---
title: "Major Release: \"China FMCG Production-Supply-Marketing Transformation White Paper (Industry Insights 2025)\""
description: "I'm Qi Te from New Distribution. Every year, New Distribution publishes a white paper on retail industry changes. In 2023, it was the Snack Hard Discount White Paper, covering the snack bulk retail industry, which began rapid growth that year. In 2024, it was the China Hard Discount Development Report, as full-category hard discount stores expanded rapidly. For 2025, industry cycles have shifted again, leading to the concept of integrated production-supply-marketing, as retailers, brands, and distributors can no longer view the market from their own single perspectives."
author: "戚特"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-08-27"
categories: "Industry Trends"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/eQeCRTex1OijaaGWW1H9rw"
translation: "https://xinjignxiao.com/zh/articles/%E9%87%8D%E7%A3%85%E5%8F%91%E5%B8%83-%E4%B8%AD%E5%9B%BD%E5%BF%AB%E6%B6%88%E5%93%81%E4%BA%A7%E4%BE%9B%E9%94%80%E5%8F%98%E9%9D%A9%E7%99%BD%E7%9A%AE%E4%B9%A6-%E8%A1%8C%E4%B8%9A%E6%B4%9E%E5%AF%9F2025-9f8befd8.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/major-release-china-fmcg-production-supply-marketing-transformation-whit-9f8befd8/"
citation: "戚特. “Major Release: \"China FMCG Production-Supply-Marketing Transformation White Paper (Industry Insights 2025)\".” New Distribution, 2025-08-27. https://xinjignxiao.com/en/articles/major-release-china-fmcg-production-supply-marketing-transformation-whit-9f8befd8/"
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---

# Major Release: "China FMCG Production-Supply-Marketing Transformation White Paper (Industry Insights 2025)"

> I'm Qi Te from New Distribution. Every year, New Distribution publishes a white paper on retail industry changes. In 2023, it was the Snack Hard Discount White Paper, covering the snack bulk retail industry, which began rapid growth that year. In 2024, it was the China Hard Discount Development Report, as full-category hard discount stores expanded rapidly. For 2025, industry cycles have shifted again, leading to the concept of integrated production-supply-marketing, as retailers, brands, and distributors can no longer view the market from their own single perspectives.

I'm Qi Te from New Distribution.
Every year, New Distribution publishes a white paper on retail industry changes. In 2023, it was the Snack Hard Discount White Paper, covering the snack bulk retail industry, which began rapid growth that year. In 2024, it was the China Hard Discount Development Report, as full-category hard discount stores expanded rapidly.
For 2025, industry cycles have shifted again, leading to the concept of integrated production-supply-marketing. Retailers, brands, and distributors can no longer view the market from their own single perspectives.
Why propose integrated production-supply-marketing? Because low prices alone can no longer solve problems. This year, we've clearly felt this, not just from feedback from brands and retailers.
Why is this? I'll explain from both the macro cycle and the meso-level industry evolution.
Every retail revolution has a core driver, and each time it's different. This round of retail changes stems from upstream supply chain shifts.
Why do upstream changes occur? They are the combined result of multiple cycles.
Since I work in investment, I may have a macroeconomic perspective that can serve as a reference. Of course, this is just my opinion.
How to correctly understand the current cycle.
First, as the economy develops, limited demand and unlimited supply inevitably arise. This is an objective law.
That is, the marginal decrease in total consumer spending in modern society is an objective law, due to marginal propensity to save and income distribution, but the massive supply hasn't disappeared.
If you've studied economics, you know its two pillars: supply-demand theory and the rational actor assumption.
However, these are also the two major errors of classical economics. Say's Law states that demand automatically satisfies supply, meaning goods once produced will be consumed. But this has conditions: it only holds during the industrialization stage. The rational actor assumption posits that if everyone is perfectly rational, market competition will automatically clear the market. But in reality, humans are the most irrational creatures, and their behavior is heavily manipulated and suggested by psychology.
We've entered a post-industrial society where traditional economics can no longer explain many phenomena.
In the past, Say's Law held because supply was far less than demand. Then society gradually moved to a state of both supply and demand flourishing, and then to supply-demand mismatch.
Why does supply-demand mismatch occur?
Humans are the most irrational creatures. As society evolves, consumers develop new needs that aren't met. In this context, the old logic of "produce goods + distribute" no longer holds.
This year, a Japanese person named Mitsuhiro Tsuji has become popular. He divided Japanese society into three consumption eras and predicted a fifth era in the future. While later parts involve his personal speculation, from a rearview mirror perspective, his three-stage division is still meaningful for an economy from early industrialization to maturity.
Emotional consumption, represented by Pop Mart, is one such phenomenon. In the future, more consumption behaviors may emerge that deviate from the traditional paradigm focused on basic needs. What exactly they will be is hard to predict now, but they will likely occur.
In late industrialization and post-industrial times, consumers exhibit diverse consumption aesthetics.
Even in the context of major consumption downgrade, the emerging business formats aren't simply low-price. Sam's Club, Mixue Bingcheng, Pop Mart, Haoxianglai, and Snacks are all based on value for money, adding layers of people, emotion, and scenario.
Above, we've looked from the most macro perspective. Now let's think from a meso perspective.
We said all retail changes today come from upstream changes. What exactly is happening upstream?
Disruptive retail transformation stems from distribution revolutions. That is, macro view cycles, meso view distribution, micro view retail.
This diagram is my summary of China's distribution transformation stages. It combines observations of distribution evolution in Japan, Europe, and the US, along with judgments on China's current macro cycle.
China's past retail phenomena are products of the second distribution revolution. The rise of many discount stores is under the backdrop of deflation and a macro environment where the commodity price center shifts downward, distribution layers are compressed, and brand-manufacturer-dominated markets transition to retailer-dominated markets.
But from historical experience, this isn't the end. When prices across the industry are driven down, what becomes the competitive advantage?
Ultimately, it's how to meet consumers' unmet needs—the part of supply-demand mismatch that hasn't been matched.
How to achieve this? Brands, suppliers, and retailers need to form a collaborative relationship to better serve consumers, which is the only way to survive.
That is, when the economy is in full stock competition, and we find we can't eliminate each other, but continuing as is might kill us all, only then will a collaborative relationship form.
Of course, after proposing this, I also have a realization: the second distribution revolution in China will be a long cycle, which is the stage we're currently in. This is caused by the overall cycle and is closely related to our country's conditions. It takes time to form new brand-retail relationships, and it's not something I can solve with a few words. Things have objective laws.
The discount retail space is still huge, but it will place new demands on companies in the industry. Besides low prices, what else do you have? What value can you create for consumers?
These are questions companies need to consider as the industry enters the third distribution revolution stage.
China's biggest characteristic is that it's a highly stratified market.
The group that can barely be called middle class in China is no more than 400 million people (according to official standards, a three-person household with annual income of 100,000-500,000 yuan). One billion people have household incomes below 100,000 yuan, representing the vast grassroots working population.
It's basically impossible to reverse these numbers. The global economic development cycle determines that 600 million new middle-class people can't appear out of thin air in the short term.
So in the medium term, retail formats are stratified. Sam's Club, Yonghui, Xianfeng Life, and instant retail serve the 400 million middle class, while Hema NB, Snacks are busy, and Haoxianglai serve the one billion ordinary people.
Regardless of which tier you serve, new capabilities are needed—besides low prices, what else can you offer?
So we propose that in the new cycle, new brand-distribution-retail role positioning must be formed to create new competitive advantages.
People are anxious because they don't know their positioning, and Chinese entrepreneurs often prefer to be big and all-encompassing, with a muscle memory of competing to the death to dominate the market.
But what is the brand's positioning? What is the retailer's positioning?
In my early career, I participated in overseas investment work, and one case left a deep impression. The company is called High Ridge Brands, which I think few people know. If I mention its brands—Zest, VO5, White Rain, Coast—fewer still would know them. But this company is the third-generation personal care and chemical group in North America, second only to P&G and Unilever.
Its approach is simple: acquire brands that P&G and Unilever discard but that still have some brand equity, then reintegrate them. One of the most important methods is co-creating with channels: whatever products the channel wants, we develop for you.
Its biggest customer is Walmart, so Walmart eventually stopped sourcing from others and had it develop products.
So, despite reluctance, many brands will have to transform in the future, as will distributors and retailers. Not every retailer can become a manufacturing retailer like 7-Eleven or ALDI. Excellent overseas retail companies form a system or ecosystem, not a big-and-all-encompassing approach where everything is done in-house.
So this report aims to help everyone find their positioning in the current cycle.
We also conducted some research on brands. Interestingly, discount channels are the biggest negative impact channel for brands, but also the biggest sales growth channel.
The commonality of growth channels is that brands are closer to consumers, with shorter links and faster response. Brands must build flexible supply capabilities + price stratification, a system + multi-channel coordination logic, otherwise they'll "eat on one side and get hit on the other."
We also found that many brands don't cooperate with incremental channels not because they're waiting, but because their systems are incompatible. For example, discount supermarkets' business model requires "extreme value for money + stable sell-through," while most brands still stick to "unified pricing + high-margin rebates." Brand pricing power and channel profit structures naturally conflict with the discount model. Discount formats aren't about selling cheap; they require structurally compressing redundancy in the supply chain, which is precisely what brands aren't good at.
Supermarket adjustments also put enormous pressure on brands. Direct supply, adjustments, and curated categories are weakening brands' control over terminals. The trend of de-KA in regional supermarkets is very obvious; many mid-sized supermarkets are decentralizing procurement, compressing categories, cutting rebates, and improving efficiency and product control.
But some brands have started structural optimization. The old tactic of "new products + distribution" is no longer effective; they must return to the fit between product fundamentals and sell-through efficiency. Rebates and inventory pressure can't maintain stable channel relationships, so they're starting to replace rough channel strategies with refined management.
Although slow, some changes are indeed gradually moving in the direction we expect.
Above, I've shared some of the report's background thoughts according to my thinking. For more details, you can contact me to get the report. Thank you.


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## Citation metadata

- Publisher: New Distribution
- Author: 戚特
- Published: 2025-08-27
- Canonical: https://xinjignxiao.com/en/articles/major-release-china-fmcg-production-supply-marketing-transformation-whit-9f8befd8/
- Original source: https://mp.weixin.qq.com/s/eQeCRTex1OijaaGWW1H9rw

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