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Who is winning more Chinese consumers in 2016?

Jason Yu

Greater China General Manager

Shoppers 01.12.2016 / 08:10

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P&G, Yili and Mengniu remain in the lead. Twenty-two FMCG companies have reached over 100 million urban Chinese households.

There were 22 fast moving consumer goods (FMCG) companies reaching over 100 million urban Chinese households during the 52 weeks ending October 7, 2016, with 12 of them being Chinese companies, according to latest data from Kantar Worldpanel. P&G maintains its lead amongst all FMCG companies, by reaching 154 million urban families, which means 93.4% of Chinese urban families have bought at least one item from P&G in the report period. They are followed by Yili (88.2%) and Mengniu group (including Yashili) (88.1%). Nongfu Spring, the local beverage giant, made to the list for the first time in 2016.

FMCG Companies Ranking by Consumer Base (million households)

1201-EN-100 Mln Family Ranking

Gaining new buyers is key to growth in the FMCG market, and in the latest 12 months some of the country’s biggest companies have added to their-already considerable buyer base. With their extensive national reach, Chinese companies managed to grow penetration substantially, including Nongfu Spring (8.1million extra households), Haday (5.7 million), Hengan and Nice Group (4.6 million each), Yili (4.3 million) and Mengniu (3.4 million). However, only P&G managed to reach more than 90% of Chinese urban families, indicating there is still room for other ambitious players to grow their buyer base.

Winning through premium innovation

As the FMCG market evolves and growth slows down competition is intensifying between brands to win the hearts and minds of Chinese consumers. While growing volume becomes increasingly challenging, brands are trying to innovate to capture the young and affluent middle class consumers. This was primarily achieved through launching premium offers in new categories to new demographics

Notably, Nongfu Spring’s impressive growth of buyers - 8.7% year on year - was attributed to the successful launch of its RTD tea brand Tea π. Despite commanding a price premium of 60%, the brand reached 9.4% Chinese shoppers 6 months after its launch, thanks to its novel name, fun package, and new flavour (Oolong Peach). It also used the super popular Korean band BIGBANG to increase its appeal to younger consumers. Apart from this new RTD tea brand, Nongfu Spring continues to capitalize on the growth trend of packaged water and managed to add another 10 million households.

In the personal care and home care sector, laundry liquid, facial skin care and make up remain bright spots. Nice group managed to recruit 4.6 million new families in 2016 thanks to its Chaoneng laundry liquid product. While its femcare and bathroom tissue business remain robust in shopper attraction, Hengan also added more than 1.2 million households through its kitchen towel products, an emerging category in China.

Winning consumers across different city tiers

Thanks to continued urbanization, lower tier cities remain growth drivers for the buyer base of FMCG companies. Among all the 22 FMCG companies in the ranking 10 of them managed to grow their buyers in lower tier cities, which was much faster than the growth seen in high tier cities. However, as competition also intensifies in the lower tier cities, we are seeing a number of leading companies reporting a faster decline in their buyer base there.

At the same time, some Chinese companies are also expanding out of their low tier city strongholds, such as Hengan (1.4 million households added) and Nongfu Spring (2.5 million households added), into the top 27 cities in China as they develop offers more relevant to consumers in the mega cities. The general trend, for all key players who have experienced significant growth in their penetration in the last 12 months, is that they tend to capture growth opportunities and make headroom across all city tiers.

Winning with e-commerce

B2C E-commerce retailers, such as Tmall and JD.com, have thrived in the last few years as they expand their category availability and product range within FMCG to drive traffic. In the past 12 months the E-commerce channel has attracted 52% of urban families to buy FMCG, with growth substantially outpacing all brick-and-mortar channels. Each online sales event, with Single’s Day being the highlight, adds a step change in the E-commerce penetration. With modern trade channels, such as hypermarkets and supermarkets, projecting limited growth all FMCG companies are trying to increase their buyers through online stores. 

 E-commerce Buyers Growth of Top Risers

1201-EN-fast E -commerce Risers

Altogether 39 million urban families bought products from those 22 companies through the e-commerce channel with P&G leading the way, attracting 15 million urban families online.  Mengniu, Yili and Orion are the companies with the most rapid growth in e-commerce in buyer terms. At the moment, E-commerce in China still makes little contribution in driving incremental buyers for major players.  Amongst all players, Colgate saw biggest e-commerce only buyer base, with 1.1 million families purchasing its products exclusively online.

Source: Kantar Worldpanel

Editor's notes

Kantar Worldpanel China continuously measures household purchases over 100 product categories including cosmetics, food and beverages and the toiletry/household sector through its 40,000 sample families. Its national urban panel covers 20 provinces and four municipality cities (Beijing, Tianjin, Shanghai and Chongqing). The channels within its monitoring scope modern trade (supermarket, hypermarket, convenient stores), traditional trade (grocery, free market, whole sale), e-commerce, overseas shopping, direct sale, work unit/gifting etc.

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