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FMCG sales grow even faster in Q3

Jason Yu

Greater China General Manager

Retail 26.10.2018 / 18:08

Shopping carts 2 col

E-commerce continues to report very strong growth, with sales value up by 43.6%, now representing 10.6% of the total FMCG market.

Sales of China’s fast-moving consumer goods in the third quarter grew by 6.3% from a year ago, the second fastest expansion since 2017 (note 1), according to Kantar Worldpanel. On the one hand, consumers continued to buy premium goods with higher prices. On the other hand, major retailers began to see early payoff from their investment in omni-channel strategy.



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Even though there were debates about whether China’s consumption upgrading has stopped, Kantar Worldpanel data showed that price was the biggest driver of the growth, up by 4.8% in Q3 compared to the same period last year. China’s consumer price inflation in September rose to 2.5%, the highest monthly figure since this February, according to the latest government figures.

Modern trade (including hypermarkets, supermarkets, and convenience stores) also reported faster growth of 2.6% in the past 12 weeks, among which supermarkets have grown by 5.0%, thanks to more traffic and higher basket values. This has in part been driven by both digital and shopper experience transformation within the offline stores.  E-commerce continued to report very strong growth in the latest quarter, with sales value up by 43.6%, now representing 10.6% of the total FMCG market.

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. The goods under monitoring are those obtained for in-home consumptions.

Leading Grocery Share of Modern Trade-National Urban China

 

52 w/e 2017/09/08

52 w/e 2018/09/07

17Q3

18Q3

SUN ART GROUP

8.3

8.4

8.3

8.3

      AUCHAN

1.3

1.3

1.3

1.3

      RT-MART

7.0

7.1

7.0

7.0

VANGUARD GROUP

6.5

6.8

6.5

6.9

WAL-MART GROUP

5.2

5.4

5.2

5.3

YONGHUI GROUP

3.2

3.7

3.3

3.9

CARREFOUR

3.3

3.1

3.3

2.9

BAILIAN GROUP

2.8

2.6

2.8

2.5

WU-MART GROUP

1.9

1.9

2.0

1.9

WSL GROUP

1.8

1.9

1.7

2.0

SPAR GROUP

1.4

1.5

1.4

1.5

BUBUGAO GROUP

(Incl. NANCHENG)

1.1

1.4

1.2

1.4

Vanguard and Yonghui improve market share and regional players catch up

Mixed performance was observed amongst the top 10 players. Sun Art Group maintained its leading position, but did not see any share growth over the last quarter. With 11 new stores opened since the beginning of this year, RT-Mart focused on the digital transformation of a quarter of its 400 stores using New Retail technology developed by Alibaba Group. Using Alibaba’s Hema supermarket as a model, RT-Mart has rolled out a series of features aimed at improving the shopping experience for customers. RT-Mart is now the first grocery partner of Alibaba to leverage some of the Hema innovation models for its own New Retail transformation.

Vanguard Group and Yonghui have improved their market share noticeably in Q3 2018, up by 0.4 and 0.6 percentage point in the latest 12 weeks respectively. Vanguard Group reported a significant value growth of 9.1% in Q3 2018, mostly driven by strong performance in the South and West regions. FMCG shopper traffic flow is moving more towards smaller and convenient stores, and the Vanguard Group is riding on this trend by opening more new small store formats. In the past 12 weeks, 59% of Vanguard Group’s value came from supermarkets and CVS. In the meantime, Vanguard also strived to adopt new retail business models by introducing dining service and unmanned cashiers into some stores.

Yonghui kept its pace of shopper expansion and in August in Beijing announced the opening of its 1000th store. The latest Kantar Worldpanel report confirmed improved penetration for Yonghui on both large and small stores, which grew from 8.6% in Q3, 2017 to 9.8% in Q3, 2018. Of all the regions, Yonghui grew faster in the East and West regions. And for the first time in the West region, Yonghui surpassed Walmart to be the No.1 retailer in modern trade. Also, Yonghui recently revamped its private label strategy and further extended its private labels from fresh food to other categories. By emphasizing the freshness and quality, its fresh food private label “CaiShiXian” now provides daily fresh vegetables with product labels to match each day of the week.

It is worth noticing that regional players are also shaking up the retail landscape in their home turf. WSL Group’s market share grew from 1.7% in Q3, 2017 to 2.0% in Q3, 2018, with value growth of 18.8% in the last 12 weeks. WSL Group saw a significant uplift on shopper basket value in the past two quarters, as its Zhongbai hypermarkets accelerated the speed of introducing new products and optimising their product profiles. Bubugao Group is another regional retailer reporting good performance. In the first half of 2018, it opened 17 new stores. Kantar Worldpanel reported that Bubugao Group increased its penetration in both the South and West regions.

E-commerce went from strength to strength

E-commerce showed the strongest value growth in Q3 since the beginning of this year, thanks to the continued expansion of the online buyer base and stronger performance during the online festivals. In the last 12 weeks ending September 7, 2018, 41.5% of Chinese urban household bought FMCG online. This number was 9.9 percentage points higher than the same period in 2017.



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Taobao and Tmall (under Alibaba Group) together was still well ahead of JD and YHD, with 19.4% of shoppers purchasing from Alibaba platforms in the past 12 weeks. Kantar Worldpanel expects strong growth momentum with the upcoming Single’s Day, as Alibaba and JD are fully leveraging the presale period from mid-October to early November to lock consumers’ spend. This year major brands have been encouraged to put their latest innovation on the list of presale with support of traffic and KOL (key opinion leaders) before Singles’ Day.

Online giants continued to push the integration of online and offline assets. All the new formats under the “New Retail” banner already reached 5.2% of all shoppers in the top 27 cities, though their impact at national level is still limited. Alibaba is rapidly expanding Hema business, with over 80 stores in 16 cities. The latest quarter was also a period of intensive competition of the food delivery market. The IPO of Tencent backed Meituan-Dianping in September and the merge of Ele.me and Koubei recently will re-write the definition of convenience through local services and blur the boundaries between different ways of reaching shoppers even more.

Source: Kantar Worldpanel

Editor's notes

Note 1: Kantar Worldpanel began to remove all sales value of tobacco products in its FMCG statistics in Q1, 2017. Year-on-year growth calculations had also excluded tobacco sales value from previous year since Q1, 2017.

 

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