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The latest data released by the Kato Consumer Index (which is part of CTR in China) shows that FMCG sales in China rose 5.8 percent year-on-year in the first half of 2021 and 3.8 percent over the same period in 2019, indicating that the market is still recovering gradually. The southern region and e-commerce channels contributed the main growth. As the weather warmed, the beverage and personal care categories grew 14.5 percent and 9.8 percent, respectively. The recent macro data released by the National Bureau of Statistics also showed that GDP grew by 7.9 in the second quarter, continuing the pace of steady recovery.

The latest report also shows that outdoor food and beverage consumption in first-and second-tier cities increased by 15.1 in the second quarter compared with the same period last year. With the normalization of epidemic prevention and control, consumers' lives are gradually returning to normal, and the outdoor market is recovering more rapidly. Sales of ready-made products sold through proprietary channels have surged, with ready-made drinks and ice cream being more popular.

Physical retailers test new formats to cope with growth pressures

Modern channels (including hypermarkets, supermarkets and convenience stores) fell by 4.6 compared with the same period last year. Small supermarkets and convenience stores maintained growth of 4.4 and 1.7 respectively, but the growth rate slowed down significantly. Sales at hypermarkets and hypermarkets fell by 7.2 per cent and 7.7 per cent, respectively, in tandem. This suggests that a year after the outbreak, consumers are more in favor of formats that highlight near-proximity and convenience.

Among the major retailers, Gaoxin Retail maintained its leading position with a market share of 8.5, up more than 0.3 percentage points year-on-year. Gaoxin Retail announced plans to open more medium-sized stores this year to expand the density of outlets and increase consumer reach.

Yonghui's market share increased by 0.2 percentage points to 5.3 per cent in the latest quarter. In the past three months, Yonghui has accelerated its transformation and launched more than 30 warehouse-style member stores to attract family shoppers with more selected core products and daily low prices. Costco, Box Horse X, Metro Plus and other fee-based member stores are more likely to attract urban middle class with higher quality requirements through commodity power and service experience. In recent years, hypermarkets and supermarkets have faced new retail models such as mainstream e-commerce platforms and community group buying, returning to the essence of retail, providing selected high-quality goods and maximizing value for consumers in order to achieve a breakthrough.

Regional retailers continued to grow significantly in the second quarter. Both BBK and SPAR account for 1.7 percent of the market. By actively expanding the southern and western markets, BBK's market share has increased by nearly 0.3 percentage points. SPAR mainly through expansion in North China and its market share grew by over 0.2 ppt YoY. SPAR's member entrepreneur Jiayue accelerates the pace of store expansion outside Shandong and increases investment in the supply chain to quickly empower regional retailers with supply chain advantages.

O2O local instant mode to maintain development

Although most consumers have returned to normal life, the buying habit of placing orders online from home or office and delivering from offline physical stores has been retained. Sales in the O2O channel also continued to grow. In the first half of this year, nearly 50% of Chinese urban families bought fast-moving consumer goods through the O2O platform. Major retailers and e-commerce platforms are working hard to develop the local O2O business, while mainstream retailers have also achieved the scene resonance of e-commerce shopping festivals and offline stores through the O2O model, linking marketing and achieving growth. For example, Yonghui's online sales exceeded 0.25 billion during the "618" period, and the order volume exceeded 3 million twice that of last year. Carrefour's O2O business and small program orders also doubled during the "618" period.

E-commerce channels continue to grow

The e-commerce channel maintained its growth trend, up 10.6 percent year-on-year, but slowing down from 33.2 percent in the first quarter. The number of e-commerce consumers is still growing, and the frequency of purchases has also maintained year-on-year growth. By the second quarter of 2021, e-commerce channels accounted for 28.4 percent of China's FMCG market, with more than 74 percent of China's urban households buying FMCG online.

Alibaba Group leads e-commerce platforms with a market share of 43.9 per cent, up 0.4 percentage points year-on-year. About half of urban Chinese households made at least one FMCG purchase on Alibaba's platform in the second quarter of 2021. Pinduoduo maintained rapid growth, with market share increasing by 5.7 percentage points year-on-year, accounting for 9.3 percent of the total e-commerce channels.

It is worth noting that the number of users has doubled in one year. Pinduoduo announced that by the first quarter of this year, the annual active users had reached 0.8 billion. In addition to traditional e-commerce, the realization of e-commerce realization through short video live channels is also accelerating. The latest data from the Kaido Consumer Index shows that in the first half of 2021, nearly 10% of urban Chinese households purchased fast-moving consumer goods through Douyin or Kuaishou stores.

Source: Kato Consumer Index

Source: Jung-International Nonwovens Industry