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Experts optimistic for FMCG sector in 2025

0 Comment(s)Print E-mail China Daily, December 13, 2024
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Customers select food at a supermarket in Boxing County, east China's Shandong Province, Dec. 9, 2024. [Photo/Xinhua]

While growth of China's fast moving consumer goods has been slowing down in the past three quarters of the year, experts still hold a cautiously optimistic outlook on this sector for 2025, thanks to economic stimulus packages.

The forecast was made on Tuesday when the 13th China Shopper Report 2024 Vol 2 was jointly released by market consultancies Bain & Company and Kantar Worldpanel.

Positive signals can be found in the October data, as sales of FMCG products increased year-on-year and the decline in prices slowed, said Rachel Lee, general manager of Kantar Worldpanel China.

The consumption coupons issued by local governments around the National Day holiday boosted consumption in October. The Singles Day online shopping carnival started around Oct 14, which was 14 days earlier than that in 2023, resulting in the increase of online sales, explained Lee.

Meanwhile, the lowered mortgage rate, which was announced in late September, led to a stock market rally after the National Day holiday. Consumer confidence was lifted and shoppers became more generous with their consumption budgets, she added.

"It can be anticipated that the government will continue its strategy to further boost consumption. We estimate that China's FMCG sector will grow by low single-digit in 2025, but higher than that of this year. It takes time for all the economic stimulative policies to really influence the market and consumption," said Lee.

China's FMCG sector registered a mild 0.8 percent year-on-year value growth in the first three quarters of the year, with the sales value up by 4.6 percent on a yearly basis and average selling prices down by 3.6 percent, according to the report released on Tuesday.

"The growth deceleration in China's FMCG is due to the average selling price deflationary trend which we had identified since 2021. We are seeing this year the highest average selling price decline since 2021, while the consumer price index rose by 0.3 percent during the same period. The intensifying market competition and the escalating demand for value for money are the primary drivers behind this trend," explained Lee.

Home care, such as laundry detergent and kitchen cleaning supplies, was the only segment that maintained three full quarters of growth. Chinese consumers' heightened health and hygiene needs, as well as a growing demand for improved quality of life at home were the major driving forces, according to the report.

The market share of e-commerce contracted by 0.6 percent as of end September, the first time for this channel to show a decline since its inception. Although overall online sales volume grew by 6 percent, driven by various promotions, sales revenue dropped slightly due to a 6 percent decline in selling prices.

While short-video platform Douyin's e-commerce continued to grow at a double-digit rate of 35 percent, it was much slower than the 65 percent growth seen in 2023. The e-commerce platform of Kuaishou, another video-sharing site, declined by 12 percent.

Derek Deng, head of Bain & Company Greater China Consumer Products practice, pointed out that a big challenge for FMCG brands at present is consumer loyalty, which has been steadily declining over the past decade.

Therefore, brands need to maintain higher penetration rates in the market, which is more important than repeated purchases or purchase frequency, he said.

FMCG companies need to seize out-of-home opportunities, as research finds that Chinese people now make more such consumption at scenarios related to office, travel, outdoor activities and even commuting, suggested Deng.

Meanwhile, given the persistent deflationary environment, FMCG companies need to continue their cost management, including looking for more partnership opportunities or building asset-lite operating models, he added.

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