China’s FMCG sector recovers as spending increases by 2% in Q1 2024

CHINA- According to a joint report by the China Shopper Report, Bain & Company, and Kantar Worldpanel, FMCG spending increased by 2% in Q1 2024, with sales volumes increasing by 3.5% in a show of recovery of the sector.  

In the reported quarter, the packaged food and beverage sector experienced a value growth of 2.7% and 4.3%. The report also revealed that the urban FMCG market grew by 1.9%, mostly because buyers delayed purchases before the mid-year promotion season. 

China’s Eastern region outgrew other areas, recording a 7% valuation growth in the reported quarter, partly driven by economic vitality and resilient consumer purchasing power despite high inflation.  

The report also showed a 4.6% increase in urban retail sales, influenced by improved customer demand and current retail trends. Lower-tier cities continued to outpace upper-tier cities in driving FMCG market growth, with town market sales up by 3.9% (year-on-year) YoY, surpassing city sales. 

The report showed a shift towards smaller retail outlets, as hypermarkets saw a 1.4% decline while supermarkets expanded by 1.3%. Membership stores also witnessed a robust 20% sales growth. 

The joint report reiterated although the FMCG market shows signs of recovery, customers remain price-conscious. It advised players to balance input and operational costs affected by high inflation and attractive pricing. 

The report also revealed that international players are increasing interest in the Chinese market. 

Derek Deng, Senior Partner at Bain & Company said, “Most leading multinational FMCG players have already acknowledged the importance of the Chinese market and are paying greater attention towards localized supply chain in order to stay close to market trends.” 

The joint report advised local players to leverage young people’s increasing confidence and interest in online shopping. Players were advised to concentrate on long-term strategies and cement their brand image. 

This interest is driven by platforms like Douyin, the Chinese version of TikTok, which has managed to catch up with players like Alibaba and JD. 

The offline FMCG market also showed recovery and potential for continued growth, with a 2.4% valuation increase. Physical store visits contributed to this growth despite e-commerce’s 2% valuation increase. 

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