Study: Future of consumption intact
China’s consumption story has been experiencing COVID-induced turbulence in recent months, but long-term fundamentals and future growth prospects remain solid, a joint study by two consultancies has found.
The fast-moving consumer goods or FMCG market in China showed signs of recovery in 2021 but consumer behavior underwent critical changes in the four months of this year due to fresh COVID restrictions, said Bain & Company and Kantar Worldpanel on Tuesday.
The two market research agencies published the latest volume of China Shopper Report for the 11th year running.
“Looking farther out into 2023, there’s reason for optimism,” said Bruno Lannes, a partner at Bain& Co based in Shanghai.
“Inflation remains relatively lower in China compared with Western markets, and the energy crisis is under control, with strong indications that the government is still striving to maintain GDP growth and is committed to balancing COVID clearance and economic development.”
In the past decade, Bain and Kantar have analyzed the key 26 categories that span the four largest consumer goods sectors: packaged foods, beverages, personal care and home care. The pair also looked at another 17 categories to form a more comprehensive view of the market.
Last year, Chinese consumers made more frequent trips to stores as COVID restrictions eased, which contributed to a 4.1 percent gain in volume growth for the entire year.
But as major Chinese cities entered into lockdowns in the first four months of this year, shoppers began stocking up again by purchasing food and home care products in larger pack sizes, the report said. With nowhere to go, they spent less on categories like high-priced skin care and makeup.
In the four weeks to April 22, sales volume grew by 5.6 percent year-on-year, while average prices dropped by 5.7 percent, the biggest decline in recent years, demonstrating enhanced consumer sensitivity to price.
But challenging times always create opportunities, experts said. The rise in at-home consumption, they said, will benefit many categories, especially food, beverages and home care. Consumers’ growing concern for health and hygiene will continue to spur growth of milk, personal wash and other categories.
The joint research-based report showed that e-commerce was the only channel to maintain solid growth in 2021, though that growth slowed to 15 percent from the 30 percent level of previous years. And e-commerce platforms became increasingly fragmented, with more consumers shifting to options such as Pinduoduo and niche content-driven e-commerce platforms such as Douyin and Kuaishou.
“Brands should be optimistic about the future, and expect a much better 2023－similar to how 2021 compared with 2020,” said Jason Yu, general manager of Kantar Worldpanel Greater China.
“The fundamentals of the Chinese economy remain strong, with a growing middle-income group, continuous urbanization, and inflation under control. Brands should use the year 2022 to prepare for a strong rebound in 2023.”
Source: China Daily