China's FMCG market recovered steadily in Q2

China's FMCG market recovered steadily in Q2, and the performance of different formats continued to diverge

The latest report released by Kantar Worldpanel indicates that the fast-moving consumer goods (FMCG) market in urban China continued to recover steadily in the second quarter of 2024, with a year-on-year sales growth of 2.5%.

In the first six months of 2024, the overall market sales grew by 2.3% year-on-year, with the difference in performance across categories continuing to widen. The beverage category became the main engine of growth in the FMCG market, with an 11% year-on-year increase in the first half of the year, with ready-to-drink teas and fruit juices showing even stronger growth. While homecare and food categories sustained positive growth, the dairy and personal care categories are facing more serious growth challenges.

The latest data released by the National Bureau of Statistics also shows that the retail sales of consumer goods in urban areas increased by 3.7% in the first half of the year, and the contribution of final consumption expenditure to China's economic growth was 60.5%. However, the lack of effective domestic demand is also affecting the full recovery of the FMCG market.

At the city level, the lower-tier market continued to be the key driver of China's consumer market, particularly the consumption of prefecture-level and county-level cities where growth has exceeded 4%. The East and West regions led the consumer recovery, recording year-on-year growth of 6.8% and 3.1% respectively.

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Modern trade: 

Proximity channel continues to lead, while the performance of different formats increasingly diverges

In the first half of 2024, Chinese consumers maintained their proximity shopping habits, with mini-supermarkets and convenience stores remaining the main growth channels among modern trade.

Focusing on consumers' daily life scenarios, a strategy of category management and regional market development, convenience stores achieved 6.2% year-on-year growth.

Among the top ten retailers, Walmart Group increased its market share by 0.2 percentage points compared to the same period last year, driven by the strong performance of Sam's Club.

Jiajiayue within the SPAR group achieved a 0.2 percentage point market share gain through internal resource consolidation and the expansion of new formats such as discount stores.

In 2024, Hema not only continuously improved the quality of store services and consumer experience, but also accelerated the opening of new stores, expanding its presence in lower-tier markets.  According to the Kantar Worldpanel data, in the most recent quarter, the penetration of different formats, such as Hema, Hema X members' club and Hema NB Outlets, has increased. Hema NB Outlets, tasked with exploring the lower-tier market and meeting the needs of price-sensitive consumers, achieved a 190% increase in sales during the second quarter. Overall, Hema achieved a 0.3 percentage point increase in market share in the second quarter.

Regional retail brands continue to expand aggressively.

Biyoute, which has optimised the supply chain and reduced operating costs by simplifying SKUs and implementing shared warehousing, has achieved a 0.2 percentage point increase in market share in the northern region.

The Shizu Convenience Stores, deeply established in the Yangtze River Delta region, have recently expanded into the northern market. In 2024 the Shizu group plans to open 2,000 convenience stores in Shandong and establish a comprehensive supply chain and logistics system in order to achieve cross-regional development.

Ecommerce Platform: 

Interest-based e-commerce continues to Lead

In the first half of 2024, the general trend of FMCG in the e-commerce remained relatively stable compared to the same period last year.

Taotian Group still dominated the market, but its market share slipped by 3 percentage points year-on-year. Meanwhile, JD Group and Pinduoduo gained 0.2 percentage points and 0.8 percentage points in market share, respectively.

Interest-based e-commerce continues to expand its consumer base, with 37.2% of Chinese households purchasing fast-moving consumer goods on Douyin, surpassing Pinduoduo in market penetration.

Despite the normalisation of promotions on e-commerce platforms that diminished the promotional impact of the 618 shopping festival, Douyin still performed outstandingly. Kantar Worldpanel data indicates that, for the four weeks to 14 June 2024, Douyin sales increased by 29.4%. During the 618 shopping festival of Douyin, the platform invested heavily in traffic, and combined with innovative low-priced marketing strategies to attract consumers. Douyin also avoids over-reliance on short term and low-priced promotions, focusing on the goal of GMV growth while ensuring consumer experience and product quality.

The leading discount stores accelerate expansion