Kantar Worldpanel reports 14 per cent value growth for the FMCG (Fast Moving Consumer Goods) market in China in 2012.
Amongst all the categories Kantar Worldpanel monitors, seven out of 10 categories enjoyed an average family spending level increase of more than three per cent. This indicates that consumption levels have started to play a more significant role in the overall market growth in China.
Continuous tracking of 40,000 urban Chinese families throughout 2012 shows that Chinese consumers continue to spend more on mature categories, despite the category penetration being stable over the last two years.
For example, average families spent 12.5 per cent more on toothpaste. The premium segment, especially products with professional and special claims, such as whitening, anti-sensitivity and gum-protection, became more attractive to consumer, driving the category expansion.
Biscuits have also reached 98 per cent household penetration in urban China, which leaves very little room for further expand penetration. Nevertheless, the biscuit category still posted 23 per cent market growth in 2012 thanks to increasing consumption. Premium European biscuits for gifting have been a significant driving factor in consumption growth.
New flavours and innovative product formats are another success factor leading to the market expansion. In order to secure space in consumers’ baskets, innovation that results in premiumisation and new consumer demand combined with changing lifestyles are inevitable to justify value-for-money.
Unlike mature categories, emerging categories should take totally different approaches to grow consumption. Kantar Worldpanel observes that less than 40 per cent of the Chinese families bought coffee in 2012, which was still a lot lower than other more developed markets (58 per cent in Taiwan), indicating the market is still very much in development phase.
However, there are differences in different city tiers. Consumers in key cities generally have higher accessibility and higher acceptance toward innovative concepts and products while consumers in lower tier cities are more reluctant to change.
As a result, for emerging categories, cultivating usage habits through innovative and premium products would be important for key cities, whereas overcoming adoption barriers to new products and arousing interest in innovate concepts would be more relevant for lower tier cities. Marketers for emerging categories will have to take a tiered strategy for product development.
Although most categories still grew by using a combination of shopper base expansion and spending level growth, thanks to urbanisation and market developments, 90 per cent of the FMCG categories reported a noticeable increase in buyer base and leading players benefited more from the race for consumer acquisition.