Click to read the original text for details "Agriculture must know the seasons," and with knowledge, growth and maturity follow, "nothing will not be achieved." This is an influential saying by Chen Fu, an agronomist of the Song Dynasty. Similarly, whether the market environment is good or bad, consumer sentiment rises or falls, and whether the future market will heat up or cool down are all "must-know" matters for enterprises and distributors surviving in the industry. But predicting the future is increasingly difficult, and today it has become almost an impossible task. Since 2022, the dramatic changes in the global situation have shattered almost everyone's expectations for the future. The Russia-Ukraine conflict continues, and new variants of the COVID-19 virus have made a comeback. What else will happen in the second half of the year? Will consumers return, and will there be a chance for a consumption boom? How much of the lost sales in the first half can be recovered in the second half? Precisely because the future is increasingly uncertain, today we are more eager than ever to know the answers about the future. Will the world get better? Will the domestic market improve? Will consumption pick up? Breaking it down, the answers to these three questions basically cover the entire second half. 01 Will the world get better in the second half? The split between East and West is a fact, and the answer is likely no. The Russia-Ukraine conflict is still not over, and there are various accounts of its causes. Regardless of which account holds, objectively, the United States and European countries like the UK have gained short-term benefits from capital flight back to their shores. But this has not given the U.S. economy much breathing room; the consumer price index rose 8.6% year-on-year in May, the highest in 40 years. The trade war between China and the U.S. continues, and in today's globally integrated economy, this is bound to be a lose-lose outcome. The G20 foreign ministers' meeting on July 7-8, where Chinese and U.S. finance ministers met, drew widespread attention. There may be some positive news, but it clearly cannot change the trend of China and the U.S. moving apart. COVID-19, the Russia-Ukraine conflict, and the tightening of U.S. monetary policy—if any of these global issues is not resolved well, the world will not see signs of improvement. The COVID-19 pandemic continues unabated. Europe and the U.S. have adopted open policies, but the recurrence of COVID-19 has created huge uncertainty for the global economic recovery. Recently, two new subvariants of the Omicron strain have hit the U.S. and other places, triggering new global alerts. As long as the shadow of COVID-19 lingers, consumer confidence is hit, supply chains are repeatedly disrupted, and economic recovery is hard to sustain. The Russia-Ukraine conflict has triggered food and energy crises and global supply chain problems. IMF Managing Director Kristalina Georgieva believes that the conflict has caused a major setback to the global economic recovery, leading to downgrades in growth forecasts for 143 economies, which account for 86% of global GDP. To this day, the Russia-Ukraine conflict shows no signs of ending, and COVID-19 remains a lingering cloud that could return at any time. In this round of major crisis, most countries will fall into recession, and island nations like Sri Lanka, which rely on tourism and face multiple crises in tourism, food, and energy, coupled with low foreign exchange reserves, have plunged into a nationwide economic collapse in July. 02 Will our domestic market improve? The world economy has long been globally integrated, and with the sudden rise of anti-globalization crises, it is naturally difficult for us to stay immune. But at the same time, it must be said that so far, Chinese wisdom has allowed us to suffer relatively less impact from the pandemic and economic shocks in this round of crisis, but we still face considerable pressure. For example, categories like beer face high raw material cost pressures, and the sharp rise in oil prices has also led to a huge increase in logistics costs across society. However, the situation in the second half can be cautiously optimistic. Recently, the Bank of China Research Institute released the "2022 Q3 Economic and Financial Outlook Report," stating that in the second half, China's macroeconomy may enter a fast recovery track, with Q3 GDP growth expected around 4.6% and annual GDP growth around 4%. Image source: Tuchong Creative The report believes that the external environment will become more severe and complex in the second half, and domestic demand will replace external demand as the ballast stone for stabilizing the macroeconomy. Therefore, at the consumption level, the second half may see a gradual recovery under the premise that the pandemic is controllable. But the report also believes that while the economy will inevitably stabilize and rebound in the second half, the recovery process will be more fragile than in 2020, especially due to the possible recurrence of the pandemic. But after the impact of the Omicron virus in the first half, China has formed experience and models to deal with "fast-spreading, low-toxicity, and recurrent infection" COVID-19 variants. While maintaining low-level infections, with precise and rapid epidemic prevention on one hand and opening the market to encourage consumption on the other, we are hopeful of seeing a recovery in FMCG in the second half. However, we must also see that after three years of fighting the pandemic, the impact of the epidemic in the first half of this year has dealt a huge blow to consumer confidence. It will take longer for this confidence to recover and climb out of the trough, not only for consumers but also for practitioners in the FMCG industry. More critically, due to increased uncertainty about the future, many brand managers have lost confidence in making medium- and long-term plans. Under huge uncertainty, any longer-term planning seems unnecessary because it is not feasible. And all of this recovery will take time. 03 Will consumption pick up in the second half? The turmoil of 2020, the strong rebound of 2021, and the renewed turmoil in 2022. After three years of pandemic, what changes have occurred in FMCG consumption? Will consumption rebound again in the second half? On June 21, Bain & Company and Kantar Worldpanel released the "2022 China Shopper Report" (hereinafter referred to as the report), analyzing the future trends of the FMCG market and interpreting the changes behind consumer shopping behavior. Regarding the future, the report believes: In the second half of this year, the market will remain full of turmoil and uncertainty, and consumers will become more sensitive to price increases in many categories. But looking ahead to 2023, the report believes that the long-term fundamentals of China's FMCG market remain stable, and industry insiders are optimistic about the market returning to healthy growth. The report shows: From March 26 to April 22, 2022, FMCG sales volume grew 5.6% year-on-year, but average prices fell 5.7%, the largest price drop in recent years. Among the 26 categories studied by Bain, more categories saw average selling prices decline in 2021, or the increase in average selling prices was lower than the CPI increase. "This reflects that consumers are becoming more price-sensitive," said Bruno Lannes, global senior partner at Bain & Company. In recent years, brands have continued to push premiumization, and product prices have risen year by year. But as the pandemic persists, consumers are becoming more cautious, and purchasing behavior varies greatly across categories. In terms of data, the report shows: Beverages performed best in 2021, reversing the decline with 5.9% growth. Packaged food, on the other hand, saw a 2% decline in sales volume compared to 2020. Image source: Panoramic Vision Personal care and home care categories continued to grow in 2021, with sales value up 4% and 6%, and sales volume up 3.6% and 7.5%, respectively. "Amid the ongoing uncertainty brought by the pandemic, Chinese consumers have started shopping again but are showing new mindsets and different consumption behaviors," said Bruno Lannes, global senior partner at Bain & Company. "Although the market shows signs of recovery, consumers have also become more cautious and price-sensitive. Brands must work harder to connect with consumers and highlight their value propositions." In addition to price, FMCG consumption has also seen a change where local brands are increasingly recognized and welcomed. In recent years, a large number of new consumer brands have gained many consumers through the internet, and some online brands have even gradually penetrated offline channels. In terms of consumption scenarios, due to the pandemic, home consumption has risen to a scenario as important as out-of-home consumption. The main channels for home consumption growth are one is near-field e-commerce, and the other is community retail. In terms of out-of-home consumption, consumers are using every possible condition to meet their out-of-home consumption needs. For example, the recent boom in camping in suburbs and parks is such an example. Image source: Panoramic Vision Will consumption pick up in the second half? At present, the only uncertainty lies in the effectiveness of epidemic prevention and control. The state is also taking multiple measures to find a balance between dynamic zero-COVID and economic development. For brand owners and distributors in the FMCG industry, the most important thing to do now is to prepare for both scenarios, to meet the possible turmoil challenges or growth opportunities in the second half. How can you prepare for both? As a professional new media platform in the FMCG industry, New Distribution will hold the "7th China FMCG Channel Innovation Conference" in Chengdu from July 20 to 22, which marks the official start of the second half. The conference, themed "Seize the Opportunity, Stabilize the Market," invites over 80 distinguished guests and thousands of FMCG manufacturers and distributors from across the country to gather in Chengdu for three days of high-density meetings to discuss market development trends, response strategies, and methods for the second half of 2022. Most importantly, at this conference, you can learn how to prepare for both scenarios, how to seize the opportunity and achieve growth in optimistic situations, and how to stabilize your market and maintain health in unfavorable situations. Note: Some data and information are from internet reports. -END-