---
title: "Why Are FMCG Giants All in Decline? What Exactly Is Going On?"
description: "During the 2008 financial crisis, traditional FMCG industry maintained strong double-digit growth and was hailed as a necessity. However, a strange phenomenon is that those once-thriving companies are now collectively declining, such as China Agri-Industries' stock price falling to a historic low of 2.03 yuan, and Mengniu Dairy's stock price dropping from a high of 45 yuan in 2015 to the current 11 yuan. The declines are extremely alarming. Why is this happening? The impact of diverse brands: In fact, the total market demand for FMCG has not decreased, but competition has intensified dramatically..."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-04-02"
language: "en"
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# Why Are FMCG Giants All in Decline? What Exactly Is Going On?

> During the 2008 financial crisis, traditional FMCG industry maintained strong double-digit growth and was hailed as a necessity. However, a strange phenomenon is that those once-thriving companies are now collectively declining, such as China Agri-Industries' stock price falling to a historic low of 2.03 yuan, and Mengniu Dairy's stock price dropping from a high of 45 yuan in 2015 to the current 11 yuan. The declines are extremely alarming. Why is this happening? The impact of diverse brands: In fact, the total market demand for FMCG has not decreased, but competition has intensified dramatically...

**Editor's Note:** During the 2008 financial crisis, the traditional FMCG industry maintained strong double-digit growth and was hailed as a necessity. However, a strange phenomenon is that those once-thriving companies are now collectively declining, such as China Agri-Industries' stock price falling to a historic low of 2.03 yuan, and Mengniu Dairy's stock price dropping from a high of 45 yuan in 2015 to the current 11 yuan. The declines are extremely alarming. Why is this happening?

## The Impact of Diverse Brands
In fact, the total market demand for FMCG has not decreased, but competition has intensified dramatically. Traditional FMCG companies only needed to control offline supermarkets, where shelf space is fixed, so channel was king. Whoever could occupy the supermarket would occupy the market.

However, competition in the e-commerce era has completely overturned this state. On the internet battlefield, shelf space is unlimited, and all FMCG companies are pulled onto the same front. Therefore, new competitors, unlike traditional FMCG companies, can sell via the internet even without offline channels. In addition, with the rise of cross-border e-commerce, consumers have become more diverse and open in brand choices, which to some extent has eroded the market share of traditional FMCG companies.

## The Decline of Traditional Advertising
Traditional FMCG companies relied on offline channels for communication, but it is a well-known fact that most traditional advertising has begun to decline. The time users used to spend watching TV and reading newspapers is now occupied by mobile devices, and they no longer watch traditional media ads. Therefore, the effectiveness of FMCG companies' investment in traditional media has greatly diminished. Below is a report titled "2015 China Advertising Market Review" released by CTR Market Research.

▼

The survey report shows that the advertising investment ratios for TV, newspapers, magazines, radio, traditional outdoor, and traffic video have all decreased to varying degrees, indicating that the effectiveness of such ads is far less than before.

A major characteristic of FMCG companies is their dependence on advertising, so their rise and fall is closely linked to the advertising industry. Currently, the internet has brought about the collapse of traditional channels, and the decline in the effectiveness of traditional advertising inevitably affects FMCG companies.

## How Do Current FMCG Brands Do Communication?
Traditional FMCG companies had a relatively simple way of communication: content was handed to 4A agencies, and offline placement was given to channel distributors. However, the fission of the internet has profoundly changed the rules of the game. **The channels to reach users are not single but can be infinitely fragmented,** such as news clients, WeChat groups, and Moments. Good content itself can be reposted by various news clients, WeChat public accounts, and friends' Moments. Therefore, content itself is the channel. The simple and crude advertising model has died, and an era driven by content has officially risen.

Therefore, to make advertising content truly engage users, several key points can be considered. **First, follow hot topics.** Hot topics themselves carry dissemination attributes, and brands associated with hot topics will have a spillover effect. Companies create content and find relevant key KOLs to invest in, achieving brand bundling. **Second, invest in offline advertising.** Through the linkage of offline and online, communication can be maximized. Of course, this mainly refers to commercial buildings and cinemas.

## What Are the Trends in the FMCG Industry?
**Currently, FMCG is moving towards mid-to-high-end development, with users in first- and second-tier cities being the main force.** FMCG brands must first grasp this group of people before they can expand to third- and fourth-tier cities. In addition, due to the information asymmetry caused by the internet, **the consumption products of users in third- and fourth-tier cities will also follow the changes in first- and second-tier cities, which is an inevitable trend.**

FMCG has crossed the stage of meeting basic functional needs and is moving closer to more "value appeals." Therefore, more FMCG brands will rise in this era, and the decline of traditional FMCG giants is actually inevitable because they must make way for new brand value.

Finally, the relationship between FMCG and the advertising industry has shifted from the traditional channel-king era to a new communication model that emphasizes online-offline linkage and content. The value of building and cinema advertising has increased rather than decreased.

**Conclusion:** The internet has dismantled the sales and communication channels of traditional FMCG, creating huge opportunities for emerging FMCG brands. The former giants did nothing wrong; it's just that their value was attached to "basic needs," and the needs of the new era have already surpassed that. Users' demands for brand value and user experience are spreading like a plague.

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