2024年中国购物者报告系列一 China FMCG Settles into New Reality,with Moderate Growth and Continuous Price Pressures

NewReality,withModerateGrowthChinaShopperReport2024,Vol.1BAIN&COMPANYAuthorsandacknowledgmentsBrunoLannesisaseniorpartnerwithBain&Company’sConsumerProductsandRetailpracticesandisbasedinShanghai.Youcancontacthimbyemailatbruno.lannes@.DerekDengisaseniorpartnerwholeadsBain&Company’sConsumerProductspracticeinGreaterChinaandisbasedinShanghai.Youcancontacthimbyemailatderek.deng@.JasonYuisthemanagingdirectoratKantarWorldpanelGreaterChina.Youcancontacthimbyemailatjason.yu@.ThisreportisajointeffortbetweenBain&CompanyandKantarWorldpanel.Theauthorsextendgratitudetoallwhocontributedtoit,especiallyMinghuiJia,StevenWang,XuyangZhai,AnzhiFu,JocelynChen,RoseZhou,YuewenWang,andDarylChanfromBain;andTinaQin,SallianHe,andRitaYangfromKantarWorldpanel.Thisworkisbasedonsecondarymarketresearch,analysisoffinancialinformationavailableorprovidedtoBain&Company,andarangeofinterviewswithindustryparticipants.Bain&CompanyhasnotindependentlyverifiedanysuchinformationprovidedoravailabletoBainandmakesnorepresentationorwarranty,expressorimplied,thatsuchinformationisaccurateorcomplete.Projectedmarketandfinancialinformation,analyses,andconclusionscontainedhereinarebasedontheinformationdescribedaboveandonBain&Company’sjudgment,andshouldnotbeconstruedasdefinitiveforecastsorguaranteesoffutureperformanceorresults.Theinformationandanalysishereindonotconstituteadviceofanykindandarenotintendedtobeusedforinvestmentpurposes.NeitherBain&Companynoranyofitssubsidiar-iesortheirrespectiveofficers,directors,shareholders,employees,oragentsacceptanyresponsibilityorliabilitywithrespecttotheuseoforrelianceonanyinformationoranalysiscontainedinthisdocument.ThisworkiscopyrightBain&CompanyandKantarWorldpanelandmaynotbepublished,transmitted,broadcast,copied,reproduced,orreprintedinwholeorinpartwithouttheexplicitwrittenpermissionofBain&CompanyandKantarWorldpanel.Copyright©2024Bain&Company,Inc.andKantarWorldpanel.Allrightsreserved.KantarWorldpanel|Bain&Company,Inc.1Contents Thefullreport Relectionon2023 Gainingperspectivefromtheirstquarterof2024 Insurgents:Competitivestrengthsthatnavigatedthroughcycles 36Whatsnext:Implicationsforbrandsandretailers 43KantarWorldpanel|Bain&Company,Inc.2ExecutivesummaryThisisthe13thconsecutiveyearwehavetrackedtheshoppingbehaviorsofChineseconsumers.Ourcontinuingresearchhasgivenusavaluable,long-termviewacross106fast-movingconsumergoods(FMCG)categoriespurchasedforhomeconsumptioninChina.1Asineachofthepast12years,weanalyzedthe26keycategoriesspanningthefourlargestconsumergoodssectors:packagedfood,beverage,personalcare,andhomecare.2Thisyear,weupdatedourtrackingtoincludenutrientsupplements,coffee,andsanitarypadsandeliminatedtoothbrushesandfabricsoftener,bringingourtrackedcategoriestotalto27,toalignmorecloselywithevolvingmarketdynamics.3ThisreportupdatesthefindingsfromourChinaShopperReport2023,Vol.2,Chartingaresilientpath:Navigat-inguncertaintyandbuildingmomentum,andincludesKantarWorldpanelshopperbehaviordatafor2023andthefirstquarterof2024.ThisreportrecapsFMCGperformancein2023,aperiodwhenconsumptionregainedmomentumfollowingtheliftingofremainingCovid-19restrictions.WealsoexploreconsumertrendsshapingtheFMCGmarketduringthefirstquarterof2024.BuildingontheanalysespresentedinChinaShopperReport2018,Vol.2,andChinaShopperReport2021,Vol.2,wereviewtheperformanceofinsurgentbrandsfromtheClassof2018andClassof2021andselectrepresentativebrandstofeatureintheClassof2024.Thereportincludesimplicationsforconsumergoodscompaniesandretailers.3Reflectionon2023In2023,China’sfast-movingconsumergoods(FMCG)marketexperienceditsfirstfullyearofoperationsfollowingtheliftingofCovid-19restrictionsinDecember2022.Despiteapromisingstart,theyearfellshortofconsumerconfidenceandconsumptionexpectations.TheFMCGmarketwitnessedamoderaterecoveryinthefirstthreequartersof2023andanotablesurgeof6.5%inQ4,resultingin2.4%annualgrowth.ThestrongrecoveryinQ4canbepartiallyattributedtothelowbaselineinthesameperiodofthepreviousyear(Q42022).However,theFMCGmarket’slagginggrowthcomparedtoGDPgrowth(5.2%)andtotalretailmarketgrowth(7.2%,excludingcatering)canbepartiallyattributedtoincreasingout-of-homeconsumptionpost-Covid.Volumecontinuedtobethemaindriverofgrowth,postinganincreaseof+2.4%fortheyear.Averagesellingprices(ASPs)remainedrelativelystablethroughouttheyear,landingat0.0%,indicatingthatpricechangeshadaminimalimpactonthemarket’soverallperformance.Thispricingtrendispositivecomparedto2022,whichrecordeda-2.5%declineinASP.Nevertheless,weobserveddivergentpricingtrendsacrosscategoriesduetosupplyanddemanddynamics.Categoriessuchasjuice,facialtissue,andtoothpasteexperiencednotableinnovationandcapitalizedona“tradeup”trend,meetingconsumers’increasingdemandforhealth,wellness,andaffordability.Ontheotherhand,somecategoriessawinnovationandconsumersaremovingtobetterproducts.However,thereisseverepricecompetition,andpartialconsumersaremovingtolower-ASPsegments,leadingtoa“K-shape”trendinthesecategories,suchasfabricdetergent.Meanwhile,categoriessuchasskincareandmakeup,withlimitedinnovationandintensecompeti-tion,sawconsumersselectingmorevalue-for-moneyoptions,representinga“tradedown”trend.Geographically,growthwasledbyTier2citiesacrossallcitytiers,intermsofvolumeandASPs.4ThesecitieshavebecomedestinationsforpopulationmigrationandtestfieldsforFMCGbrands.Tier2citieshavereceivedapopulationinfluxof8millionormoreinthepastfouryears.Forexample,Changshahasseenapopulationincreaseof1.2million(+13%),outgrowingothercitiesinHunan.Thesecitieshavebecomethelaunchpadsforthetransformationpilotsandinitiativesofmultina-tionalcorporationsandthebirthplaceofinsurgentFMCGbrands.Categoryupdate:HomecareledFMCGgrowth,followedbypackagedfoodandbeverageWithinthefourmajorsectors,homecareledFMCGmarketgrowth(+8.3%),followedbypackagedfood(+3.4%)andbeverage(+3.2%),whilepersonalcaresawanarroweddecline(-2.1%,comparedto-4.8%in2022).Homecaredeliveredhealthymarketgrowthof+8.3%,drivenbyastrongvolumereboundof+7.4%andstableASPat+0.9%,thoughASPdeceleratedinQ1–Q3andshoweddeflationinQ4.Therisingdemandforhealthandhygieneneedssupportedthisvolumegrowth.Fabricdetergentexperiencedagrowthof+5.5%,primarilyduetoincreasedengagementinout-of-homeactivities.Additionally,facialtissuesawsignificantgrowth,withvolumeincreasingby+17.2%andASPby+4.2%,drivenbyoccasion-specificconsumptionsuchasbabyfacialtissueandfacetowels.Kitchencleaneralsosawasubstantialvolumegrowthof+6.6%,drivenbyspecificuses,suchasoilremoveranddishwasherdetergent.4Packagedfooddeliveredrobustmarketgrowthof+3.4%.Volumedropped(-1.5%),partiallyduetoincreasingon-premisesconsumptionpost-Covid-19,whilethepremiumizationtrendaccelerated(+5.0%ASPvs.+3.2%in2022).Nutrientsupplements,anewadditiontoourtrackedcategories,ledgrowthwithanotable+20.5%increase.Thisexpansionwasprimarilydrivenbyastrongvolumeincreaseof29.6%,reflectingrisingconsumerdemandforhealth-relatedproducts,thoughthiswasoffsetbya7%declineinASPduetotheinfluxoflocalbrandsenteringthesegment.Infantformulawasnegativelyimpactedbydemographicchanges,postinga-15.3%valuedecline.Othercategoriesgenerallysawadeclineinvolume,attributedtoincreasedout-of-homeconsumption.However,atrendtowardpremiumizationwasevidentacrossthesecategories.Consumerswerewillingtopaymoreforhealthierandhigher-qualityfoodoptions,suchaslow-sugarchocolateandcandycontainingingredientswithbeautybenefits.Beverageexperienced+3.2%marketgrowth,drivenbystrongvolumegrowth(+3.3%)andstableASP(-0.1%).ThissectorsawstableconsumptioninQ1–Q3.However,Q4witnessedastrongrebound,primarilyduetoarelativelylowbaseinQ42022.Thelatesttrendinbeverageisnear-waterdrinks(近水化),withconsumersmovingfromhigh-sugardrinks(e.g.,normalcarbonatedsoftdrinks[CSD])tolow-/no-sugaroptions(e.g.,zero-sugartea).Asaresult,juice(+24.1%),packagedwater(+8.9%),andready-to-drink(RTD)tea(+14.1%)ledmarketgrowth.Asconsumers’beveragedemandshiftedtowardhealthieroptions,CSDsawasignificantdecline(-7.3%).Beerpricestrendedupward(ASP+4.2%)asmostleadingbrandscontinuedtheirfocusonpremiumproductlines.Yogurt,meanwhile,reportedadecliningvalueof-8.5%.Thisyearweaddedcoffeetoourtrackedcategories,inrecognitionofitsstronggrowthandincreasingconsumerimpactoverthepast10years.Coffeesawavaluegrowthof+5.6%,drivenbybothvolumeandASP.Thedeclineofpersonalcarenarrowed(-2.1%vs.-4.8%in2022).However,weobservedrecoveringvolumedemand(+1.3%),despiteASPdeflation(-3.4%)throughouttheyear.Somecategoriesexperi-encedgrowthduetoincreasingout-of-homeactivities.Forexample,makeup(+6.4%),shampoo(+3.2%),andhairconditioner(+4.6%)allshowedstrongvolumerebounds.However,thissectorfacessignificantchallengesfromdomesticbrandsandalackofproductdifferentiation,leadingtoanASPdeclineinmostcategories.Forsomecategories,suchasskincare(-3.1%)andpersonalwash(-2.2%),decliningASPdroveoverallvaluedowndespitestablevolumedemand.Sanitarypads,anewadditiontoourtrackedcategories,experiencedaslightdeclineof-2.3%,primarilydrivenbyadecreaseinvolume(-4.0%)asconsumersshiftedtowardcompetingproductssuchastamponsandmenstrualcups.Thetwo-speedphenomenon—splitbetweenhigh-speedandlow-speedcategories—continuedin2023.Thefastest-growingcategoriesweremainlydrivenbyhealthandemotionalneeds.Withinthesehigh-speedcategories,therewasanincreaseddemandforhealth-relatedandhygieneproductssuchasfunctionaldrinks(+23%)andairfresheners(+22%).Consumersalsoillustratedawillingnesstopayapremiumforentertainmentandemotion-drivenproductssuchasforeignspirits(+29%).5Ontheotherhand,low-speedcategorieswereprimarilyconcentratedinpackagedfoodandbever-agesectors,suchascheese(-17%)andyogurt(-8%).Thesecategorieswerenegativelyimpactedbychangingconsumptionhabits,withamarkeddecreaseinat-homeconsumptionandanincreaseinout-of-homedining.Incontrast,consumerswereincreasinglywillingtotradeupincategoriesrelatedtohealthandpersonalhygiene.Forinstance,thejuicesectorsawa+9%increaseinASPin2023,drivenbythepopularityofhealthieroptions,suchas100%not-from-concentrate(NFC)juiceandfreshjuice.Channelupdate:Offlineconsumptionregainedmomentum,yetperformancedivergedacrossformatsOfflinechannels:Duetorecoveringofflineconsumptionpost-Covid-19,mostofflineformatsre-gainedmomentum.Small-formatandnear-homestores,includinggrocery(+6%)andconveniencestores(+7%),continuedtoleadthisgrowth.Manylargekeyaccountshaveclosedhypermarketswhileopeningsuper/ministores,leadingtogrowingsuper/mini(+4%)anddeclininghypermarket(-6%)sectors.Withinhypermarkets,clubwarehousescontinuedtoexperiencesubstantialgrowth(42%)duetotheiruniquevaluepropositions.5Thegrowthofspecialiststores(+4%)wasdrivenbydiscountstores,suchassnackdiscountshops.O2O(Online-to-Offline):6O2Ogrowthdeceleratedto+3%in2023,comparedto+16%in2022.Foodandbeveragedeceleratedsignificantly(+1%,comparedto+21%in2022)duetoincreasedout-of-homecatering.However,thisdoesnotmeanthatO2Opurchasingbehaviorisdisappearing,asevidencedbyacceleratinggrowthinpersonalcareandhomecare(+7%,comparedto+5%in2022).Overall,O2Ochannelbehaviorwasalsoshapedbymajorplatforms’growthstrategies.Thelargestcommunitygroup-buyingplatforms,DuoduoMaicai(多多买菜)andMeituanYouxuan(美团优选),haveslowedtheirexpansionplansandshiftedtheirfocustowardseekingprofitablegrowth.Thisslowdownisoffsetbyacceleratinggrowthinofflineretailers,aslargekeyaccountscontinuetodirectpurchasestoproprietaryplatforms,suchasself-runapps.Onlinechannels:Gradualshiftstowardonlinechannelscontinued,withaslightuptickin2023(+4%comparedto+2%in2022).Intereste-commerce,anddiscounte-commerceplatformscontinuedtogainsharefromtraditionale-commerce.PlatformssuchasDouyin,Kuaishou,andPinduoduosawtheirmarketshareincreaseto34%,a12-pointincreasefrom2022.Totale-commercepenetrationincreasedsignificantlybetween2019and2021duetoCovid-19,butithasremainedstablesince2021.Foodandbeveragesawdeclinesinonlinepenetrationduetotherecoveringcateringmarket,whiletheonlinepenetrationofpersonalcareandhomecareincreasedslightly.6Brandupdate:LargeLargebrandsvs.smallbrands:Brandcompetitionremaineddynamic.Inrecentyears,theTop5brandshavelostmarketshare,withtheexceptionof2022,whenlargebrandswereboostedbyresiliencyintheirsupplychainsandfinances.In2023,thetrendoftheTop5brandslosingsharereturned,observedin16outof27trackedcategories.Afterachallenging2022,mid-to-smallbrandsstartedreinvestingonthebackofthepositiveoutlookforChineseconsumption.Thistrendwasparticularlynoticeableinthehomecareandbeveragecategories,wheresmallerbrandsintroducedinnovativeproductofferingstargetingnichesegmentsandoccasions.Forexample,inthejuicecategory,if(宜芙)investedinthecoconutwatersegmentandachievedrapidgrowth.Foreignbrandsvs.domesticbrands:In2023,domesticbrandscontinuedtogainshare(+1point)fromforeignbrandsinaggregatedresultsacrossthe27trackedcategories.Thisisconsistentwithourobservationsoverthepast12years.Internally,someforeignplayersstrategicallyreducedinvestmentincertaincategoriesduetoapessimisticcategoryoutlook.Moreover,foreignbrandsencounteredheightenedcompetitionfromdomesticbrands’breakthroughproductinnovationsandintensifiedpricingstrategies.7Gainingperspectivefromthefirstquarterof2024Followingamoderatemacroeconomicoutlook,theChinaFMCGsectorrecoveredinQ12024withvaluegrowthofapproximately2.0%,ahalfpointhigherthanthe1.5%growthobservedinQ12023.Thisindicatesapositivesignfortherestof2024.TheQ1economicrecoverywasevenmoreevidentfromGDPgrowth(+5.3%)andretailsalesvaluegrowth(+4.9%,excludingautosales).Socialactivityindicatorsalsoshowedpositivesignsofgrowth.Subwaytrafficin29majorcitiesreachedanaverageof2.8milliondailypassengerspercity,ahistorichigh.Meanwhile,socialmobilityduringthe2024ChineseNewYeartravelperiodreached8.4billion,a70%increasefromthe2023ChineseNewYear.Despitethesepositivetrends,China’sconsumerconfidenceindex,housingpriceindex,andunem-ploymentratehavenotyetrecoveredtopre-Covid-19levels.Themarket’s2.0%valuegrowthinQ12024hasbeenpropelledbya3.5%increaseinvolume,anup-tickfromthe2.3%volumegrowthobservedinQ12023.Thisvolumeincreaseillustratesacontinued,strongdesireforconsumptionamongconsumers.However,themarketexperiencedadeflationof-1.5%intheASP,markingamorepronounceddeflationtrendcomparedtothestablepricingtrendobservedin2023.Categoryupdate:PackagedfoodandbeveragecontinuetoleadgrowthinQ12024;homecarelargelydecelerated;personalcarecontinuestodeclineAmongthefourmainsectors,packagedfoodandbeveragewitnessedstablegrowth,demonstratingconsumers’strongconsumptiondesire.Packagedfoodcontinueditsgrowthtrend(+2.7%),drivenbyvolumegrowth(+2.9%)andaquasi-stableASP(-0.2%).Beverageshowedfastergrowth(+4.3%),drivenbybothvolume(+2.4%)andASP(+1.8%).However,personalcaredeclinedby-2.8%,whilehomecare’sgrowthdeceleratedto+2.2%.Despiterobustvolumedemandforpersonalcare(+5.1%)andhomecare(+8.5%),bothsectorsfacedsevere“tradingdown”issues,illustratedbytheirASPsdecliningby-7.5%and-5.8%,respectively.Packagedfood:Thesectorgrewby+2.7%invalue,drivenbya+2.9%increaseinvolume,despiteaslight-0.2%decreaseinASP.Mostcategorieswithinpackagedfoodexperiencedvolumegrowthduetorecoveringsocialmobilityandactivities.Forinstance,ChineseNewYearsawanotablesurgeingiftingdemand.However,theASPdeclinedslightlyby-0.2%,contrastingwiththepremiumizationtrendobservedthroughout2023.Thisdeclineisattributedtoconsumerschoosingdifferentpricebandsfordiverseoccasions,suchasoptingforlargerpackswithlowerASPforgifting.Beverage:Thesector’svaluegrewby+4.3%,drivenbyincreasesinbothvolume(+2.4%)andASP(+1.8%).Thenear-watercategoriesmaintainedtheirhighgrowth,withnotableincreasesinjuice(+20.8%),RTDtea(+8.6%),andpackagedwater(+5.6%),whileCSDdeclinedby-5.9%.Milkandcoffeereversedtheirgrowthtrends,decliningby-2.9%and-5.9%,respectively,likelyduetoincreasedout-of-homeactivitiesandconsumptioncomparedtoQ12023,whenmostpeoplestayedhomeduetoCovid-19.Beerexperiencedgrowthof8.4%,drivenbymoreat-homegatherings.Yogurtcontinuedtodecline(-8.4%).8Homecare:Thevolumegrewby+8.5%,buttheASPdroppedby-5.8%.Mosthomecarecategoriessawstrongvolumedemanddrivenbyleadingplayers’effortstopromotediverseuseoccasions,increasedsocialactivities,andestablishedfocusonhygieneandhealthpost-Covid-19.Consequently,fabricdetergent(+5.7%),facialtissue(+7.5%),andkitchencleaner(+6.0%)sawrobustgrowthdrivenbyvolume.However,incontrastwiththepremiumizationof2023,trackedcategoriesdisplayedapricedeflationinQ12024,drivenbybrands’pricecutsandpromotionoflarger,bulk-sizedproducts.Personalcare:Thesectorexperiencedavolumereboundof+5.1%,offsetbyasignificantdropinASP(-7.5%).Mostcategoriesshowedstrongvolumegrowth,drivenbyincreasedsocialactivities.Forexample,makeup(volume+13.8%)andtoothpaste(volume+6.4%)sawnotableincreases.However,consumersremainedcost-conscious,andmostpersonalcarecategoriesfacedcompetitionfromdomesticbrandsofferingmorevalue-for-moneyproducts,resultinginadecreaseinASP,particularlyinskincare(ASP-8.8%),makeup(ASP-13.2%),andhairconditioner(ASP-6.8%).Thediapercategorycontinueditsdeclineduetoadecreaseinnewborns.Pricingupdate:FMCGASPdeflatedinQ12024,adownturnfrom2023’sstablepricingtrendInflationinChinahaslargelymoderatedfollowingitsreopening,withaslightriseof0.1%inQ12024consumerpriceindex(CPI),maintainingthetrendobservedsinceQ22023.Unlikethestablepricingtrendobservedin2023,FMCGASPsawadecreaseof-1.5%inQ12024.Ofour27trackedcategories,18categorieswitnesseddeflationinQ12024.Thistrendwasespeciallypronouncedinpersonalcareandhomecaresectors.Overall,weobservedthreepricingtrendclusters:Cluster1:ContinuouspreThisclusterprimarilyincludespackagedfoodandbeveragecategories,suchascoffee(Q12024+6.4%,2023+2.0%),juice(Q12024+3.2%,2023+8.9%),candy(Q12024+1.9%,2023+6.2%),andbiscuits(Q12024+1.9%,2023+3.0%).Thesecategoriesbenefitedfromconsumers’preferenceforhealthierproductssuchasfreshjuiceandlow-sugarbiscuits,duetotheirincreasingfocusonwellness.Addi-tionally,brandinnovationhasenabledconsumersto“tradeup”tohigherqualityproducts,suchascoffeecapsulesandsoftcandieswithbeautybenefits.Cluster2:ContinuousdeflationMostpersonalcarecategoriesfallintothisbracket.Inahighlycompetitivemarket,insurgentbrandscontinuetochallengeincumbentsbyofferinglower-pricedproducts,whilelargeincumbentsreducepricesduringcampaigns.Thistrendisparticularlyevidentinskincare(Q12024-8.8%,2023-3.0%)andmakeup(Q12024-13.2%,2023-5.4%).Somecategoriessawbrandspromotinglargerpacksizes,leadingtocontinuousASPdeclines,e.g.,packagedwater(Q12024-3.4%,2023-0.8%).Diapers(Q12024-7.0%,2023-4.7%)andinfantformula(Q12024-2.6%,2023-3.3%)arealsointhisclusterduetoincreasedcompetitioncausedbydemographicchanges.9Cluster3:PremiumizationreversedtodeflationThisclusterconsistsmainlyofhomecarecategories,includingfabricdetergent(Q12024-3.0%,2023+0.9%),kitchencleaner(Q12024-1.0%,2023+0.8%),andfacialtissue(Q12024-0.6%,2023+4.2%).Itisnoteworthythatthisdeflationdoesnotnecessarilyindicateaconsumerpreferenceforcheaperproducts.Consumersarestilltradinguptobetterproducts,suchasliquiddetergentfrombarorpowderformats.Thisdeflationisprimarilysupplydriven,asbrandshaveproactivelypromotedlargerpacksizesandloweredpricesduetolowermaterialcosts.Channelupdate:Overalltrendinlinewith2023,withfurtherdivergenceinofflinechannelperformanceOfflinechannels:Offlinechannelsgrewby+2.4%,slightlyhigherthantheoverallFMCGande-commercechannels,duetorecoveringofflinetraffic.Withinofflinechannels,groceryandsuper/miniformatscontinuedtogainshare,growingat+11%and+7%,respectively,inQ12024,whilehypermarketsegmentscontinuedtoshrink,withadecreaseof-6%.However,withinthehypermarketsector,clubwarehousessawnotablegrowthof+22%,representing9%shareofthetotalhypermarketchannel.Meanwhile,specialiststoresdeclinedby-4%(comparedto+4%growthin2023).O2O(Online-to-Offline):O2Osawadeclineof-8%inQ12024duetothefullrecoveryofofflineactivities.However,thereisstillgrowthmomentumcomparedtoQ12022,indicatingthatconsumershavedevelopedO2Oshoppinghabits.Asdiscussedinthe2023full-yeartrend,O2Oinnon-foodandbeveragecategoriescontinuedtogrow.Onlinechannels:E-commercegrowthmaintainedalowsingle-digitrateofaround+2%.Notably,DouyinsurpassedJDtobecomethesecond-largeste-commerceplatform,deliveringsubstantialgrowthof+46%andachievingan18%marketshareinQ12024,6pointshigherthanQ12023.Pinduoduosawincreasedtrafficdrivenbyitsvalue-for-moneyproposition,resultingin+6%growthanda15%marketshare,1pointhigherthanQ12023.JDexperienced+5%growthasaresultofitslow-pricestrategy,reversingfroma-1%declinelastyear.Taobao/Tmallcontinuedtodeclineat-7%,withtheirmarketsharelandingat32%(3pointslowerthanQ12023),yettheyremainthelargeste-commerceplatform.KantarWorldpanel|Bain&Company,Inc.ChinaFMCGSettlesintoNewReality,withModerateGrowthandContinuousPricePressuresInsurgents:CompetitivestrengthsthatnavigatedthroughcyclesTheChineseFMCGmarkethasrecentlywitnessedaninfluxofnumerousinsurgentbrands.Bylever-agingventurecapitalandonlinetraffic,theseinsurgentbrandsrapidlygrabbedmarketsharefromincumbents.However,inrecentyears,astraffichaspeakedandcostshaverisen,their“cash-burning”operationalmodelhasbecomeunsustainable.Investorshavebecomemorecautiousandrational,forcingbrandstooptimizeefficiency.Whenthefacadeoftrafficfadesaway,abrand’struestrengthorfalseprosperitybecomesevident.Inourpreviousreports,ChinaShopperReport2018,Vol.2,LocalInsurgentsShakeUpChina’s“Two-Speed”Market,andChinaShopperReport2021,Vol.2,ASuddenSlowdownin2021’sFMCGRecoveryandtheMixedFateofChina’sInsurgentBrands,weselectedrepresentativeinsurgentbrandswith“disruptorpotential.”Wehavebeentrackingtheperformanceofthesebrandsovertheyearstosynthesizekeyfactorsbehindtheirdegreeofsuccesstodate.Classof2018brandperformancereflectionIn2018,weselected46representativeinsurgentbrandsbasedonbrandcharacteristics,scale,andgrowthperformance.In2021,wereviewedtheirperformancefrom2018to2020andcategorizedthemintothreegroups:“Stand-out”(17brands,40%),“Hold-out”(9brands,20%),and“Fade-out”(20brands,40%).Revisitingtheirperformancein2024,wefoundasimilarcategorydistribution:Stand-out(18brands,40%),Hold-out(9brands,20%),andFade-out(19brands,40%).Byanalyzingthedevelopmenttrajectoriesofthesebrands,weidentifiedfourkeysuccessfactorsforinsurgentbrandsin2021:brandpower,productecosystem,channelcapability,andorganizationalagility.Whenrevisitingthesebrands’performancefrom2021to2023,wefoundthatthesesuccessfactorsstillheld.Stand-out:ThestronggetstrongerManyStand-outbrandsin2021continuetoexcel.Forexample,YankershopFood(盐津铺子)strength-eneditscompetitiveedgeinproductinnovationandomnichanneloperations,achievinga34%CAGRinretailsalesfrom2021to2023.Meanwhile,somebrandscategorizedasHold-outorFade-outin2021achievedbreakthroughsandbecameStand-outbyinvestinginoneormoreofthefourpreviouslyidentifieddriversofsuccess.Forinstance,Ganten(百岁山)achieveda34%CAGRinretailsalesfrom2021to2023andrevitalizeditsbrandimagethroughpremiumbrandpositioning,focusingdeeplyonofflinechannels.Hold-outandFade-out:ContinuedstrugglesMostHold-outandFade-outbrandscontinuetofacegrowthchallengesinacompetitiveenvironment.Thesestrugglescanbeattributedtothelossofestablishedadvantages,failuretoadapttochannelchanges,orlaggingproductinnovation.Forexample,OneLeaf(一叶子)consistentlyunderperformedduetoheavyrelianceoncosmeticsspecialtystorechannels,outdatedproductupgrades,andfailedrebrandingefforts.KantarWorldpanel|Bain&Company,Inc.Classof2021brandperformancereflectionIn2021,weappliedsimilarcriteriatoidentify69insurgentbrands.Recently,weconductedareviewoftheirperformancebetween2021and2023.Ouranalysisrevealedadistributionofplayersakintotheclassof2018,withthreemaincategories:Stand-out(28brands,40%),Hold-out(12brands,20%),andFade-out(29brands,40%).Inaddition,thefour-levermodelmentionedabovecontinuestoexplainthedifferencesinbrandtrajectories.Stand-out:Thesebrandshaveestablishedremarkablecompetitiveadvantagesacrossatleasttwolevers,withnoevidentshortcomings.Forinstance,despitedecliningdemographicsinthematernalandinfantmarket,BabycarehasemergedasaStand-outinrecentyears,leveragingfull-categorystrategyandembracingomnichannelacceleration.ThisapproachhasledtoaretailsalesCAGRof27%from2021to2023.Hold-out:Thesebrandsexhibitnotablestrengthsinoneortwodimensionsbutsufferfromidentifi-ableweaknesses.Forexample,theemergenceofthe“singleeconomy”phenomenonhasspurredtheproliferationofpackagedfoodbrands.