FMCG in China is set to recover steadily in 2023
The latest Kantar Worldpanel report indicated a 4% drop in FMCG sales in Q4 2022 as COVID infections spread rapidly across China since the beginning of December, resulting in a sharp drop in household purchases and reduction in spend on non-essentials. Lockdown and zero-COVID policies put enormous pressure on consumer spend per capita consumption in China in 2022 which only grew by 1.8% growth year on year according to National Bureau of Statistics. Kantar Worldpanel reported a 1.4% growth year on year for FMCG on the back of sporadic COVID outbreaks, yet the growth was still higher than the level in 2020 when the pandemic first hit the country, indicating a high level of resilience.
In Q4 massive infections nationwide once again lead to higher demand for convenience food categories. Both instant noodles and frozen food saw sales jump by more than 20%. Thanks to the new optimized COVID prevention policy, the peak of infections reached its peak by the end of December 2022 and the market started to show signs of a quick rebound. Throughout December, high demand for healthy and immunity propositions also created huge demand for nutrition supplements. In additional, increased usage and development of new usage habits also drove the growth of the tissue category by 12% in Q4.
Modern trade faced challenges while proximity channel continued to fly
The performance of different modern trade formats became even more divided in 2022. Footfalls of offline stores, especially hypermarkets, were severely impacted by reduced mobility. In Q4, sales of hypermarket and supermarket fell by 10.9% and 11.7% year-on-year, respectively. Meanwhile, the performance of proximity channels remained robust, with those small formats closer to consumer movements and communities kept winning a higher share of wallets. Small supermarkets in China reported a stellar growth of 11.3% in Q4 as consumers had to stay at home and chose to shop nearby for daily staples for convenience. Consumers also started to buy products which improved their quality of life, creating new opportunities for growth for those proximity stores.
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