The Chinese FMCG market has navigated some turbulent times in recent months. Spend rebounded strongly in the first quarter of 2021 compared to the previous year, with personal care and home care making the biggest gains. Value sales across most categories then fell sharply, before a slight recovery in Q4. The overall result was an value increase across the year of 3.1%.
Chinese consumers are demonstrating new ways of thinking and behaving as a result of the pandemic. Brands and retailers should take notice, and respond by working even harder to connect with shoppers, for instance by highlighting their value proposition.
More cautious, more price-sensitive
As Covid-19 restrictions eased in 2021, consumers made more frequent trips to stores, which contributed to a 4.1% gain in volume over the year. However, they also took advantage of heavy promotions, which was a factor in the 0.9% drop in average selling prices (ASP). The result was a 10.6% value growth in the first quarter, followed by a drop of 1% in the third quarter.
Beverages enjoyed the best performance, with 5.9% value growth compared with a 4.1% loss in 2020, while packaged foods went in the other direction, losing 1.2% based on a 2% drop in volume and 0.8% increase in ASP. Spend in the personal care and home care categories continued to grow, by 4% and 6% respectively, with volume sales up for both. However, those gains were offset by rising ASP.
Similar to previous years, local brands won share from overseas brands in 2021. They focused on increasing volume as a growth strategy, while international brands relied on premiumisation.
The fragmentation of online FMCG
Ecommerce was the only channel to maintain solid growth in 2021, although at 15% this was only half the rate seen in previous years. Platforms became increasingly fragmented, with more consumers shifting to options like Pinduoduo and the short-form video platforms Douyin and Kuaishou.
To win, FMCG brands need to re-evaluate their ecommerce channel strategy across platforms to reach different consumer segments and satisfy different needs. Leveraging the rise of online-to-offline (O2O) commerce will also drive incremental value.
There are good reasons to be optimistic about the future: the fundamentals of the Chinese economy remain strong. That said, FMCG brands and retailers may need to accept that volatility is the new normal. To prepare for a rebound, they should build their strategies with this in mind – reviewing product and brand portfolios, optimising supply chains, integrating online and offline routes-to-market and reducing operational complexity.
For a comprehensive view of the FMCG market in Mainland China, download Kantar Worldpanel and Bain & Company’s 11th annual China Shopper Report Vol I by filling in the form below.