High End Becomes Consumption Trend -- China'S Fast Moving Consumer Goods Market Ushered In A Rebound In 2017

Bain and kaydo consumer index released the "China shopper report" for seventh years in a row. The report found that the total sales growth rate of China's consumer goods market increased from 4.3% in 2016 to 4.3% in 2017, the first time in six years.

As the growing middle class consumer groups increasingly focused on improving health and quality of life, China's fast moving consumer goods market rebounded in 2017.

The 2018 Chinese shopper report series, "shoppers' consumption upgrades and market growth bounce", released by Bain and the kaydo consumer index, showed that in 2017, the total sales growth in China's consumer goods market increased from 3.6% in 2016 to 4.3% in 2017, the first time since the series began tracking the behavior of Chinese shoppers in 2012, the first time the sales growth has exceeded that of the previous year.

We see that Chinese consumers are spending more and more on high-end products, mainly because they can help consumers further improve their health or improve their lifestyles.

At the same time, consumers' incomes are rising and have higher consumption power.

The report shows that over the past six years, the compound growth rate of per capita disposable household income has reached 8.2%.

"As China's growing middle class continues to upgrade to buy more high-end and healthier products, we can see a clear pattern from the trajectory of China's dual growth."

"Our research shows that the double speed growth phenomenon first proposed in 2016 is still continuous, and there are more and more high-speed growth categories, the main driving force comes from the wave of high-end and mature Chinese shoppers," said Yu Jian, co-author of the consumer index greater China and the joint report.

The report found that pleasure, health and health care, lifestyle improvement and gift giving are the main drivers of high-end trends.

In addition, mouthwash, pet food and cosmetics and other fast growing categories have developed steadily, while chewing gum, MSG and other low-speed growth categories are still weak.

Key trends affecting China's fast moving consumer goods market

E-commerce sales continued to maintain strong momentum. Last year it grew by more than 28%. Today, about 10% of the total sales of the market have doubled since two years ago.

The growth channel of e-commerce channel penetration is moving from high level to low level cities.

First tier cities, the penetration of e-commerce channels is 73%, still ranked first.

But low level cities are also catching up: the annual growth rate of e-commerce channel penetration rate of three and four line cities is 18% and 17% respectively, while the annual growth rate of e-commerce channel permeability in the five line cities is even 21%.

China's O2O market continues to grow, with a growth rate of around 30% in 2017, of which the growth rate of O2O door-to-door service (such as delivery and distribution services) is as high as 76%.

The centre of gravity of convenience stores and grocery stores continued to shift to external consumption, and 10% of fast moving consumer goods contributed about 85% of sales.

Convenience stores' external consumption increased by 6.8%, while household consumption increased by only 1.9%.

Hypermarkets continue to lose passenger traffic, and sales in 2017 declined by 2.5%.

The local brand achieved 7.7% sales growth in 2017, contributing to China's fast moving consumer goods.

Compared with the growth of 98%, foreign brand sales increased by only 0.4%.

On the whole, foreign brands once again handed over market share to local brands in 2017.

"This is the sixth consecutive year that we have observed local brands beating foreign brands."

Bain global partners, Greater China consumer goods and retail business leader and co author of the report, Bruno (Bruno Lannes) said.

"There are multiple reasons behind this, but one of the main reasons is that local businesses have faster and more agile business models, which are critical to the rapidly changing Chinese consumer market."

Based on the above trend, Bain and the Kay consumer index believe that

1. Make full use of channel dynamics to predict future retail integration.

2, develop high value and personalized products, give full play to the role of high-end trend.

3, pform into a data driven, consumer centric enterprise.

Through the production of proprietary consumer data, closely cooperate with the platform to launch more centralized sales and marketing activities to achieve more efficient operation.

Retailers can take the following key actions to win:

1. Reference to the recent establishment of alliance between Gao Xin and Alibaba to prepare for the development of "new retail".

2, integrate inventory and supply chain management with e-commerce retail or solution platform.

3, redesign store mix and format to capture customer needs more comprehensively.

4, let store experience become attractive again.

Bain and Kay consumer index tracked the real shopping behavior of Chinese consumers, and established a valuable long-term observation for the 106 fast moving consumer goods categories purchased by Chinese families.

As in the past 6 years, Bain and the Kay consumer index have again analyzed 26 categories of packaged goods, beverages, personal care and family care in the four major consumer products sectors.

This year, we have focused on 24 other categories, forming a more complete relationship.

Perspective.

These 50 categories account for about 80% of all fast moving consumer goods.