1、China FMCG:Still Volatilebut with Signs of Hope China Shopper Report 2022,Vol.2Copyright 2022 Bain&Company,Inc.and Kantar Worldpanel.All rights reserved.This work is based on secondary market research,analysis of financial information available or provided to Bain&Company and a range ofinterviews wi

2、th industry participants.Bain&Company has not independently verified any such information provided or available to Bainand makes no representation or warranty,express or implied,that such information is accurate or complete.Projected market and financialinformation,analyses and conclusions contained

3、 herein are based on the information described above and on Bain&Companys judgment,and should not be construed as definitive forecasts or guarantees of future performance or results.The information and analysis herein doesnot constitute advice of any kind and is not intended to be used for investmen

4、t purposes.Neither Bain&Company nor any of its subsidiaries or their respective officers,directors,shareholders,employees or agents accept any responsibility or liability with respect to the use of or reliance on any information or analysis contained in this document.This work is copyright Bain&Comp

5、any and Kantar Worldpanel and may not be published,transmitted,broadcast,copied,reproduced or reprinted in whole or in part without the explicit written permission of Bain&Company and Kantar Worldpanel.Authors and Acknowledgments Bruno Lannes is a partner with Bain&Companys Consumer Products and Ret

6、ail practices and is based in Shanghai.You can contact him by email at .Derek Deng is a partner who leads Bain&Companys Consumer Products practice in Greater China and is based in Shanghai.You can contact him by email at .Jason Yu is managing director at Kantar Worldpanel Greater China.You can conta

7、ct him by email at .This report is a joint effort between Bain&Company and Kantar Worldpanel.The authors extend gratitude to all who contributed to it,especially Monica Li,Feifan Zhang,and Jimmy Wu from Bain;and Tina Qin,Jennifer Ge,and Eva He from Kantar Worldpanel.China FMCG:Still Volatilebut with

8、 Signs of HopeKantar Worldpanel|Bain&Company,Inc.1ContentsExecutive summary 2The full report 7Overall FMCG trends:resilience despite the odds 7Demystifying price trends 21Whats ahead in 2023and what it means for brands and retailers 27China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|

9、Bain&Company,Inc.2Executive summary This is the eleventh consecutive year that we have tracked the shopping behaviors of Chinese consumers.Our continuing research has given us a valuable long-term view across 106 fast-moving consumer goods(FMCG)categories purchased for home consumption in China.As i

10、n past years,we analyzed the 26 key categories1 that span the four largest consumer goods sectors:packaged food,beverages,personal care,and home care.This report,which updates the findings from China Shopper Report 2022,Vol.1,China FMCG:Navigating through Turbulent Times,includes Kantar Worldpanel s

11、hopper behavior data for the first three quarters of 2022.A look back at 2022s first three quartersChinas FMCG industry faced significant challenges in the first three quarters of 2022.At the end of 2021,just as the country had begun to rebound from Covid-19s initial blow,a resurgence of cases disru

12、pted supply chains,heightened consumer anxiety,and triggered another economic slowdown.Covid cases peaked in April,grinding the Yangtze River Delta economy to a halt in the second quarter.Shanghai was hardest hit,with over 28 million people impacted by a two-month,citywide lockdown.However,despite t

13、he odds,Chinas FMCG industry showed resilience with 3.6%year-over-year growth and strong third-quarter recovery.This ascent exceeded Chinas gross domestic product growth in the second and third quarters,reversing the trend in past years.The big hero this year was volume:Market growth was driven by a

14、 5.9%gain,as average selling prices(ASP)continued to decline despite rising input cost.Category update:Packaged food and home care leadWithin the four major sectors,packaged food and home care led growth during the first three quarters due to Covid-fueled stockpiling and heightened health and hygien

15、e concerns.Packaged food alone averaged 7.4%value growth in the first three quarters of 2022,with 4.6%in volume and 2.6%in ASP.Standouts were pandemic stockpile staples like instant noodles,which saw ASP and volume increases of 5%and 13%,respectivelyand a value surge of 18%.Just as the pandemic bols

16、tered some categories,it hurt others:Impulse buys like chewing gum dropped 11%in volume.Another key winner was beverage.Its 4.1%value increase in the first three quarters was shaped by a volume increasemainly in the third quarterof 7.2%,despite an ASP decline of 3%.Pent-up demand following pandemic

17、confinement was part of the equation,but so was weather.This past summer China endured its most severe heat wave in 60 years,driving up demand for cold drinks.If there was one category that helped boost the sector it was juice,which garnered outstanding year-over-year growth of over 20%,as a result

18、of both volume and ASP growth.The signals above point to its runaway success,but there was another driver:rising consumer sophistication amid the China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.3growing popularity of the“super fruit”segment(i.e.,niche,relatively rar

19、e fruits with functional benefits such as mulberries,prunes,and blueberries).Because these juices changed consumers perception of juicepreviously associated with unhealthy ingredients and artificialityshoppers were more willing to pay a premium.For example,traditional big brands such as Nongfu Sprin

20、g and Huiyuan have all seen growth in this segment,as have insurgent small players like iF(a Thai coconut juice brand)and Bosun(寶桑園).In contrast,personal care reversed in trend,dropping 1.9%in value with a slight increase of 0.7%in volume and 2.5%decline in ASP.Cosmetics categories drove this plunge

21、,and Covid provided the push.As social occasions largely came to a halt,demand and willingness to pay for premium makeup took a nosedive,resulting in a 16%drop in makeup value.While personal-hygiene-related categories like personal wash and toothpaste fared somewhat better,overall,the category suffe

22、red.Home care saw similar pandemic-related gains as packaged food,with a value increase of 6%this year driven largely by a 5.4%volume increase and 0.6%increase in ASP.Facial tissue skyrocketed with a 11%value growth thanks to a 12%volume growth.While their increases were less pronounced,other home c

23、are categories like kitchen cleaner and fabric softener reaped the rewards of consumers prolonged time at home and increased focus on domesticity.Another unique growth pattern was seen with toilet tissue,which saw a 5%price increase as manufacturers passed rising raw material costs to end consumers.

24、Despite the price hike,consumers still upped their volume 3%for this essential purchase,resulting in an 8%value growth.An update on growth trajectoriesThe two-speed growth phenomenon showed similar patterns as in 2020.The high-speed cluster was largely dominated by food and beverage categories,with

25、juice boasting a 22%value growth rate.Top spots,like instant noodles(18%)and wet tissues(14%),benefited from stockpile behaviors.Others,like ice cream(19%)and beer(14%)were benefactors of the“small treats”mentality.All told,these were mainly driven by volume growth.Low-speed categories were those de

26、emed nonessentialparticularly in a pandemiclike makeup,which fell 16%,and foreign spirits,which declined 13%.In 2020,we identified four distinct category growth trajectories following the initial Covid outbreak.Continuous booming are those categories that benefited from Covid,followed by slower and

27、stable growth,like soy sauce and carbonated soft drinks.Boom and stabilize categories,like household cleaner and frozen food,did well as a result of Covidbut the growth was not sustained.V-shape and stabilize categories were hit by the pandemic but rebounded after,like skin care,beer,and fabric dete

28、rgent.Lastly,the L-shape group,including makeup,foreign spirits,and yogurt,all continue to decline during and after Covid.For the most part,the trajectories of these four groups of categories showed a similar pattern as in 2020.They diverged again in the first two quarters of the year,though to a le

29、sser extent than in 2020.Crucially,they converged quickly in the third quarter,much faster than in 2020.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.4Four factors created a different picture for 2022.For one,lockdowns were less expansive and were issued at the ci

30、ty vs.national level.After their experience in the first wave of Covid,brands were much better equipped to respond to logistics disruptions.Some even decentralized warehouses to keep fulfillment humming.As brands adapted quickly to Covids new normal,so did consumers,who rapidly showed signs of retur

31、ning to regular consumption patterns.Finally,seasonality also had a big impact.When the lockdown lift collided with an unusually hot summer,the beverage sector soared.Channel update:E-commerce stagnates,O2O soarsGrowth in e-commerce has slowed with some categories,like facial tissue and makeup,start

32、ing to show decline in online penetration rate,while smaller offline store format(e.g.,grocery,convenience stores(CVS)gained momentum.E-commerce amounted to 5%year-over-year growth rate in the first three quarters,relative to 15%between 2020 and 2021,whereas convenience stores grew 9%,relative to no

33、nexistent growth the prior year.Online-to-offline(O2O)shopping continued to grow as consumers wanted to stock up and fulfill instant needs while avoiding traffic and exposure in physical stores.Here,a 14.6%increase in store trips compared with last year,not to mention a 6.1%increase in shopper base,

34、was a key growth driver.Among the four O2O platform types,community group buying(CGB)captured the lions share at 46%this year,up from 39%last year.At-home vs.out-of-home:similar patterns observed as in 2020At-home food and beverage consumption2 saw marked improvement as consumers sheltered in placea

35、nd in fact was even higher than in 2020.Not surprisingly,out-of-home consumption dropped after a year of recovery in 2021,as Covid measures restricted outdoor activities and social gatherings.Out-of-home accounted for 44%of spend,compared with 49%in 2021 for select food and beverage categories2 in T

36、ier 1 and 2 cities.Within both at-home and out-of-home consumption,we observed variances in terms of channel and category preferences between high-tier and low-tier cities.Demystifying price trendsIn this edition,we have paid special attention to how consumers responded to price increase in various

37、FMCG categories.Overall,we saw that ASP declined by 2.1%in the first three quarters vs.last yearcontinuing the deflationary trend observed since 2020but the reaction to the decline differed by sector.While seeking more value-for-money products seems to be a common trend,food and bever-age saw a volu

38、me increase with consumers stocking up on larger pack size items.Personal care and home care,on the other hand,saw a shift toward less expensive products and channels.Promotion activities largely remained unchanged,except in personal care which rose 2.8%between 2020 and 2022,as it increasingly relie

39、d on sales amid compressed demand.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.5A return of three pricing patternsplus an emerging oneWhile the four distinct pricing patterns we identified in Volume 1 largely still hold true,polarization within category was less

40、remarkable in the first three quarters of 2022.Consumers continued to premiumize,with carbonated soft drinks,beer,and fabric detergent leading this segment largely thanks to continual innovation and the introduction of new formats and flavors.In the trade up to mid-range cohort,toothpaste,personal w

41、ash,and infant formula were strong players.In the case of personal wash,consumers opted for familiar brands that reinforced“top-of-mind”brand value over premium ones.Toothpaste brands like Yunnan Baiyao steadily gained share by emphasizing functional claims that addressed consumers pain points.Consu

42、mers stockpiling behavior during Covid outbreaks brought about a new pattern unique to 2022:larger pack stock-up.Packaged water and facial tissue both saw a 1%decline in ASP,as sporadic Covid lockdowns motivated consumers to purchase daily essentials in bulk,which dragged down the average price poin

43、t per unit.Finally,in the flight to value group,we observed consumers growing preference for value-for-money options rise with inflation.In skin care,there was a noteworthy shift toward more affordable products through domestic substitution.Yogurt,makeup,and other nonessential purchases continued th

44、eir steady decline across all price tiers.Looking at the city tiers,price trend differences were most pronounced in beverage and home care categories,where Tier 1 cities scored positive ASP growth and reached approximately 5 percentage-point-variance with Tier 5 cities.These cities also drove growth

45、 in categories with ongoing premiumization like carbonated soft drinks,beer,and fabric detergent.In contrast,the downward ASP trend in lower-tier cities was driven by value-seeking behaviors,including trading down to more affordable alternatives or purchasing larger pack sizes.Whats nextand implicat

46、ions for brands and retailersFollowing a challenging three quarters bearing the brunt of Covid,next year is likely to remain volatile.By keeping their fingers on the pulse of changing consumer needs and making strategic adjustments,brands and retailers alike can position themselves for success.Impli

47、cations for brandsIn a challenging market,its important to pursue new growth engines.Brands can expand into new geographies,segments,or channels by keeping their finger on the pulse of market and consumer trends.Rising input costs and supply chain disruptions put efficiency at the forefront,too.Cost

48、 management becomes an important lever to explore in this turbulent market.Meanwhile,brands should adopt a test-and-learn approach to maximize marketing effectiveness,while optimizing China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.6pricing and promotion to boost re

49、venue potential.Finally,this volatile climate demands that brands stay flexible,making risk mitigation and scenario planning key strategies for success.Implications for retailersAs the retail industry faces continued deflationary pressures,retailers must shift focus from gross merchandise value(GMV)

50、and topline growth to sustainable operations and profit margin.Improving shopper loyalty via differentiated services and consumer engagement is critical.As consumers spend less,retailers need to establish a differentiated portfolio and attract traffic with private label or exclusive products.Despite

51、 great uncertainty,there are reasons for FMCG players to be hopeful.Chinas middle class continues to grow,along with urbanization.A controlled rising input cost trend is on the horizon,and confidence in consumer spending is expected to return.With a nuanced approach,based on understanding consumer n

52、eeds and building agility into operations,adaptable FMCG companies can chart a path toward healthy performance in 2023 and beyond.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.7The full reportOverall FMCG trends:resilience despite the oddsAs geopolitical uncertain

53、ty and rising input costs shook business confidence,brands treaded lightly with cautious investments.Still,despite the headwinds of supply chain chaos and mounting macroeconomic pressures,Chinas FMCG industry was remarkably resilient,exhibiting 3.6%year-over-year growth(see Figure 1).This growth was

54、 largely owed to volume,which rose 5.9%compared to the same period last year(see Figure 2).Pandemic-fueled stockpiling behaviors are a likely cause,with volume rising across all sectors except personal care.While the economic slowdown eroded consumers income and buying power,recovery accelerated onc

55、e Shanghais lockdown restrictions were lifted in June.In particular,the third quarter saw robust gainsto the tune of 6%growth.Packaged food largely contributed to the strong momentum in third-quarter growth.Even after Shanghais citywide lockdown was lifted in June,consumers remained vigilant in thei

56、r preparedness,including stocking up on essential foods long after necessary.One factor that was not a contributor to overall FMCG growth was ASP,which we first observed declining in 2020 after five years of premiumization.In fact,it continued to precipitously drop2.1%vs.same period last yearwhich i

57、s even more remarkable considering 2%inflation during the first three quarters.Still,while all city tiers experienced price drops,Tier 1 megacities like Shanghai showed more resilience with premiumization across most sectors except personal care(see Figure 3).A tumultuous start to the year brought e

58、bbs and flows in consumer behaviorbut overall,Chinas FMCG market demonstrated true buoyancy in rough waters,signaling theres hope for the months and years ahead.Packaged food leads with continued premiumizationAcross the four sectors,packaged food was a big winner,leading growth during the first thr

59、ee quarters as a result of increased stockpiling and heightened health consciousness(see Figure 4).Remarkably,over half of the total year-over-year FMCG growth in the first three quarters was attributable to packaged food.Value grew 7.4%due to gains in volume(4.6%)and ASP(2.6%)(see Figure 5).As with

60、 the 2020 Covid outbreak,key growth drivers were pandemic stockpile items like frozen foods,cheese,and instant noodles,the latter of which enjoyed an extraordinary 18%value increase.Packaged food ASP rose 2.6%as some manufacturers,like soy sauce brands,increased prices due to inflationary pressure.P

61、remiumization also was a factor.As consumers became more sophisticated about ingredients and calorie intake,and as brands innovated their offerings,shoppers voted with their dollars.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.8ValueVolumeAverage selling pricesUr

62、ban FMCG market value growth(%)Urban FMCG market volume growth(%)Urban ASP growth(%)10%505.25.60.53.13.6201718 181919202021YTD21Q3YTD22Q3510%500.72.01.54.15.9201718 181919202021YTD21Q3YTD22Q3510%504.53.51.00.92.1201718 181919202021YTD21Q3YTD22Q35CPINotes:Kantar Worldpanel excluded cigarettes from to

63、tal FMCG data in 2017 and adjusted online channel weight factor upper threshold for paper products to better reflect market realities in 2020;consumer universe update in 2021;skin care and makeup include ages 1564,Tier 1Tier 5;infant formula and baby diapers include ages 036 months,Tiers 15;all chan

64、ges may lead to some inconsistencies with previous years data;all average selling prices(ASP)are calculated based on RMB per Kg/L,except diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilet tissue and facial tissue on 100 sheets/rolls basis;CPI data is calcul

65、ated as of YTD Q3 2022,is from the National Bureau of Statistics,and includes all consumer goods;FMCG inflation in 2021 could be higher,as the price of pork declined heavily in 2021,dragging down the overall CPISources:Kantar Worldpanel;National Bureau of Statistics;Bain analysis Figure 2:Overall FM

66、CG value growth in the first three quarters was mainly driven by volume growth as price deflation continuedYear-over-year change in urban shoppers total spending on fast-moving consumer goods101020%Q12017Q2Q3Q4Q12018Q2Q3Q4Q12019Q2Q3Q4Q12020Q2Q3Q4Q12021Q2Q3Q12022Q2Q3Q4Since Covid-19(More volatile)Pre

67、-Covid-19(More stable)Notes:Kantar Worldpanel excluded cigarettes from total FMCG data in 2017 and adjusted online channel weight factor upper threshold for paper products to betterreflect market realities in 2020;consumer universe update in 2021;Skin care and Makeup cover ages 1564,Tier 1Tier 5;Inf

68、ant formula and Baby diapers coverages 036 months,Tier 1Tier 5;all average selling prices are calculated based on RMB per KG/L,except diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilet tissue and facial tissue on 100 sheets/roll basis;all changes may lead t

69、o some inconsistencies with previous years dataSources:Kantar Worldpanel;Bain analysis Total FMCGPersonal and home careFood and beverage0Figure 1:After a stagnant first half of 2022,Chinas FMCG market grew in the third quarter and increased to 3 6%growth YTD compared with 2021China FMCG:Still Volati

70、lebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.9ValueVolumeAverage selling pricesUrban FMCG market value growthby city tier(%,YTD 21Q322Q3)FMCG market volume growth by city tier(%,YTD 21Q322Q3)Change in FMCG ASP by city tier(%,YTD 21Q322Q3)8%62403.83.34.54.02.1Notes:Skin care and makeup

71、include ages 1564,Tiers 15,and infant formula includes ages 036 months,Tiers 15;all average selling prices(ASP)are calculated based on RMB per Kg/L,except baby diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis and facial tissue on 100 sheets/rolls basis;all changes m

72、ay lead to some inconsistencies with previous years data Sources:Kantar Worldpanel;Bain analysisTier 1Tier 2Tier 3Tier 4Tier 5428%62404.36.05.5Tier 1Tier 2Tier 3Tier 4Tier 5428%62400.42.81.81.93.2Tier 1Tier 2Tier 3Tier 4Tier 5426.26.4Notes:Skin care and makeup include ages 1564 in Tier 15,and infant

73、 formula includes ages 036 months in Tier 15;all average selling prices(ASP)arecalculated based on RMB per Kg/L,except baby diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis and facial tissue and toilettissue on 100 sheets/rolls basis;all changes may lead to some inc

74、onsistencies with previous years data Sources:Kantar Worldpanel;Bain analysisTotal FMCGFood and beveragePersonal and home careUrban FMCG market value growth(%)Urban FMCG market value growth(%)Change in urban FMCG market value(%)Packaged food22Q122Q222Q3BeveragePersonal careHome care15%100515%100515%

75、1055505Growth rate(YTD 22Q3 vs.last year)3.12.06.03.6%19.6%in Q3 if excludedairy products22Q222Q35.88.18.67.4%2.70.110.14.1%22Q10.83.81.01.9%6.0%6.16.85.222Q222Q322Q1Figure 3:Average selling price dropped across all city tiers,with Tier 1 showing the most resilienceFigure 4:Packaged food and home ca

76、re led overall growth,while beverage experienced a seasonality-driven jump in the third quarter and personal care growth sufferedChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.10Notes:All average selling prices(ASP)are calculated based on RMB per Kg/L,except baby d

77、iapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilet tissue and facial tissue on 100 sheets/rolls basis;all changes may lead to some inconsistencies with previous years dataSources:Kantar Worldpanel;Bain analysisValueVolumeAverage selling pricesAnnual growth o

78、f urban FMCG market value(%)Annual growth of urban FMCG market volume(%)Annual growth of urban FMCG market ASP(%)Packaged foodPackaged foodBeverageBeverage8%64026424.52.32.81.27.41.63.04.15.94.1YTD 21Q322Q32020212019202018192017188%64026421.21.95.72.04.60.30.81.86.77.2Packaged foodBeverage8%64026423

79、.20.42.80.82.61.92.12.40.83.0Figure 5:While spending on packaged food and beverage both increased,average selling price for the two categories moved in opposite directionsBeverage sees strong third-quarter gainsWhile overall beverage ASP declined by 3%,primarily in the first two quarters,a volume in

80、crease of 7.2%contributed to a strong recovery and overall value gain of 4.1%.After a stable first half of 2022,beverage rose an astonishing 10.1%in the third quarter.As expected,pent-up demand coming out of lockdown was a factor.Less expected was the record-setting heat wave that shot up demand for

81、 juice,carbonated soft drinks,and beer,raising value 22%,15%,and 14%,respectively.In the case of sector frontrunner juice,new flavors and rising consumer sophistication played a vital role.Fast product innovation also helped other categories continue their robust upward trend.Carbonated soft drinks

82、growth was led both by insurgent domestic players like Genki Forest and traditional brands that identified new opportunities for advancement.Category stalwarts like Dayao,Guangshi,and Beibingyang turned declining sales around by expanding and growing their footprint(in geography and channels),while

83、tailoring their products/pack to consumers needs.To augment their approach,they rebranded with fresh marketing campaigns celebrating national pride.All told,excluding dairy products,beverage recorded a 19.6%year-over-year volume growth in the third quarter.While juice,carbonated soft drinks,and beer

84、 saw various levels of premiumization,two beverage categoriesforeign spirits and packaged watercontributed to the overall fall in ASP.As social China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.11gatherings tapered off,and it became uncouth to show off,consumers bough

85、t fewer foreign spirits at premium prices.With water,shoppers opted for larger packs for stockpiling purposes,despite its like-for-like price increase.Personal care takes a dipConsumers avoidance of social gatherings hurt personal care overall.It was the only sector that saw overall declines with a

86、1.9%drop in value,amounting to a reversal to its historical growth trend in previous years(see Figure 6).Volume only grew 0.7%,though variance across subcategories prevented a more dire outcome.For example,personal hygiene items deemed essential during lockdown sustained volume or even showed minor

87、growth;personal wash increased 4%in value,with toothpaste following at 3%.Those go-to products helped keep the category afloat as expendable items like makeup plummeted 16%in value.Most significantly,personal cares ASP fell 2.5%.Shifting needs as a result of lockdown,coupled with fierce market compe

88、tition,pushed many brands to offer larger discounts and promotions like free gifts and samples.At the same time,consumers became more discerning about price in selecting personal care brandsand were also more willing to choose domestic substitution.ASP for makeup,for example,fell 6%in the third quar

89、ter both as a result of increased promotion and the flight-to-value trend,which also impacted shampoo,toothbrushes,and skin care.ValueVolumeAverage selling pricesNotes:Skin care and makeup includes ages 1564 in Tier 15,and infant formula and baby diapers includes ages 036 months in Tier 15;all avera

90、ge sellingprices(ASP)are calculated based on RMB per Kg/L,except baby diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilettissue and facial tissue on 100 sheets/rolls basis;all changes may lead to some inconsistencies with previous years dataSources:Kantar Wo

91、rldpanel;Bain analysisPersonal carePersonal careHome careHome care15%1050510.311.81.14.01.98.49.47.76.0 6.0YTD21Q322Q320202120192020181920171815%105050.54.22.63.60.74.36.86.17.55.415%105059.77.31.50.42.54.02.51.51.40.6Personal careHome careAnnual growth of urban FMCG market value(%)Annual growth of

92、urban FMCG market volume(%)Annual growth of urban FMCG market ASP(%)Figure 6:Personal care value dropped due to falling average selling price,while home care continued its volume-driven growthChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.12Home care benefits from

93、lockdownsNot surprisingly,as consumers stayed at home for longer periods during Omicrons peak,home care saw a 6%boost in value.More time at home meant more rapid use of products along with increased stocking up in preparation for uncertainty.Categories like facial tissue,for example,saw Covid-spurre

94、d gains;it increased 11%in value,as a result of a 12%volume growth and 1%ASP drop.In parallel with preparedness,consumers also became more educated about caring for their house and family,prompting them to try categories they had not previously purchased.Aligned with this trend,fabric softener saw a

95、 2-percentage-point increase in penetration in the past two years,resulting in 22%growth in value.A 0.6%rise in home care ASP was twofold.On the one hand,some manufacturers passed raw materials price increases to end consumers,as with toilet tissue,which saw 5%year-over-year ASP growth.Perhaps more

96、significantly,manufacturer-led innovation redefined the category and drove up prices.In tandem,consumers heightened sophistication around home care purchases and desire for the latest innovation spurred premiumization.Take fabric detergent,which emerged as a strong contender with a 3%ASP increase th

97、is year.Its format evolved over time,from powder to liquid and then eventually concentrate and capsule.With each iteration,the price went up.Specialty products with higher price points like lingerie detergent also significantly outpaced the overall detergent category as consumers proved they were wi

98、lling to pay a premium.Covid shapes two-speed growth patternsThe two-speed growth trajectories,which we first identified in 2016,surfaced distinct patterns in the first three quarters of 2022.As in the first wave of Covid in 2020,the high-speed cluster was largely dominated by food and beverage.Low-

99、speed,in contrast,was made up items deemed nonessential particularly during Covid(see Figure 7).The high-speed growth cohort grew out of both temporary and structural drivers.As lockdowns were announced,consumers stocked up on frozen food and instant noodles.Similarly,the unusually hot summer drove

100、up demand for ice cream,carbonated soft drinks,and beer.This phenomenon was compounded by a“small treats”mentality that drew consumers to low-cost,high-reward items that boosted their happiness during a difficult time,as demonstrated in the growth of ice cream.Structural factors were also at play.Pr

101、oduct and marketing innovation led to a breakout star in juice,which was new to the high-speed cluster.Packaged juice used to be considered artificial,sweet,and unhealthy,but the growing popularity of the“super fruit”segment(i.e.,niche,relatively rare fruits with functional benefits such as mulberri

102、es,prunes,and blueberries)captured the attention of health-conscious consumers in the wake of Covid.Insurgent brands such as iF(a Thai coconut juice brand)and Bosun(寶桑園)as well as traditional players like Nongfu Spring and Huiyuan enjoyed growth in this segment.China FMCG:Still Volatilebut with Sign

103、s of HopeKantar Worldpanel|Bain&Company,Inc.13Percentage point change in value CAGR YTD 21Q3YTD22Q3High speed2019181514141312124556710111313Notes:Skin care and makeup includes ages 1564 in Tier 15;infant formula and baby diapers includes ages 036 months in Tier 15;all changes may lead to some incons

104、istencies with previous years dataSources:Kantar Worldpanel;Bain analysisWineYogurtChewinggumForeignspiritsCheeseInstantnoodlesWettissuesPetfoodCerealsFragranceToothbrushSoybeanmilkReady-to-drinkcoffeeJuiceIce creamCarbonatedsoft drinksBeerFrozenfoodHairconditionerMakeup1622Low speed101530030%Figure

105、 7:Product innovation and quality-of-life improvements boosted high-speed categories,while the pandemic-driven reduction of social activities hurt the low-speed groupProduct upgrade also shaped instant noodles,which was new to the fast-growing group this year,reversing a previous declining trend.One

106、 success story came out of traditional brand Baixiang,which accelerated sales with a series of strategic transformations.The brand continually upgraded its products and optimized portfolio/channel and price strategy to accelerate revenue growth,with a consistent pursuit of quality that was well publ

107、icized this year.Combined,these moves helped Baixiang earn more consumers and drive revenue growth.New opportunities for consumption gave a lift to other categories.The rapid adoption of work-from-home models spurred demand for ready-to-drink coffee,which expanded penetration and continued the high-

108、growth trend seen in 2021.Another lifestyle trend that boosted the bottom line was the growing humanization of family pets.As pet owners became more conscientious about providing their pets with higher-quality ingredients,pet food brands like Orijen answered the call with a high-protein diet while e

109、ducating consumers on the benefit of a nutritional diet for pets.As with the high-speed cluster,the low-speed products were impacted by both temporary and structural factors.With consumers relegated to their homes during lockdown,and fewer social occasions as a result,categories like makeup,hair con

110、ditioner,fragrance,foreign spirits,wine,and chewing gum all took a dip in value.Lack of education and awareness about the health benefits of certain products also reduced nonessential purchases.For example,yogurt continued its multi-year China FMCG:Still Volatilebut with Signs of HopeKantar Worldpan

111、el|Bain&Company,Inc.14Notes:January and February are combined to minimize the effects of the Chinese New Year;the frozen food category maintains the same adjustments as previous volumes,averaging 4 weeks ended in June and July to mitigate the effect of the 618 online shopping festival;periods in 202

112、1H1 are compared with the same period in 2019 rather than 2020 to mitigate the effects of the pandemic;skin care and makeup include ages 1564 in Tier 15;infant formula and baby diapers include ages 036 months in Tier 15;all average selling price(ASP)are calculated based on RMB per Kg/L,except baby d

113、iapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilet tissue andfacial tissue on 100 sheets/rolls basis;all changes may lead to some inconsistencies with previous years data;w/e is“week ending”Sources:Kantar Worldpanel;Bain analysisYear-over-year growth in Urba

114、n FMCG sales valueL-shapedV-shape and stabilizeBoom and stabilizeContinuous boomingDivergingagainConvergingsignsGrowth pattern converging trend30%15300158 w/e2020/02/218 w/e2021/02/268 w/e2022/02/25FY 194 w/e2020/03/204 w/e2020/05/154 w/e2020/07/104 w/e2020/09/114 w/e2020/11/064 w/e2021/01/014 w/e20

115、21/03/264 w/e2021/05/214 w/e2021/07/164 w/e2021/09/104 w/e2021/12/314 w/e2021/11/054 w/e2022/07/154 w/e2022/09/094 w/e2022/03/254 w/e2022/05/20Figure 8:Overall,the four distinct category growth trajectories diverged again in the first half of the year,though to a lesser extent than in 2020,but quick

116、ly converged in Q3decline,dropping 7%in volume this year.Milk,which is more well socialized as a healthy food,grew 9%.Other low-speed categories,like toothbrushes and cereal,suffered from a lack of breakthrough category innovation and thus led to dwindling willingness to pay.Growth trajectories take

117、 a page from 2020 In 2020,we identified four distinct category growth trajectories that emerged in the wake of Covid:Continuous booming:categories that benefit from Covid,followed by slower and stable growth Boom and stabilize:categories that boom during Covid but with a boom that is not sustained V

118、-shape and stabilize:categories that are hit by Covid but rebound afterward(V-shape)L-shape:categories that continue to decline during and after lockdownand take longer to recoverAfter seeing growth convergence in 2021,we once again witnessed a resurgence of the diverging patterns during March to Ma

119、y this year,as a result of high Covid cases and citywide lockdowns (see Figure 8).However,the level of divergence was less pronounced,and convergence came much sooner than in early 2020.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.15Several factors created a diff

120、erent picture for 2022.For one,lockdowns were less expansive and issued at the city vs.national level.After their experience in the first wave of Covid,brands also became much more adaptable.As consumer demand shifted,or logistics disruptions occurred,they were able to pivot and respond in a more ag

121、ile way.Some brands even decentralized their warehouses to keep order fulfillment humming along in the event one warehouse was shut down.Others increased warehouse automation to expedite order delivery and manage social distancing.If brands learned from the trials of 2020,so did consumers.Their temp

122、ered anxiety and gradual adjustment to the“new normal”meant a return to regular consumption soon after lockdowns lifted.For example,soy sauce,a frequently stockpiled item and“continuous booming”category,declined once cities reopened.Consumers also resumed their purchase of wine and foreign spirits a

123、s social gatherings resumed.Lastly,as mentioned above,seasonality also had a big impact.When the lockdown lift collided with an unusually hot summer,the beverage sector soared.Following the Covid outbreak,many categories adopted a lower-impact,faster-recovery trajectory.A few V-shaped categories,lik

124、e shampoo,toothpaste,Chinese spirits,and sake,saw robust recovery after lockdowns ended.Other categories,like milk,fabric detergent,and toilet tissue,were not affected by Covids disruption due to a more prepared supply chain and logistics system.Ready-to-drink tea and juice,which showed an L-shaped

125、declining trend in 2020,were unaffected during this outbreak as a result of continuous category innovation and a hot summer that sustained demand and price.Shifting channel dynamicsThe unpredictable nature of Chinas pandemic restrictions introduced new channel dynamics.The shift toward online only t

126、rod at a similar pace as the overall FMCG market during the first three quarters of the year,while smaller offline store formats and online-to-offline(O2O)commerce rode on Covids tailwinds(see Figure 9).E-commerce claimed a stable 30%share of the overall FMCG spend.Its relatively lackluster performa

127、nce5%compound annual growth rate,relative to 15%between 2020 and 2021had a two-pronged cause:logistics disruptions during lockdown and heightened regulatory scrutiny of key opinion leaders(KOL)and livestreaming industry.In contrast,convenience stores and grocery stores gained traction,with convenien

128、ce stores growing 9%relative to nonexistent growth last year.This represents a reversal of trend from our last report and suggests a change in consumer preferences.Pandemic-related disruptions to transportation,along with concerns about virus exposure in large crowds,had consumers gravitating to the

129、 predictability,convenience,and safety of shopping at nearby locations.This years Covid resurgence was a boon to O2Os expansion.In the third quarter,FMCG O2O saw 17%value growth compared to last year.Consumers wanted to stock up and fulfill instant needs while avoiding fulfilment issues from online-

130、only orders,not to mention traffic and exposure in hyper-markets.Frozen food,toilet tissue,and facial tissue are among the categories that saw remarkable growth in O2O penetration.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.1620406080Notes:Hypermarket refers to

131、stores with more than 6,000 square meters;the hypermarket channel includes top-named KA hypermarket retailers,representing 83%(based on 2018 revenues);super/mini refers to stores with 100-6000 square meters;CVS category includes chain and individual convenience stores(operating hours 16 hours);groce

132、ry refers to stores with less than 100 square meters;other includes department stores,free market,wholesales,work unit,direct sales,overseas shopping,family shopping,drugstore,beauty salon,milk store and new retail(started to report in 2018);skin care and makeup include ages 1564 in Tier 15;infant f

133、ormula and baby diapers include ages 036 months in Tier 15;all average selling prices(ASP)are calculated based on RMB per Kg/L,except baby diapers and toothbrushes on per piece basis,skin care and makeup on per pack basis,and toilet tissue and facial tissue on 100 sheets/rolls basis;all changes may

134、lead to some inconsistencies with previous years data Sources:Kantar Worldpanel;Bain analysisValue share in urban FMCG retail market by channel(B RMB)100%02017201820192021202015%14%5%3%5%22%36%15%17%4%3%5%20%35%14%22%4%3%5%19%34%13%28%3%3%5%17%32%12%31%3%2.9%5%16%31%3%1,2441,3091,3821,3891,43313%30%

135、3%4%15%31%1,011YTD 22Q3CAGR(2021)CAGR(YTD21Q322Q3)2%9%Other15%5%E-commerce12%7%Grocery0%9%ConvenienceStore1%1%Specialist store4%2%Hypermarket1%CAGR(1720)3%4%4%2%27%9%0%0%5%0%3%Super/mini3%Figure 9:E-commerces growth continued to slow down,while offline channelsespecially small store format growth li

136、ke convenience and grocerygained value share as a result of lockdownsOnline penetration idlesModerate gains and declines in certain categories online penetration resulted in stagnation.Traditionally low-online-penetration categories like food and beverage showed modest growth,while typically high-on

137、line-penetration categories like personal care and home care declined slightly(see Figure 10).We observed three patterns:Cluster 1:Low but growing online penetration categories largely from the food and beverage sector,such as juice,instant noodles,and ready-to-drink tea.These typically low-penetrat

138、ion categories gained momentum as consumers stocked up.The lowered logistics cost of heavy-weight products like juice,beer,and packaged water contributed to this move to purchase online.Cluster 2:Low but declining online penetration,including categories sold offline that consumers dont stockpile.The

139、se are most often impulse purchases from offline stores,like chewing gum,or items deemed nonessential,like yogurt and biscuits.Cluster 3:High but declining online penetration,generally in personal care and home care,like makeup,skin care,and facial tissues.Boasting already very high penetration,thes

140、e categories are difficult to grow further.In addition,as these are infrequent purchases,customers chose offline over online given the disrupted logistics of e-commerce.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.17Notes:Online relative penetration is defined as

141、 the total number of online purchasers divided by the number of purchasers of the category;skin care and makeupinclude ages 1564 in Tier 15;infant formula includes ages 036 months in Tier 15;all changes may lead to some inconsistencies with previous years dataSources:Kantar Worldpanel;Bain analysis

142、Online relative penetration change(YTD 21Q3YTD 22Q3)Packaged food and beveragePersonal care and home care5%31-175%5-30%Online relative penetration rate YTD 22Q3(%)Cluster 1:Low but growing online penetration(largely food and beverage)Cluster 2:Low but declining onlinepenetration(categories not for s

143、tock-up)Cluster 3:High but declining online penetration(largely personal care and home care)70656055504540353025201510DiapersHair conditionerBeerJuiceReady-to-drink teaInstant noodlesMakeupToilet tissuesBiscuitsYogurtMilkSkin careCandyPackaged waterCSDInfant formulaToothpasteToothbrushChewing gumKit

144、chen cleanerChocolateFabric softenerShampooFacial tissuesFabric detergentPersonal washFigure 10:Online penetration growth lost steam in the first three quarters,with traditionally high-penetration(non-food)categories declining slightlyThe fragmentation of e-commerce channels persisted over the first

145、 three quarters.Among more mature platforms,Tmall continued to demonstrate its strong leadership in driving innovation and new categories,with targeted marketing and established membership programs.JD.coms 7%growth outpaced e-commerce overall.It benefited greatly from its self-owned supply chain,as

146、the reliability of inventory and shipping logistics emerged as an important differentiatorand repeat purchase driverfor locked-down consumers.Also key to its Covid-era resilience were its B2C model,relatively lower reliance on influencers,and lower exposure to beauty categories relative to its C2C c

147、ompetitors.PDD doubled its size between 2020 and 2021,but that accelerated growth came to a jarring halt in the first three quarters of 2022.In contrast with JD.com,PDDs dependence on third-party logistics providers made it more vulnerable to pandemic-related disruptions.Interest e-commerce,or lives

148、treamed selling on platforms like Douyin and Kuaishou,maintained its extraordinary momentum.A continued rise in daily active users,paired with an uptick in time spent viewing short videos,contributed to a growth rate of 171%.Platforms made a splash with new campaigns,like Douyins 921 Goodies Festiva

149、l,and rising KOL sellers.This buzzy approach was effective at luring consumers from traditional e-commerce platforms,ultimately promoting its outstanding growth.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.18O2O:More than a trend,its here to stayAs in past report

150、s,we closely tracked four main participants in the O2O space:Offline retailers such as RT-Mart(大潤(rùn)發(fā)優(yōu)鮮)offer O2O services via self-owned or third-party delivery capabilities.With declining penetration and purchase frequency,offline retailers lost share this year with declining penetrationand accountin

151、g for 20%of total O2O value.However,their average basket size saw a 33%year-over-year boost,thanks to the growing popularity of warehouse club O2O destinations.Vertical grocery e-commerce retailers such as Dingdong Maicai(叮咚買菜)and Missfresh(每日優(yōu)鮮)rely on self-owned dark stores and their own delivery

152、capabilities.Because this model works best in condensed urban areas,expansion potential might be limited.Whereas other models can convert consumers from existing online platforms,vertical grocerys success relies heavily on promotions to draw traffic.As expected,vertical grocery continued to lose sha

153、re this year as it struggled to find a profitable business model.But while their penetration rate rapidly declined,their loyal customers helped keep them afloat,purchasing more frequently and spending more per trip.Community group buying(CGB)platforms such as Duoduo Maicai(多多買菜)and Meituan Maicai (美

154、團(tuán)買菜)rely on community captains to coordinate orders and delivery and manage offline pickup points.With their low-price value proposition,these platforms used to be more popular in lower-tier cities.However,lockdown in Shanghai and other high-tier cities significantly boosted their penetration rate i

155、n these markets and enabled the model to account for 46%of total O2O value.Although overall usage cooled in the third quarter as lockdowns lifted,the platforms penetration still carried overall O2O growthboasting a 7-percentage-point increase compared with the same time last year.Duoduo Maicai in pa

156、rticular emerged as a strong contender,thanks to its pandemic-friendly ease of use and reliability.It curated a set of suppliers that could ensure 48-hour delivery within Shanghai at a reasonable cost,leveraging PDDs strength in fresh produce and a purchasing tool called Kuai Tuan Tuan(快團(tuán)團(tuán)),to spur

157、penetration.Horizontal marketplace platforms such as Meituan(美團(tuán))and Ele.me(餓了么)serve retailers and brands with their O2O distribution capabilities.In 2022,these asset-light platforms saw steady growth on par with overall O2O growth,thanks to easy access via platform super-apps,quick and reliable del

158、ivery,and a diversified product assortment.Capturing nearly one-third of total O2O value,odds look good that they will continue to win customer loyalty and thus grow and scale.Growth in the O2O space is largely driven by a higher penetration rate and growing purchase frequency;so even as average bas

159、ket sizes dropped this year,O2O was strong,increasing trip frequency 14.6%and growing user base by 6.1%.Thats largely due to Covid-accelerated behaviors,like staying home and stockpiling,as well as mindset shifts like a demand for immediacy despite an unwillingness to go to physical stores.China FMC

160、G:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.19At the same time,large e-commerce players doubled down on O2O as a growth source.For example,JD.com incorporated it into its core strategy,launching a SaaS system for partner hypermarkets to optimize O2O operations.Though we

161、saw variance in performance among the models below,we believe that the O2O trend is more than a trendbut here to stay.At-home vs.out-of-homeThe pandemics resurgence gave a welcome lift to at-home food and beverage consumption,following a slight decline in 2021.For select food and beverage categories

162、,at-home consumption landed comfortably at 56%by the end of the third quarter for Tier 1 and 2 cities(see Figure 11).Convenience stores and grocery are dominant channels for out-of-home consumption,as they proved to be more suitable for on-the-go needs.E-commerce continued to gain traction in these

163、select food and beverage categories in Tier 1 and 2 citiesboth at home and out of home.Milk is still growing in value share in at-home and out-of-home consumption for Tier 1 and 2 city consumers,whereas expendable categories like yogurt and chocolate have either maintained or slightly lost share.Bee

164、r was heavily hit this year in out-of-home occasion given the Covid restrictions for dine-out,which was also reflected in restaurants declining share of out-of-home consumption.This year we also tracked consumption patterns for these select food and beverage categories at a national level.Across all

165、 city tiers,at-home consumption was lower(52%),suggesting more out-of-home consumption in lower-tier cities with fewer Covid restrictions.Lower-tier cities are less reliant on e-commerce overall,due to weaker logistics networks that make the shopping experience less streamlined.Consumers in these ci

166、ties generally prefer traditional grocery,especially for out-of-home purchases.Compared to Tier 1 and 2 city consumers,lower-tier city shoppers tend to spend proportionally more on essentials like milk vs.“small treats”like chocolate and beer.increase in shopper baseincrease in store trips compared

167、with last year14 6%6 1%China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.20Note:Food and beverage(F&B)consumption includes categories overlapped by at-home and out-of-home,including beer,chewing gum,chocolate,yogurt,milk,candy,biscuits,packaged water,ready-to-drink te

168、a,juice,and carbonated soft drinks Sources:Kantar Worldpanel;Bain analysisChinas F&B spending at-home vs.out-of-home in Tier 1&2 cities(2016YTD 22Q3)Chinas F&B at-home and out-of-homespending by category in Tier 1&2cities(YTD 22Q3)Chinas F&B at-home and out-of-homespending by channel in Tier 1&2citi

169、es(YTD 22Q3)100%20406080100%20406080100%20406080(53%)(47%)(47%)(53%)(49%)(51%)At home(56%)Out ofhome(44%)Other(25%)E-commerce(21%)Beer 8%Chocolate 6%Yogurt 10%Biscuits 6%Milk 11%Chocolate 6%Super/Mini(23%)Hypermarket(24%)Yogurt20%Beer34%Milk29%Biscuits13%Other 24%Other 33%Selected F&B categories0002

170、01620202021YTD 22Q3At homeOut of homeAt homeOut of homeHypermarket/Super(16%)Convenience(35%)Grocery(25%)E-commerce(6%)Restaurant(11%)Other(7%)Gained share vs.last yearMaintained shareLost shareGrocery(3%)CVS(4%)Figure 11:At-home consumption soared due to Covid restrictions,with different channel an

171、d category dynamics than out-of-home consumptionChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.21Growth difference in average selling prices(YTD 21Q3YTD 22Q3 vs.YTD 20Q3YTD 21Q3)Notes:Online relative penetration is defined as the total number of online purchasers d

172、ivided by the number of purchasers of the category;skin care and makeup include ages 1564 in Tier 15;infant formula includes ages 036 months in Tier 15;all average selling prices(ASP)are calculated based on RMB per Kg/L,except baby diapers and toothbrushes on per piece basis,skin care and makeup on

173、per pack basis,and facial tissue on 100 sheets/rolls basis;all changes may lead to some inconsistencies with previous years dataSources:Kantar Worldpanel;National Bureau of Statistics;Bain analysisAverage selling prices year-over-year growth(YTD 21Q3YTD 22Q3)8%8642042610%YTD 22Q3 CPI:2%T1:ASP growth

174、 magnifiedT2:ASP growth slowing downT3:ASP decline slowing downT4:ASP decline magnified100Chewing gumBeerJuicePackaged waterBiscuitsSkin careDiapersCarbonated soft drinksCandyHair conditionerChocolateInstant noodlesMilkFabric detergentToothpastePersonal washShampooInfant formulaToilet tissueFacial t

175、issueMakeupYogurtKitchen cleanerFabric softenerToothbrushReady-to-drink teaPackaged foodBeveragePersonal careHome careFigure 12:While most categories saw a real-term decline in average selling price,select food and beverage and home care categories continued to premiumizeDemystifying price trendsCur

176、ious about ASPs 2.1%decline,we conducted further analysis to unpack the drivers behind this complex and nuanced development.Here,we looked to the Consumer Price Index(CPI)to illustrate Chinas overall inflation level,but its important to note that CPI measures a broader set of industries beyond FMCG,

177、including fresh produce,electronics,etc.This deflationary trend continued what was already observed in 2020,but the magnitude of the decline was greater than in 2019 to 2020(1%)and 2020 to 2021(0.9%).Further,only a few categories showed real ASP growth above inflation level,and these were largely in

178、 food and beverage and home care due to the pandemic-related consumer behavior changes discussed above(see Figure 12).Facing rising input costs,FMCG brands understandably pushed for price increases to manage margins.That said,how consumers reacted to the price increases in food and non-food sectors

179、differed significantly as illustrated below in this third-quarter analysis(see Figure 13).China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.22Packaged food and beverage sectors:Hypothetically,a household that spent 1,000 RMB on food and beverage purchases last year wo

180、uld be spending 1,040 RMB this year.With Covid as a mitigating factor,brands 3.2%like-for-like increase on the same basket of products had little impact on shoppers channel selection and promotion participation.Rather,volume played a big role in total spend.As a result of Covid uncertainty,consumers

181、 stocked up on packaged food and beverage and opted for larger pack sizes,which often came at a lower per volume price.As a result,average household spend on food and beverage saw a 4.1%net increase in the third quarter of 2022 compared with the same period in 2021.Personal care and home care sector

182、s:Relative to food and beverage,consumers reacted more strongly to the price increase in non-food categories.As brands tried to pass inflation costs to consumerswith a like-for-like price increase of 4.9%consumers responded by reining in spending,leading to a decrease of 0.7%in 2022s third quarter c

183、ompared with the same time last year.To cope with the rising product price,they reduced volume,switched to discounted online channels,and most importantly,opted for more value-for-money alternatives(whats known as trading down).Store choice:Personal care and home care categories saw a shift in their

184、 channel dynamics,as consumers tended to prefer discounted channels like PDD or interest e-commerce.Within personal care,online growth mainly came from Kuaishou,Douyin,and JD.com;in home care,online growth came from PDD and JD.com.Notes:Analysis only reflects the average shopping behavior of single

185、households and is not comparable to the total FMCG trendSources:Kantar Worldpanel analysis;Bain analysisContribution of different factors to FMCG averagehousehold spending change in Food and Beveragecategories(12 weeks ending Sep 2022 vs.12 weeks ending Sep 2021)Contribution of different factors to

186、FMCG averagehousehold spending change in Personal and Home Carecategories(12 weeks ending Sep 2022 vs.12 weeks endingSep 2021)8%642208%64220Overalllike-for-likeprice increasefor existingSKUsShoppers arebuying morefood andcertainsubcategoriesNo changefor shoppersbuying inpremium stores/channelsLesspr

187、omotioneventsor lowerdiscountsShoppersare choosinga lessexpensiveproductShoppers arespendingmore on foodvs.last yearOveralllike-for-likeprice increasefor existingSKUsShoppers arebuying morefood andcertainsubcategoriesShoppersare buying inless premiumstore/channelsLesspromotioneventsor lowerdiscountS

188、hoppersare choosinga lessexpensiveproductShoppers are spendingless onnon-food vs.last yearLFL priceincreaseAveragehouseholdpurchasevolumeStorechoicePromotionchoiceProductchoiceAveragehouseholdspendingLFL priceincreaseAveragehouseholdpurchasevolumeStorechoicePromotionchoiceProductchoiceAveragehouseho

189、ldspending3.21.90.00.31.44.14.90.90.90.34.10.7Figure 13:As FMCG brands pushed for price increases,product choice became important,but resulting consumer behavior differed between food and non-food categoriesChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.23Promotion

190、:Consumers participation in promotion has been stable since 2020,with the exception of personal care,which has steadily risen 2.8 percentage points during the same period(see Figure 14).If personal care was a promotions frontrunner,other sectors were less driven to discount.In fact,personal care and

191、 home care spend made during promotion remained much higher than in packaged food and beverage.It appears that the more frequent lockdowns under the zero-Covid policy had little impact.Despite somewhat depressed consumer demand,brands and retailers offered roughly the same level of promotions and di

192、scounts in the face of cost pressures and supply shortages.Locked-down consumers didnt seem to mind,prioritizing availability of essential items over discounts.In the background,promotions also continue to be a baseline expectation vs.special feature,given the rise of everyday-low-price e-commerce r

193、etailers like PDD.When it comes to seeking sales,consumers go online vs.to offline stores,which they view as a less promotion-oriented destination.Thus,at the category level,we saw a high correlation between categories online penetration and the percentage sold on promotion.Items like diapers,infant

194、 formula,and skin care have a high online penetration rate and correspondingly high reliance on promotion(see Figure 15).In contrast,toilet tissue,kitchen cleaner,milk,and carbonated soft drinkscategories that rely more on offline channelsdecreased promotion participation this year.201030Notes:The p

195、romotion data is collected by letting consumers record if they participated in a promotional event when they purchased the products;skin care and makeup include ages1564 in Tier 15;infant formula and baby diapers include ages 036 months in Tier 15;all changes may lead to some inconsistencies with pr

196、evious years dataSources:Kantar Worldpanel;Bain analysisPercentage point of market value sold on promotion400OverallPackaged foodBeveragePersonal careHome careYTD21Q3YTD20Q3YTD22Q324.723.323.920.919.419.920.820.219.631.929.832.630.0+0.6 ppt+0.5 ppt0.6 ppt+2.8 ppt0.8 ppt29.228.4Figure 14:Consumers ov

197、erall participation in promotions has remained stable since 2020,with the exception of personal cares steady riseChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.24Notes:The promotion data is collected by letting consumers record if they participated in a promotional

198、 event when they purchased the products;online relativepenetration is defined as the total number of online purchasers divided by the number of purchasers of the category;skin care and makeup include ages 1564 inTier 15;infant formula and baby diapers include ages 036 months in Tier 15;all changes m

199、ay lead to some inconsistencies with previous years data;CSDstands for carbonated soft drinksSources:Kantar Worldpanel;Bain analysis Promotion rate,YTD 22Q3Online relative penetration rate60%4020080%R-Square:77%p-value 0.056040200Chewing gumBeerJuicePackaged waterBiscuitsSkin careDiapersCSDCandyHair

200、 conditionerChocolateInstant noodlesMilkFabric detergentToothpastePersonal wash ShampooInfant formulaToilet tissueFacial tissueMakeupYogurtKitchen cleanerFabric softenerToothbrushReady-to-drink teaFigure 15:Category-level promotion trends can largely be explained by online penetration levelCategorie

201、s hit hardest by sweeping changes,be it the pandemic or demographic shifts,increasingly turned to promotions to spark consumer demand.As makeup and skin care lagged during Covid,local players upped promotions to compete with foreign competitors.The national birth rates descent to a record low last y

202、ear hurt infant formula and diapers,prompting more promotiondespite an already high leveland fierce market competition to win new consumers.A return of three pricing patternsplus an emerging oneThe four distinct pricing patterns we identified in Volume 1 largely hold true,with some emerging category

203、 shifts(see Figure 16).While the polarization trend previously identified was no longer remarkable in the first three quarters of 2022,it has become more evident across categories.Further,consumers stock-up behavior during Covid outbreaks brought about a new pattern unique to 2022.Continuous premium

204、ization:Consumers continued to premiumize carbonated soft drinks and beer.Fabric detergent,which we last reported was a polarizing category,also showed strong(13%)growth in the premium segment,while stagnating in mid-range and mass.Categories in this cluster saw success from continual innovation bas

205、ed on consumer insights and success at targeting products to consumers preferences.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.25Fabric detergents evolutionfrom basic powder,then liquid,to concentrate and capsuledrove up the premium segment.Brands like Walch hav

206、e also made strong inroads with a nascent but growing specialty segment,lingerie detergent,which outpaced the overall detergent category.Another example is carbonated soft drinks,which kept its premiumization momentum as local insurgent and traditional brands frequently launched innovative flavors t

207、hat attracted new customers and kept others coming back for more.Trade up to mid-range:Toothpaste,personal wash and infant formula all maintained their previous trend,showing strong growth momentum in the mid-range price segment.In a bid to win new customers and earn loyalty from existing ones,insur

208、gent and incumbent personal wash brands introduced myriad new product concepts over the past couple years.However,relative to skin care,personal wash is a relatively“l(fā)ow involvement”category;consumers return to the familiar rather than research new options.Without a compelling reason to buy premium,

209、consumers opted for hero products from household names like Lux,which led the category with continuous investment in marketing that reinforced its“top-of-mind”brand value.In toothpaste,products with articulated functional claims tended to enjoy greater pricing power compared with offerings with diff

210、erentiated packaging.Domestic players like Yunnan Baiyao drove this overall trend toward mid-range by precisely identifying consumers unmet needs and zeroing in on functional benefits for painful/bleeding gums.With this focused approach,the brand steadily gained share from established multinational

211、players.Notes:For packaged water,fabric detergent,facial tissue,carbonated soft drinks,and yogurt categories:Premium SKUs are defined as having 1.2 times the category average priceeach year(MAT22Q3),mid-range SKUs have 0.81.2 times the category average price each year,and mass SKUs have less than 0.

212、8 times the category average price each year;existing Kantar category definitions of brand positioning were combined to create the premium,mid-range,and mass categories:for instance,brands labeled under“super premium”and“premium”were combined to form the premium category,“mid”and“l(fā)ow”to form the mas

213、s category,etc.;skin care and makeup include ages 1564 in Tier 15;infant formulaand baby diapers includes ages 036 months in Tier 15;all average selling prices(ASP)are calculated based on RMB per Kg/L,except that baby diapers and toothbrushes on perpiece basis,skin care and makeup on per pack basis,

214、and facial tissue on 100 sheets/rolls basis;all changes may lead to some inconsistencies with previous years data Sources:Kantar Worldpanel;Bain analysisValue growth by price tier by category(YTD 21Q322Q3)Growth in averageselling prices(YTD 21Q322Q3)PremiumizationTrade up to mid-rangeLarger pack sto

215、ck-upFlight to value/decliningCarbonatedsoft drinksFacialtissueBeerPackagedwaterFabricdetergentShampooInfantformulaToothpastePersonalwashSkin careYogurtMakeup2.8%1.4%1.4%3.0%0.8%0.9%0.2%1.0%1.2%0.2%5.4%6.1%30%-10-2020101392114 141013125229429771115717111825236810161915160Categories that switched fro

216、m“Polarization”in 22Vol.1Mid-rangePremiumMassCategory growth XXXFigure 16:As a result of Covid lockdowns,a new trend gained steam:the stockpiling of larger packs of certain categoriesChina FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.26Larger pack stock-up:Packaged wat

217、er and facial tissue both saw a 1%decline in ASP,with the lower-price tier segments leading the growth.Sporadic Covid lockdowns motivated consumers to purchase daily essentials in bulk,which dragged down the average price point per volume.In packaged water,a 4-liter Nongfu Spring product could be mo

218、re than 25%less expensive per liter than a regular 550-milliliter bottle.In the past,it was hard to justify selling multi-pack or larger-size packaged water online,due to the high delivery cost relative to product price point.That changed as the O2O model converted users and met the momentconsumers

219、growing need for at-home consumption.Flight to value/declining:With inflation came consumers growing preference for value-for-money options for a few categories.Among them was skin care,which saw a continuation of its early 2022 downward slope,and shampoo,which previously showed a polarization trend

220、.The headline in skin care is a noteworthy consumer shift toward more affordable products through domestic substitution.Proya,Winona,and Chando are all domestic skin care winners that showed remarkable growth this year despite industry decline.Yogurt and makeup continued to show a steady declining t

221、rend across all price tiers.From the demand side,consumers curbed their non-necessity spending during lockdown.Relatively weak association between yogurt and health benefits(particularly relative to milk)made it a less essential category and resulted in its decline across the board.Beyond weaker con

222、sumer pull,the makeup category also faced fierce competition and relied on larger promotions to generate sales,seeing drastic declines in all price segments.City tier varianceAcross all city tiers,price trend differences were most pronounced in beverage and home care categories,where Tier 1 cities s

223、cored positive ASP growth and reached approximately 5 percentage-point-variance with Tier 5 cities.Consumers in Tier 1 cities drove the growth in categories with ongoing premiumization like carbonated soft drinks,beer,and fabric detergent.In contrast,the downward ASP trend in Tiers 2 through 5 were

224、mainly driven by consumers value-seeking behaviors,including trading down to more affordable alternatives or purchasing larger pack sizes.China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.27Whats ahead in 2023and what it means for brands and retailersNo doubt 2022 was

225、 a challenging year,marked by the pandemics resurgence and the resulting soft economy.Following its plummet in April,consumer confidence will take a long time to recover,and shoppers will continue to want to build savings.Next year is likely to remain volatile,resuming some of the trends weve seen i

226、n 2022 while seeing improvement in others.Chinas government recently announced plans to refine Covid control measures to mitigate the impact on both economic development and daily lives.While this is good news for the FMCG industry,players must stay agile and prepare for shake-ups.So how can brands

227、best position themselves for success?Identify growth opportunities:As market dynamics shift and competition intensifies,brands must find new growth engines.By thoroughly assessing market and consumer trends,they can expand into new geographies,enter or create new market segments,sell into new channe

228、ls,and interact with consumers via new touchpointsall potential avenues to growth.Improve efficiency:Rising input cost and unexpected supply chain disruptions will force brands to manage cost more carefully or even reset their cost base to deliver sustainable financial returns.To sustain consumer de

229、mand and preserve brand relevance,brands should adopt a test-and-learn approach:continuously optimize marketing effectiveness,while dynamically adjusting pricing,assortment,packs,and promotion to maximize revenue potential.Plan for uncertainty:Facing enduring pandemic and geopolitical tension,brands

230、 must better anticipate changes and build flexibility and resilience.Scenario planning can help them develop non-regret moves and contingency plans for different events based on signposts and triggers.Retailers also have their marching orders.Transform business model with balanced scorecard:As the r

231、etail industry faces continued deflationary pressures,retailers need to shift focus from GMV and topline growth to sustainable operations and profit margin.Critical levers include optimizing store footprint and SKU assortment.Improve shopper loyalty with distinct shopper experiences:In a challenged

232、retail market,retailers need to focus on core consumer segments and improve shopper loyalty via differentiated services and consumer engagement across multiple channels.Doubling down on creating a frictionless O2O shopping experience could help pave the path to success.Build differentiation with exc

233、lusive assortment:As consumers are pulling back on spend,and China FMCG:Still Volatilebut with Signs of HopeKantar Worldpanel|Bain&Company,Inc.281 These 26 categories are(a)packaged food:biscuits,chocolate,instant noodles,candy,chewing gum,and infant formula;(b)beverages:milk,yogurt,juice,beer,ready

234、-to-drink tea,carbonated soft drinks,and packaged water;(c)personal care:skin care,shampoo,personal wash,toothpaste,makeup,hair conditioner,diapers,and toothbrushes;and(d)home care:toilet tissues,fabric deter-gent,facial tissues,kitchen cleaner,and fabric softener.2.These categories include beer,che

235、wing gum,chocolate,yogurt,milk,candy,biscuits,packaged water,ready-to-drink tea,juice,and carbonated soft drinks.capital markets are investing less into the retail markets,retailers need to establish a differentiated portfolio.Private label or exclusive products could help draw traffic and attract n

236、ew consumers.The good news is there are reasons to be optimistic.Chinas FMCG industry has demonstrated remarkable resilience in the first three quarters,as both brands and consumers have honed their adaptability to changing circumstances.Further,there are beacons of hope:Chinas growing middle class,

237、continuous urbanization,and a controlled inflationary environment.If FMCG companies can keep their fingers on the pulse of consumer needs and remain nimble,they can chart a path toward healthy performance.Bold ideas.Bold teams.Extraordinary results.Bain&Company is a global consultancy that helps the

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241、and we proudly maintain the highest level of client advocacy in the industry.KantarUnderstand People,Inspire GrowthKantar is one of the worlds leading evidence-based insights and consulting companies.Kantar has a complete,unique and rounded understanding of how people think,feel and act,globally and

242、 locally in over 90 markets.By combining the deep expertise of Kantars people with its data resources,benchmarks,innovative analytics and technology,Kantar helps clients understand people and inspire growth.In the China market,the Worldpanel division is one of the services in CTR more information,visit