China’s fast-moving consumer goods (FMCG) sector grew by 2.9% year-on-year in 2016 – its slowest growth in the last decade.
The findings, from Kantar Worldpanel, show that Chinese FMCG growth has slowed from 3.5% the year before.
The outlook for so-called ‘modern trade’ – hypermarkets, supermarkets and convenience stores – was even bleaker, with growth slowing to just 0.7% in 2016 as the challenge of decelerating economy and rapidly growing e-commerce channel take hold.
Despite the overall slowdown, there are shoots of growth in certain city tiers and regions – including 6.6% in the west of the country.
The three largest retailers by share were the Sun Art Group, Vanguard Group and RT-Mart. Between them, their stores control more than 20% of the traditional Chinese retail market. But the industry as a whole is a fragmented one, with many local and international retailers – including Tesco on 1%, Spar on 1.2% and Auchan also on 1.2% – vying for nominal shares of the overall market.
Familiar western names like Walmart and Carrefour make up the rest of the top five, with over 8% share between them.
Kantar Worldpanel general manager for China Jason Yu said: “In 2016 local Chinese retailers continued to outperform their international counterparts. Sun Art increased its share from 7.5% to 7.8%, further strengthening its leading position. Yonghui remained the fastest growing player in 2016, thanks to 79 new stores opened in 2016. Driven by its relentless focus on fresh foods, range and efficiency, Yonghui overtook Bailian and is set to challenge Carrefour during 2017.”
Kantar Worldpanel also revealed that more than 53% of urban Chinese families purchased FMCG products online in the last year – 10% higher than the previous year – in a sign that more consumers are moving their weekly shopping trips online, together with individual purchases of some niche, premium and imported products.
Mobile commerce continues to be the key driver of ecommerce and has helped to drive even stronger ecommerce adoption in lower cities, Kantar Worldpanel said.
Last week, FoodBev revealed how more than 60% of e-commerce activity will be conducted on smartphones by 2020.
According to OC&C Strategy Consultants, China’s online FMCG market reached value of more than $25.3 billion in the past year. That makes it worth more than the American and British e-commerce markets combined.
With immense competition from ecommerce players, the hypermarket format is under the biggest growth pressure. In 2016, the big box format, favoured by the Chinese shoppers for decades, only grew by 1.3%. But there are still growth opportunities for hypermarkets, Kantar Worldpanel said, especially in the west where new stores are still being opened.
But the hypermarket business model will need transforming in the long-run, the research company added.
Yu concluded: “We expect 2017 to remain tough for retail in China, as growth further slows for both brick-and-mortar stores and e-commerce retailers. Opening new stores will help to drive penetration, however, the higher operating costs means that retailers will have to be selective in how they market to the Chinese shoppers who are more value-conscious and digitally savvy.
“To compete effectively, retailers will have to evolve more rapidly to shopper centricity. In a ‘two-speed’ grocery market, growth of categories are increasingly divided, therefore a clear understanding on consumers’ product choices are critical to merchandise and ranging.
“Besides, more and more retailers will need to operate a distinctive multi-format and multi-brand strategy to differentiate their offers. Deployment of mobile technology and escalation of digital capabilities are essential to building a competitive advantage.”
© FoodBev Media Ltd 2018