China’s FMCG industry has started to show steady signs of recovery in the first 3 quarters of 2022, following the massive decline in 2020 and slow recovery in 2021, brought about by the COVID-19 pandemic and strict lockdown policies.
This has brought about dramatic shifts in the way Chinese consumers buy products.
Here are 3 FMCG trends we saw in China in 2022.
Before the pandemic, FMCG companies enjoyed a steady five-year run of premiumisation. The trend was most pronounced in tier one and two cities, where purchasing power tends to be higher. Chinese consumers were willing to spend more on products of higher quality, products they could trust, and products that made them feel better. Premiumisation took a back seat during the pandemic, as shoppers brought beverages and packaged food on promotion or in bulk (an effect of stockpiling) and spent less on higher-priced products such as make-up. However, amid concerns over the economy and incomes, we still see consumers trading up to more premium brands when they are looking to reward themselves, indicating that premiumisation is at the very least maintaining its momentum. Much of this premiumisation trend stems from the growing middle class in both upper and lower tier cities, aided by the rising penetration of the internet and omni-channel distribution.
2. Domestic brands
The ‘guochao’ movement in China has been growing in popularity over the past few years, mostly driven by young Chinese consumers who feel the emotional need to support local brands and their culture. The term refers to the desire to buy products from local brands or products from international brands that incorporate Chinese cultural elements into their designs and marketing campaigns. For example, local 80-year-old candy brand White Rabbit collaborated with other brands to produce White Rabbit-inspired cosmetics, milk tea, and even apparel to entice younger consumers. For global brands like American fast food chain McDonald’s, the use of Chinese ink painting style, and festive symbols like plum blossoms, and magpies in a Lunar New Year campaign video leveraged guochao and attracted Chinese consumers to its limited-edition burgers.
Pre-pandemic, Tmall and JD accounted for more than half of China’s e-commerce market share. The fast pace of digitisation in China, coupled with the shift from offline to online sales during the pandemic, saw the entry of more e-commerce players with different approaches to attract various consumer groups. Newer e-commerce platforms such as Douyin and Kuaishou grew significantly in the past two years, increasing their shares to 5% and 4% respectively. Operated differently from traditional e-commerce platforms, Douyin and Kuaishou are short-video and livestreaming platforms that claim to be interest-based. Users are hooked onto the platforms through videos and interactive experiences with live streamers, and they can then purchase items that interest them directly on the platform. Douyin mostly focuses on branded products in higher-tier cities, while Kuaishou has more non-branded goods and targets lower-tier city consumers. These emerging e-commerce formats provide an entertaining, immersive, and personalised experience, especially for younger shoppers, the future of China’s economy.
Gaining a foothold in China in the wake of COVID-19 can be tricky, feel free to speak to our team today to find out how we can help your brand enter and grow in the Chinese market.