep Cultivation of Segmented Consumer Groups The diversification of consumer needs requires brands to deeply cultivate their target consumer groups and understand their consumption behavior changes. The main need of young singles is self-pleasing. They save where they can and spend where they should, spending far more than the average on hair styling, foreign liquor, and cat food. But in budget-controlled "special forces" tourism, they also need to ensure necessary protection, with strong demand for small-pack shampoo and sunscreen products. The silver-haired group, also known as "new elderly," in addition to taking care of family members, are gradually showing more self-pleasing lifestyles. Their purchases of hair care oils, fragrances, and similar products show certain spending power. Their shopping methods are increasingly online. The latest data shows that in the first half of this year, the average spending per household of silver-haired consumers purchasing FMCG on Douyin increased by nearly 50% year-on-year. If brands can achieve online consumption, online service, and online experience for this group, there will be huge growth potential. Upgrade Opportunities in Lower-Tier Markets Lower-tier markets have become a must-fight battleground for major manufacturers to expand their territory. Over the past year, both local and foreign enterprises have accelerated their layout in lower-tier markets. We can see that consumers in lower-tier cities have basically caught up with first-tier cities in per-household spending on categories such as baijiu, laundry products, and room-temperature milk. Hot topics like "small-town rich women" and "county-level Sam's Club purchasing agents" also reflect that manufacturers need to truly understand the needs of lower-tier market consumers, update their perceptions, and make correct strategic layouts. Taking town consumers as an example, to refresh themselves, they prefer energy drinks over coffee, and they have a higher preference for local brands over foreign brands. To open the town consumer market and reach these consumers, manufacturers should focus on small supermarkets and Pinduoduo in channel selection. Three Insights First, China's long-term development dividend stems from the continuous evolution of comprehensive health needs. In this context, brands can build a moat by continuously deepening the health track, resonating with consumer emotions, and innovating with scientific research systems and highly differentiated products. Second, the logic of retail growth has changed. Brands can achieve efficient "goods-to-people" through community circles and lifestyle transmission, allowing consumers to truly understand and choose. At the same time, seize new outdoor lifestyle inspirations to co-create new usage scenarios and business opportunities. Third, in the era of stock competition, we must abandon biases, discover incremental opportunities from different growth groups with new perspectives, update our perceptions and action plans, and only then can we find new incremental opportunities. PS: Friends interested in the on-site speech content can follow the recent posts on the "New Distribution" WeChat official account. We will organize and publish all guests' speeches for our readers. Click Read Original to see more highlights of the 5th China FMCG Conference and the 1st China FMCG Distributor Conference...