SHANGHAI, March 4, 2013 /PRNewswire/ -- Kantar Worldpanel[1], the global market leader in consumer panels, reports 14% value growth for the FMCG (Fast Moving Consumer Goods) market in 2012. Amongst all the categories Kantar Worldpanel monitors, 7 out of 10 categories enjoyed an average family spending level increase of over 3%. This indicates that consumption levels have started to play a more significant role in the overall market growth in China.
Although China's economy is among the brightest performers within emerging markets in 2012, consumption is yet to play a pivotal role in its GDP. With the new government pledging to carry out more reforms to increase wages and address wealth distribution, the pick-up of spending power will inevitably reflect the rebalancing of the Chinese economy away from exports and towards consumption.
It is vital for category leaders to consider category spending as a key success factor to drive future growth in the retail market, especially mature categories whose penetration[2] has reached a plateau, such as biscuits and chocolates in the food industry and toothpaste and toothbrushes in the toiletries industry. In 2012, there were a number of categories showing substantial increase in household spend levels, including mint candies, wine/spirits, chocolates, biscuits and toothbrushes.
Mature Categories – Smart Shopping and Innovation Seeking
Kantar Worldpanel's continuous tracking of 40,000 urban Chinese families throughout 2012 shows that Chinese consumers continue to spend more on mature categories such as toothpaste, despite the category penetration being stable over the last two years.
For example, average families spent 12.5% more on toothpaste. The premium segment, especially products with professional and special claims, such as whitening, anti-sensitivity, and gum-protection, became more attractive to consumers and thus driving the category expansion.
Similar to oral care categories, biscuits have also reached 98% household penetration in urban China, which leaves very little room for further expand penetration. Nevertheless, the biscuit category still enjoyed 23% market growth in 2012 thanks to the increase of consumption level. On the one hand, premium European biscuits for gifting have been one driving factor of the consumption growth. On the other hand, new flavours and innovative product formats are another success factor leading to the market expansion. In order to secure space in consumers' baskets, innovation that results in premiumization and new consumer demand combined with changing lifestyles are inevitable to justify value-for-money.
Emerging Categories – Market Development by Creating New Needs
Unlike mature categories, emerging categories should take totally different approaches to grow consumption. Let's take the coffee market for example: Kantar Worldpanel observes that less than 40% of the Chinese families bought coffee in 2012, which was still a lot lower than other more developed markets, e.g. 58% in Taiwan. This indicates that consumers in China market are still in the developing stage of the coffee drinking habit. However, there are differences in different city tiers. Consumers in key cities generally have higher accessibility and higher acceptance toward innovative concepts and products while consumers in lower tier cities are followers and more reluctant to change.
As a result, for emerging categories, cultivating usage habits through innovative and premium products would be important for key cities, whereas overcoming adoption barriers to new products and arousing interest in innovate concepts would be more relevant for lower tier cities. Marketers for emerging categories will have to take a tiered strategy for product development.
The Race for Buyers in 2012 - Winners and Losers
Although most categories still grew by using a combination of shopper base expansion and spending level growth, thanks to urbanization and market developments, 90% of the FMCG categories reported a noticeable increase in buyer base and leading players benefited more from the race for consumer acquisition.
Total 2012 data suggested that there were 15 FMCG players in China who reached over 100 million urban families and the top of the table continues to be dominated by P&G, COFCO[3] and Master Kong[4]. All three have managed to extend their buyer base, demonstrating that even the giants have room to grow.
Many of the successful manufacturers mentioned in the report have continued their push in the final quarter of 2012, especially Mondelez, President, and Mars. All three star players in 2012 have outperformed in the lower tier cities, reducing the gap in terms of consumers reached in the lower tier cities compared with the more developed higher tier cities and growing their customer base in the grocery channel, especially President who has a higher penetration in the traditional trade compared to hypermarkets and supermarkets.
Top 15 100-million Family FMCG companies
| Buyers (Million Households) |
Penetration (%) | |||
| 2011 | 2012 | 2011 | 2012 | |
| P&G | 152 | 157 | 96.6 | 97.1 |
| COFCO | 146 | 151 | 92.8 | 93.5 |
| China Food | 91 | 94 | 57.9 | 58.0 |
| Mengniu | 139 | 143 | 87.9 | 88.0 |
| MASTER KONG | 144 | 148 | 91.3 | 91.5 |
| NESTLE | 139 | 147 | 87.9 | 90.5 |
| YILI | 134 | 140 | 85.1 | 86.6 |
| UNILEVER | 133 | 138 | 84.2 | 85.3 |
| COCA COLA | 134 | 137 | 85.1 | 84.7 |
| MARS | 118 | 127 | 74.4 | 77.7 |
| COLGATE | 121 | 125 | 76.7 | 77.5 |
| WANGWANG | 118 | 124 | 76.9 | 76.4 |
| LIBY | 121 | 123 | 75.5 | 76.3 |
| WAHAHA | 120 | 121 | 76.5 | 75.3 |
| UNI-PRESIDENT | 107 | 117 | 67.4 | 71.8 |
| PEPSICO | 112 | 116 | 71.5 | 71.6 |
| MONDELEZ | 104 | 116 | 64.5 | 70.9 |
Source: Kantar WorldPanel China
In the local player battle that's playing out, Want Want has overtaken Liby in terms of consumer reach on an annual basis, helped by a surge in buyers for its snacks and confectionary products and increased recruitment in hypermarkets. Another local player, Wahaha, has managed to gain significant buyers in the juice category, but at the same time, lost buyers of its ready-to-drink tea and its yogurt products, leading to an overall decline in its buyer base, with much of the loss coming from the modern trade and in top tier cities where multinational competitors have managed to strike back.
Notes to editor:
[1] Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing).
[2] Penetration refers to % of all households purchased a brand/product over a given period of time
[3] COFCO data includes China Food and Mengniu, but excludes Yellow Rice Wine and beverage brands from Coca-Cola China
[4] Master Kong data includes its beverage lines, but excludes beverage brands from PepsiCo China
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