Consumer goods in China move towards Premiumization

Consumer goods in China move towards premium productsJun. 21 – Premiumization is a growing new phenomenon in China market with consumer goods; on-going premiumization is altering Chinese consumer’s habits. Consumption of fast-moving consumer goods in China remained robust in 2018, growing at a rate of 5.2%. Among others, premiumization playing a significant role in consumer goods sector of China mass market, according to a recent industry report.

Sense of Premiumization with Consumer Goods

Premiumization is simply a means of getting customers to pay higher prices for a brand or product. As a related report indicated that it’s about delivers value to customer, growth to the brand, and stretching the category norms upwards and creating a demand for customers to pay higher category prices. Here are some numbers from the latest China Shopper Report from Kantar Worldpanel and Bain & Company, Premium Products, Small Brands and Now New Retail. In 2018 the growth rate for the consumer goods sector is higher than the previous year’s 4.7 percent, with premiumization again playing a significant role in the sector as average selling prices rose by 4.6 percent and consumers continued to demonstrate a willingness to pay. “We continue to see premiumization playing an important role, as Chinese consumers favor goods that promise to improve their health and lifestyle,” said Bruno Lannes, partner in Bain’s Consumer Products Practice in China and a co-author of the report. “Brands can still encourage trading up, giving a much-needed boost to categories in which volume is either flat or slumping.”

Home Care and Personal Care Categories Grew at a Fast Clip

The report has tracked the shopping behavior of Chinese consumers across 106 fast-moving consumers goods categories purchased for home consumption in China for the last eight years. Home care and personal care categories grew at a fast clip, while food and beverage consumption increased at a slower pace, the report said. If measured by value growth though, soybean milk expanded the fastest at 49%, followed by mouthwash and oyster sauce. Chewing gum posted the lowest growth rate. Smaller brands are growth leaders compared with established and major brands in China as they grow faster than the top five brands in all categories except cosmetics and packaged water as consumers constantly looked for new brands and more character in their products. “The new reality is that many incumbent brands watch small brands doing an impressive job of serving specific consumer needs, responding in everything from R&D to digital marketing with agility and flexibility,” said Jason Yu, general manager of Kantar Worldpanel in China. The other major emerging trend involves New Retail. The report showed for the first time the growth limits of online penetration in China.

New Hope for Offline Stores

Overall, e-commerce channel growth slowed slightly to 30.6% between 2017 and 2018, compared with 35.1% annual growth between 2014 and 2018. Penetration in first-tier cities leveled off at around 80% in 2018. This trend offered new hope for offline stores to reformat themselves to offer seamless integration of online and offline shopping experiences. Large store formats also showed potential for growth, but it will require them to take on new roles such as reinventing themselves by upping their game in fresh food. For example, hypermarkets started to serve as a logistics base for 30-minute delivery of goods ordered online through leading delivery platforms in 2018. The report suggests that brands grow with winning channels and anticipate retailers’ consolidation by developing high-value and personalized products to make the most of the demand for high-end goods. For retailers, it is critical to redesign store portfolios in the new retail format and make the store experience more attractive by leveraging new technologies, the report said. For the List of Chinese Importer For Personal Care Products is available upon request, please contact with DCCC or email to: info@dccchina.org

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