CHINA: FMCG Sales Continue To Suffer – Kantar

Chinese consumers bought fewer daily essential products during 2015, a trend which led to declines in volume sales of FMCG goods in urban areas.

According to the fifth annual China Shopper Report by Kantar Worldpanel and Bain & Company, overall FMCG sales in urban China were down 0.9% year-on-year in volume terms (+0.1% in 2014), while value sales were up just 3.5% (+5.4% in 2014) – the lowest rate of growth in five years.

The report looked at 26 categories across the packaged food, beverages, personal care and home care sectors, which accounted for 80% of all FMCG sales in China.  It attributed the drop to a decline in the working population, as well as a shift in low-end manufacturing jobs to other countries. It said products aimed at less affluent shoppers were the worst affected – sales of instant noodles fell 12.5%, while sales of beer were down 3.6%.  However, sales of skincare products grew by 13.2%, while those of make-up products jumped up 15.5%.

Additionally, the report noticed a shift towards local brands – sales of Chinese brands were up 7.8%, while international brands reported a 1.4% drop.  Online sales jumped up 37%, highlighting China’s dominant position as the world’s largest e-commerce market.  Amongst bricks & mortar chains, convenience stores performed the best, with sales growth of 13.2% for FMCG products, while hypermarkets recorded a 0.2% drop.

The report noted: “FMCG companies have built vast distribution networks to introduce their products to Chinese consumers. With those networks now in place, brands face a new challenge: increasing the rate of sales at each distribution point. As driving frequency is hard to do and is low in many categories in China, brands often invest to offer premium products, which is proved to be a successful approach for squeezing growth when penetration plateaus or declines.”

It went on: “Despite the general malaise, some categories are making significant headway, highlighting how the performance of FMCG and other consumer sectors in China are operating at two distinct speeds: slow and fast”.

More details on the Kantar website

NAM Implications:
  • In the absence of growth elsewhere, any declines in China are an issue for global suppliers
  • Equally, in the categories that are growing, crucial to seek a fair share
  • …with trading up the consumer the only option for some…