Leading FMCG companies continue to attract new consumers

During the slow recovery, 

leading fast-moving consumer goods (FMCG) companies continue to attract new consumers

According to the latest report from Kantar Worldpanel, there were 24 Fast Moving Consumer Goods (FMCG) companies reaching over 100 million urban Chinese households during the 52 weeks ending October 6th 2023.

Compared to the previous year, these top 24 companies have experienced an overall increase of 5.63 million urban Chinese households, equivalent to a 2.9% growth. Among them, Nongfu Spring, Hengan Group, Uni-President Group, Liby Group, China Resources Group, and PepsiCo Group grew faster than average. These companies primarily focus on snacks, beverages, paper products, and home cleaning products, reflecting the fact that social life is returning to normal in 2023, with the demand for outdoor snacking and beverage occasions rising, as well as consumers maintaining a strong need for health and sanitisation products.

 “China’s FMCG market shows resilient recovery overall but there is some volatility and divergence across different categories. The growth rate of categories related to in-home consumption has dropped significantly, health-related categories have maintained growth, and the categories related to social and outdoor have significantly rebounded. In the new market environment, FMCG giants can grasp the needs of different consumer groups and launch innovative products that adapt to new occasions and new needs. They also seize emerging channels opportunities and penetrate deeper into lower tier markets, continue to winning new consumers and demonstrating growth resilience in the era of saturation.” commented Jason Yu, Managing Director of Kantar Worldpanel Greater China. 

Developing health demand is the opportunity to sustainable growth

Kantar Worldpanel indicates that, after the end of the pandemic, Chinese consumers have an unabated increase in their demand for health. Although consumers are more willing to save on regular household expenditures, health awareness is continuously rising, health-related needs are becoming more sophisticated, and they are more willing to pay a premium for professional and scientific solutions. The evolution of health needs is an opportunity for sustainable growth in the China market.

Among these top 24 companies which have over 100 million Chinese urban households, Nongfu Spring has been the fastest growing company in terms of consumer base in the past year. It targeted consumers’ sophisticated health needs, achieving explosive growth with its flagship product "Oriental Leaf", which features a "natural and healthy" and minimalist formula, that has won over 17.8 million Chinese households.

In addition, functional drinks, which are closely associated with sports activities, and nutritional fruit drinks have attracted 7.35 million and 7.84 million urban Chinese households respectively for Nongfu Spring. The healthification of snacks is a new trend among young consumers in recent years, catering for novel and diverse needs as well as offering health-related benefits.

Lay’s, one of the brands under PepsiCo’s, has won over 7.64 million urban Chinese households through continuous flavour localisation and innovation. Recently, Lay's in China introduced potato chips with 50% reduced saturated fat, allowing consumers to enjoy the joy of snacks with less burden.

Among non-food categories, Hengan Group has targeted consumers' pursuit of quality of life. By promoting mid-to-high-end products such as "Tea Classical" and "Cloud Sensation Soft Tissue," as well as kitchen paper designed specifically for kitchen scenes, Hengan's paper products have captured 9.34 million urban Chinese households.

Liby Group actively taps into consumers' demand for enhancing the quality of life by promoting the Master Fragrance Laundry liquid. Providing a pleasurable emotional experience, Liby has captured 7.24 million urban Chinese households in the laundry category.

O2O – An effective way to attract incremental consumers

Platform e-commerce traffic seems to have reached its peak as during the 40 weeks ending October 6th 2023 pure online penetration was 80.3%, a slight dip from 83.3% from same period last year.

Meanwhile, the O2O model effectively satisfied consumers’ all-category and multi-occasion need by connecting a vast user base of internet platforms and physical retail stores through digital techniques and logistics infrastructure.

The latest data from Kantar Worldpanel shows that, during the 40 weeks ending October 6th 2023, O2O sales value grew by 11.7% versus the same period last year.

For many brands O2O has also become a channel to uncover new consumption occasions and to reach more consumers.

Among the top 10 companies attracting incremental consumers through O2O, the majority are food enterprises. Wilmar and COFCO leverages O2O to meet consumers’ real-time and convenience needs by delivering daily food supplies, such as rice, flour, and cooking oil, to consumers’ homes, successfully attracting over 18 million new households.

Mengniu and China Resources Group also took full advantage of the convenience of O2O delivery, bringing heavy and inconvenient items such as water, alcohol, and dairy products directly to consumers' homes.

Want Want group leveraged O2O to meet consumers' snacking demand for "buy now, eat now".

Winning new shoppers in the lower tier

With the rise of brand awareness and lifestyles, China’s vast lower tier cities remain a critical growth engine for most FMCG companies. 

With the support of national macro policies and the continuous construction and improvement of infrastructure, such as logistics, the lifestyle and purchasing behavior in lower-tier markets are becoming increasingly similar to those in higher-tier markets. Those who can reach lower-tier market consumers earlier can seize the initiative, laying a solid foundation for future growth.

As the fastest-growing company in attracting Chinese households, tier 3-5 cities’ buyer recruitment accounts for 74% of Nongfu Spring’s consumer expansion.

Both Uni-President Group and Hengan Group have experienced a nationwide growth in China urban households up to 4.7% with households in tier 3-5 cities contributing 89% and 73% respectively to their overall increases.

In addition to tier 3-5 cities, town markets are also a blue ocean for the future development of China market. Besides traditional channels, e-commerce is undoubtedly a key development avenue for brands to outpace competitors and reach new consumers. 

Kantar Worldpanel indicates that town consumers place greater emphasis on interest-based e-commerce, which combines entertainment and social interaction.

During the 40 weeks ending October 6th 2023 Pinduoduo and Douyin in the town e-commerce market have a higher market share by 1.4 and 1.3 times respectively compared to that in upper-tier cities (key cities and provincial capitals)

Manufacturers should tailor their strategies to local conditions and consider entering town markets through new digital channels.

Currently in town markets the companies with the highest number of consumer households are Yili, Mengniu, Procter & Gamble, Haday, Master Kong. The rankings nationwide are essentially consistent, indicating that the leading enterprises with strong distribution advantages still maintain a significant edge in town markets.

However, for the majority of manufacturers, penetrating into the town market remains a challenge. Among these 24 leading enterprises, 14 of them have a lower penetration in town market compared to key to D cities. 

Therefore, gaining comprehensive insights into the purchasing preferences of town consumers, building the right portfolio and channel strategy, and driving consumption upgrades are the key factors for tapping into the town market.

备注

1. Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing). From 2022 on, Kantar Worldpanel – household panel covers more categories. All changes may lead to some inconsistencies with previous years‘ data. 2022 newly covered categories are: yellow rice wine, vinegar, Chinese sauce, flour, seaweed, noodles, sachima, nuts, rice, dry fruit/vegetables, laundry sheet, filter cartridge

2. 1-2 tier cities / Upper tier cities: include Beijing/Shanghai/Guangzhou/Chengdu and provincial level cities.

3. 3-5 tier cities / Lower tier cities: include prefecture level cities and county-level cities & counties.

4. Mengniu group includes Yashili

5. Nestle includes Nestlé, Hsu Fu Chi, Wyethnutrition, Totole and Haoji

6. Mars includes Mars and Wrigley

7. Colgate-Palmolive includes Colgate and Darlie

8. China Resources includes Jiangzhong group, and excludes Vanguard and Pacific Coffee

9. Ecommerce / pure online includes: 1) traditional platforms like Taobao, Tmall, JD.com, 2) Social ecommerce platform like Little red book, Weibo, WeChat store, WeChat moments 3) Short Video platforms like Douyin,  Kuaishou

10. O2O includes 4 types: Offline retailer self-run, Horizontal marketplaces, Community group buy and Frontline warehouse ecommerce

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