China's fast moving consumer goods (FMCG) growth has been decelerating over the first three quarters of 2024, according to the 13ᵗʰ China Shopper Report 2024 Vol. 2 released by Bain & Company and Kantar Worldpanel.
For 2024 Q3 year-to-date (YTD), the average FMCG value growth of 0.8% was a result of a 4.6% increase in volume, coupled with a decline of 3.6% in average selling prices (ASP). Looking at the respective quarters, China's FMCG grew at 2.0% in Q1, 1.6% in Q2, -1.1% in Q3, with a 3.5% decline in September alone.
Derek Deng
Senior Partner and Head of Consumer Products practice in Greater China
As Chinese shopper behavior evolves, one critical fact holds true: market leadership is determined by a brand’s ability to boost and maintain household penetration. Across all categories studied, the brands that earned market leadership have significantly higher penetration than competitors.
The big challenge is that the shopper base is a leaky bucket – and the holes are getting bigger each year. Chinese shoppers still love brands, but many will continue to switch brands.
"The growth deceleration in China's FMCG is due to the ASP deflationary trend which we had identified since 2019. We are seeing the highest ASP decline since 2019, while the Consumer Price Index rose by 0.3% during the same period (i.e., 2024 Q3 YTD). The intensifying market competition and the escalating demand for value for money are the primary drivers behind this trend." said
Rachel Lee, General Manager of Kantar Worldpanel in China
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"FMCG's performance lagged total retail sales, partly due to the country's pro-consumption policies aimed at durable goods. There has also been a continuous reallocation of consumer expenditure towards service sectors such as dining and travel, with retail sales in these areas experiencing a 6.7% increase during the first three quarters of 2024."
Home care - the only segment that recorded positive growth across all three quarters
Within the four major FMCG sectors, home care led growth with an increase of 3.5% in 2024 Q3 YTD compared to the same period last year, closely followed by beverages at 3.3%. Packaged food experienced a moderate growth of 1.4%, while personal care saw a widened decline compared to 2023 Q3 YTD, reaching a similar level to that of 2022, with a decrease of 4.4%.
Interestingly, home care was the only segment that maintained full three quarters of growth as it experienced the lowest ASP deflation and strongest volume growth compared to other sectors. Overall volume growth was supported by both increased penetration and frequency, benefiting from heightened health and hygiene needs as well as a growing demand for improved quality of life at home.
The personal care sector faced accelerated ASP deflation at -9.6%, compared to -3.3% during the same period in 2023 Q3 YTD. This deflation persisted throughout the year and was driven by consumers' cost-consciousness, competitive pressure from duty-free channels and online platforms' aggressive promotions, and domestic insurgent brands offering value-for-money alternatives.
Offline channels outperformed market; online penetration showed muted growth
Driven in part by the expansion of discount chains and club warehouse formats, offline channels achieved a growth rate of 1.8% YTD and experienced less price deflation at -3%, compared with -6% ASP of online channels. The channel landscape is characterized by smaller formats such as super/mini and grocery stores gaining share, with discounters outpacing non-discounters. Hypermarkets continued to decline at a mid-single-digit rate, while club warehouses saw notable growth of 17% supported by strong demand in Tier 3 and 4 cities, though this was a slowdown from 58% in the same period of 2023. This growth benefits from China's expanding middle class, which seeks premium quality and innovative products at good value.
Compared with 2023 Q3 YTD, overall online penetration remained stable with traditionally high online penetration categories (such as skincare, beauty, infant formula) growing at 0-2% online penetration. In 2024 Q3 YTD, e-commerce slightly declined by 0.6% and lost market share for the first time since its inception. Its robust volume growth of 6%,was offset by a similar-sized ASP decline resulting from heavy promotions across nearly all platforms. E-commerce platform Douyin continued to grow at a double-digit rate of 35%, although this growth was slower than the 65% seen in 2023. Douyin has now overtaken JD as the second-largest e-commerce channel by GMV. Discount platforms like Pinduoduo saw lower growth compared to 2023, while Kuaishou declined by 12%.
Chinese consumers preferences have shifted over past decade
At a time of increased promotional activations by brands and platforms, research found that categories behave differently along the "repertoire-loyalist" continuum, and updated analysis builds on previous studies conducted in 2013, 2016, and 2019. In repertoire categories, increased shopping frequency often leads to consumers buying a wider variety of brands, while in loyalist categories, higher purchase frequency does not increase the number of brands purchased.
This year's findings reveal both consistent trends and notable shifts:
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Shoppers in most repertoire categories have become more repertoire-oriented, likely due to intensified competition and the increasing availability of brands.
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Online penetration has minimal impact on shopper behavior, regardless of category type or level of online adoption.
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Markets remain highly competitive, with an average of 18% of the top 10 brands being replaced since 2019 across the 27 categories studied.
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Brand penetration continues to be the key driver of performance for leading brands, surpassing purchase frequency and repurchase rates.
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Average shopper engagement with brands, measured by purchase frequency, has steadily declined over the past decade.
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Revenue contributions from low-frequency shoppers have grown in importance across most categories.
Bruno Lannes
Senior Partner,
Bain & Company
The Chinese government has launched more stimulus measures and issued guidance to support household consumption since late September. Although it will take patience and time for the stimulus to fully take effect, it is likely to progressively build consumer confidence which will later translate into higher consumption.
To succeed in 2025, China's FMCG players need to consider five key strategies :
Re-examine and keep innovating portfolio
Maximize physical availability, both online and offline - capitalize on the full potential of omnichannel approaches
