In these markets, foreign brands are still occupying the highlands
In recent years, the 2018 Chinese shopper report series “Shopper Shopping Consumption Upgrade, Market Growth Rebound” jointly released by Bain and Kay De Consumer Index shows that in 2017, foreign milk powder accounted for 80% in the first and second tier markets.
It is reported that the report is the seventh consecutive year to track the real shopping behavior of Chinese consumers. Every year, there are 26 categories in the four consumer goods sectors of packaged foods, beverages, personal care and home care. This year, we also focused on 24 other categories such as pet food, fuel consumption, oatmeal, MSG, Asian traditional tea, functional drinks, and wine. These categories account for around 80% of all FMCG categories.
The report shows that Chinese local companies are growing. In 2017, local brands achieved a growth of 7.7%, contributing 98% of China’s fast-moving consumer goods market. In contrast, foreign brands only grew by 0.4%. Especially in the 21 categories of infant diapers and bottled water, the market share of local brands is growing.
According to the report analysis, Chinese companies are more aware of the needs of local consumers, can formulate and implement decisions faster than multinational companies, and quickly adapt to new trends. Moreover, the penetration of local brands in the lower-tier cities has been high, and the high-end development of these cities is becoming a major boost for their development.
In the field of baby products, the rapid development of e-commerce is a key factor in maintaining high penetration and sales share.
The report shows that the growth rate of total sales of China’s consumer goods market rose from 3.6% in 2016 to 4.3% in 2017. This is the first time since the series of reports began tracking Chinese shopper behavior in 2012, sales growth exceeded the previous year. At the same time, in 2017, baby products and cosmetics still maintain a high e-commerce penetration rate and sales share. For example, e-commerce sales of baby milk powder accounted for 28% of sales, and baby diapers accounted for up to 45%.
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The report pointed out that the e-commerce channel penetration growth engine is shifting from high-level to low-level cities. In the first-tier cities, the penetration rate of e-commerce channels is 73%, still ranking first, but growth has stagnated. Low-level cities are catching up: the penetration rate of e-commerce channels in third- and fourth-tier cities is 18% and 17%, respectively.
Although local brands benefit from these advantages, some multinational companies are taking steps to improve their performance. They are beginning to focus more on rapid innovation and enhance their digital capabilities to meet the needs of young consumers who shop online.
Another thing to watch out for is that in the four categories of infant formula, toothbrush, fabric softener and biscuits, foreign brands still occupy the highlands. It is worth noting that the market share of foreign infant milk powder in first- and second-tier cities has reached 80%. The domestic infant milk powder has no strength to compete with foreign capital in the first- and second-tier markets.
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