The FMCG market increased steadily in the first quarter

The FMCG market increased steadily in the first quarter, and the expansion of discount formats accelerated.

The latest report released by Kantar Worldpanel shows that the fast-moving consumer goods (FMCG) market in urban China maintained a modest recovery in the first quarter of 2024, with a year-on-year sales growth of 2.6%.

The eastern region showed more positive growth, increasing by 7% compared to the same period last year, demonstrating the enhancement of the regional economic vitality and the strong resilience of consumer purchasing power. 

Under the combined influence of the holiday effect and the gatherings of families, the consumption of alcohol and beverages at home showed a more significant growth in the past 12 weeks, whilst the dairy and personal care categories showed a relatively weak performance in the first quarter.

At the city level, the lower-tier market continues to be the engine of China's consumer market. With the strong recovery of population mobility and tourism, the consumption gap between lower-tier cities and upper-tier cities is continuously narrowing. Kantar Worldpanel reports that the sales in town markets in the first quarter increased by 3.9% compared to the same period last year, which is higher than the cities.

The latest data released by the National Bureau of Statistics also shows that the national economy continued to rebound, with the retail sales of consumer goods in urban areas increasing by 4.6% in the first quarter. Driven by the service retailing, the demand structure continues to improve.

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Modern trade: 

Retreat to Advance, Accelerate Upgrading and Transformation

Kantar Worldpanel's report indicates that the hypermarkets remained on a downward path in the first quarter, with sales down 1.4% compared with the same period last year. Driven by the purchase frequency and the unit price of customers, the supermarket increased by 1.3% compared with last year. 

Small supermarkets and convenience stores continued to grow. Gift giving occasions during Chinese New Year caused the significant growth of the penetration and purchase frequency of small supermarkets in the lower-tier market.

Kantar Worldpanel indicates that, the market share of the top ten retailers in modern trade further declined by 2.4 percentage points, with increased market fragmentation. Among the major retailers, Sunart Group, Vanguard Group, Yonghui Group, and other leading retailer brands adjusted their strategies, by closing some poorly performing stores and upgrading the remaining stores.

In the face of a severe decline in market share, Yonghui supermarkets still opened new stores in Chengdu, Kunming and other cities, implementing the store optimization strategy that simultaneously promoted “high quality service” and “affordable goods”.

Walmart Group also plans to transform and upgrade more than 30 hypermarket stores with a “one-stop omnichannel shopping experience”, resulting in a reconstruction of products and services, to better meet consumer shopping needs.

In the first quarter, the membership store format continued to perform exceptionally well, with sales growing by more than 20% year-on-year. Sam's Club, as a leader in this pack, increased its market share by 0.4 percentage points. Both international and local membership stores are no longer limited to first tier and new first-tier cities, and the location strategies are also becoming more refined.

In the past year, the German discount store ALDI strengthened its "affordable community supermarket" positioning, expanding their range of private-label products. ALDI also plans to rapidly expand the number of stores in Shanghai from the current 50 to 500-600 and gradually expand its business map to the Yangtze River Delta region. In the first quarter of 2024, ALDI's penetration in Shanghai reached 12.3%, an increase of 7 percentage points from the same period last year.

The regional retail benchmark in China, Pangdonglai, also showed a brilliant performance in the past 12 weeks. Recently, Pangdonglai initiated a plan to help the struggling Bubugao supermarkets. Through the store layout and product combinations, supply chain and other systematic adjustments, it aims to enhance the Bubugao consumers shopping experience and improve the store performance.

Ecommerce Platform: 

Douyin Continues to Grow, Exceeding Pinduoduo in Penetration

In the first quarter of 2024, China's shopping online channel continued to grow steadily, with the sales increasing by about 2% year-on-year, while penetration increased by 0.4 percentage points. This growth was mainly driven by an increase in purchase frequency. Among the major platforms, Taotian Group was the only Ecommerce platform to show a slight decline in penetration, down 1.7 percentage points compared to the same period last year.

The Douyin platform continues to maintain rapid development. In the first quarter of 2024, over 28% of Chinese households purchased fast-moving consumer goods on Douyin, purchase frequency also showed significant growth. 

With the official launch of the Douyin mall version app, consumers can enjoy a complete Ecommerce shopping experience. At the same time, the platform uses its iconic video page to promote sales conversion within the platform. It aims to achieve the interaction of interest and shelf ecommerce platform.

The Expansion of Discount Formats Accelerates

Since 2023, Chinese consumers have shown a growing interest in cost-effective products, and the selection of substitute products has become an important trend in the consumption stratification of some categories, which has also driven the rapid development of the discount store formats in China. 

Data from the Kantar Worldpanel shows that in the first quarter of 2024, 5.9% of Chinese households purchased FMCG from snack discount stores. In terms of regions, the main battlefield of snack discount stores is still the East and South, with steady expansion in the West and North.In the southern region, the growth rate continues to show a double digit increase month to month. 

From the city level, the penetration of snack discount stores prefecture-level cities exceeds 7%, showing the huge attraction of snack discount stores for consumers in lower-tier cities.

China’s discount store format is in a period of rapid development and transformation. By supply chain revolution and value transmission, community discount supermarkets, warehouse discount stores are becoming a new trend in the retail industry and are a new hot spot for investment.

Recently, Busy For You Group and super Ming completed a strategic merger, with the number of stores now exceeding 7500, and they have announced to accelerate the development of the national market, which focuses on the Northern market and increasing marketing support.

Wanchen Group, the parent company of Haoxianglai recently announced 2024 Q1 expected revenue of 5 billion, and lead the snack store discount format industry.

Faced with the intensifying competition and changing consumer demands, snack discount stores are expanding their categories from snacks to daily food and beverage categories, and accelerating the integration of brands and supply chains, with improving operational efficiency and establishing differentiation barriers while expanding their scale.

If you would like to learn more, please get in touch with our experts or access our data visualisation tool to explore current and historical grocery market data for your region.