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NielsenIQ: 2021 outlook for China’s FMCG remains optimistic with a focus on growth

BEIJING, April 22, 2021 /PRNewswire/ — According to the latest study by NielsenIQ, the global measurement and data analytics company, China’s FMCG market performed fairly well amidst the pandemic in 2020, and the resilience of China’s retail market can be attributed to the country’s growing omni-channel ecosystem. While business leaders remain optimistic about 2021, brand owners need to remain agile and innovative, and actively identify opportunities to drive growth.

Justin Sargent, President of NielsenIQ China and Asia Pacific said: “2020 has been a year of ups and downs. Compared to other advanced economies, China’s economy and consumption rebounded quickly after experiencing a short tumble and showed strong resilience.”

“During the pandemic, the market landscape underwent profound changes, the pace of enterprise innovation accelerated and new business models emerged. China’s FMCG market is full of dynamics and vitality. The 2020 experience will certainly give brand owners a lot of inspiration.”

A quick review of China’s FMCG market in 2020

Backed by strong policy support from the government and agile responses from enterprises, China managed to address the COVID-19 pandemic relatively well and this was reflected in the rebound in China’s economy and consumption levels. China’s GDP and retail sales grew by 6.5% and 4.6% respectively in the fourth quarter of 2020, compared to a decline of 6.8% and 15.8% respectively in the first quarter of 2020.

China’s retail market remained resilient even during the pandemic, registering a growth of 2.9%, and this could be attributed to the expansion of its omni-channel ecosystem. Compared to 2019, growth rates across categories in 2020 were more dispersed. For example, staple food, personal care and baby categories grew 11.6%, 7% and 4.4% respectively, while beverage, snacks and liquor categories fell 6.5%, 4% and 0.5% respectively.

The retail ecosystem evolved significantly in 2020, driven by growth in emerging channels and the acceleration of channel integration. Livestream e commerce continues to gain traction and its estimated FMCG market size is over 58 billion yuan with a growth rate of 78% (2H 2020 vs 2H 2019). Increasingly, FMCG brands are also leveraging livestreaming platforms and KOLs in their marketing campaigns. FMCG sales via O2O channels also grew by 78%, largely supported by lockdown restrictions while community group buying gained popularity and is now available on more than 80 platforms.

In terms of enterprise type, local companies and MNCs continue to perform well. In 2020, FMCG sales from local enterprises increased 3.8% over the previous year, while MNCs gained 2.7% and regional companies climbed 0.3%, accounting for 66.2%, 20.2% and 13.6% of the total sales respectively.

In terms of brand ranking, brands outside of the top 30 rankings delivered a stellar performance, growing 5.1% year-on-year and contributing to 62.1% of total FMCG sales, up from 60.9% the previous year.

2021 outlook: business executives remain optimistic

In the latest survey conducted by NielsenIQ in March, 93% of business executives expressed confidence for the future and are positive about 2021 and their company’s growth. In contrast, only 60% of respondents expressed similar optimism in our last survey conducted in September 2020. In addition, about 33% of those surveyed expect their businesses to grow by more than 15% in 2021, compared to the industry average of 14%.

Our survey findings also revealed that business leaders are turning their focus towards long-term competitive and consumer landscape shifts, as compared to short-term factors such as supply chain, trade resumption, as well as recovery in consumption levels and traffic. 67% of respondents expressed concern over the long-term change in consumer behavior while 73% viewed the emerging competition as an area of concern.

The record-breaking growth during Chinese New Year 2021 also sent a positive signal to the market. Based on our data, FMCG omni-channel value growth across January and February rose 11% compared to the same period in 2020, and 15% when compared to 2019. In terms of category, personal care delivered the strongest growth, up 15% from the same period in 2020 and 25% from the same period in 2019. Categories such as liquor, baby, staple food and dairy also returned to pre-COVID growth levels.

Winning in 2021: seizing white space opportunities to drive future growth

While the future of FMCG in China remains promising, market dynamics continue to intensify, driven by the growing complexity in the retail and consumer landscape, as well as an increase in the number of market players.

Tina Ding, Chief Commercial Officer of NielsenIQ China said: “market uncertainties have brought forth greater pressure and challenges, and as a result, brand owners need to push harder to achieve growth and maintain their long-term competitive edge”. She added that innovation is vital to remain competitive.

For many years, innovation has been the driving force behind China’s growing FMCG market, and is a key differentiating factor for companies, especially during times of crisis. While innovations happen on a daily basis, not all have the same outcome. Some are game changers, some contribute to sales growth, while others simply create social buzz. However, for brand owners, being in the game is more important than winning it.

Innovation may seem the way forward, although many find it difficult to innovate, partly due to the difficulty in keeping up with consumer behavior. So how should brand owners innovate? According to Tina, an agile operating model is critical in driving innovations. The ability to identify new unmet consumer needs at different demand levels, take actions quickly and adjust in a timely manner will better position brand owners to win in this competitive market.

However, growth opportunities do not just exist in new things. In most cases, brand owners can achieve bigger growth by focusing on what they are already familiar with. For example, the offline retail market rebounded very quickly after COVID-19 and this is reflected in the 3% growth in total store count in China, particularly in the southwestern parts of China. When we dived deeper into the data, it revealed that the majority of the store growth came from the rural areas and these areas demonstrated significant growth potential.

White space opportunities are not limited to rural areas. Golden stores in urban areas also experienced major changes after COVID-19. In 2020, the pattern of golden stores (premium stores in the channel that contribute Top 80% of sales) in cities changes significantly – 33% of golden stores comprised newly upgraded stores or newly opened stores, while 23% of them were also closed or eliminated from the golden store list, for an overall golden store count change rate of 56% – and in the urban and rural markets of online and offline, this has opened new growth opportunities for brand owners to capture through precise focus and effective strategies.

Justin added: “In a huge market such as China, the real challenge lies in identifying the right opportunities. Brand owners should leverage the power of data to identify the right white space opportunities while adopting an agile operating model to move forward with speed.”

ABOUT NIELSENIQ

NielsenIQ is the leader in providing the most complete, unbiased view of consumer behavior, globally. Powered by a ground-breaking consumer data platform and fueled by rich analytic capabilities, NielsenIQ enables bold, confident decision-making for the world’s leading consumer goods companies and retailers.

Using comprehensive data sets and measuring all transactions equally, NielsenIQ gives clients a forward-looking view into consumer behavior in order to optimize performance across all retail platforms. Our open philosophy on data integration enables the most influential consumer data sets on the planet. NielsenIQ delivers the complete truth.

NielsenIQ, an Advent International portfolio company, has operations in nearly 100 markets, covering more than 90% of the world’s population. For more information, visit www.nielseniq.com.

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