‘OUT OF HOME’ CONSUMPTION MARKET IN CHINA THRIVES AS COUNTRY’S FMCG MARKET CONTINUES ALONG TWO DIFFERENT TRAJECTORIES
Bain & Company and Kantar Worldpanel’s thirteenth China Shopper Report finds ongoing slowdown of home consumption reaches a new five year low while food delivery and out-of-home consumption race ahead
Beijing– June 20, 2017 – A shifting trend among Chinese consumers has seen ‘out of home’ (OOH) consumption rising significantly, signaling a major change in how Chinese customers choose to consume their food and beverage. According to volume one of Bain & Company and Kantar Worldpanel’s 2017 China shopper report, China’s Two Speed Growth: In And Out Of The Home, the results show that “two-speed” home consumption is continuing and that instead of preparing food at home, many Chinese consumers now prefer restaurant food delivery or dining out.
This year, in addition to the usual panel of 40,000 households for home consumption, Bain and Kantar Worldpanel analyzed 4,000 Chinese individual consumers in Tier-1 and Tier-2 cities about their food and beverage purchases for consumption outside of their homes using smartphones. In combination with additional data sources, they conducted an in-depth analysis of overall eating and drinking channel dynamics.
The results reveal that while food purchased for in-home meal preparation grew by 3 percent annually from 2013 to 2016, food delivery rose by 44 percent and dining out grew by 10 percent over the same period. This shift provides a new lens on fast-moving consumer goods (FMCG) value growth and provides a significant opportunity for forward looking brands.
“This is the first time that we have analyzed the Chinese FMCG market with this additional focus on out-of-home consumption and the results show a fundamental shift in how consumers across the country are shopping for food and beverage,” said Bruno Lannes, partner in Bain’s Greater China Consumer Products Practice and co-author of the report. “This shift, in many ways provides an additional lens on the “two-speed” trend we identified in the 2016 Shopper report: High-speed dining out and delivery vs. low-speed home cooking.”
Many companies have already begun to aggressively address these changes by focusing on the restaurant and out-of-home (OOH) channels.
In overall FMCG, covering food, beverage, home care & personal care, this year’s report finds two-speed growth continuing. It also shows that annual growth in FMCG value for home consumption remained sluggish across all sectors studied in 2016, hitting a five-year low of 3 percent. This was due to a combination of almost flat volume growth and a deceleration of price growth, which dragged down overall FMCG value growth.
“When we first identified the two-speed trend last year, we knew it would be game changing in how brands and companies would need to adapt to succeed in China’s retail sector,” said Jason Yu, general manager of Kantar Worldpanel Greater China. “This divergence in the market was a wakeup call to many companies that have now started to use it in their strategies and thankfully have recognized the importance of recognizing the two speeds and they can now also be prepared for this latest trend of OOH consumption.”
The findings from this year’s report have identified a number of key trends impacting the China FMCG market including:
- The China e-commerce channel continued to skyrocket, growing by more than 52.6 percent in value
- Online now represents 7 percent of all FMCG sales, having doubled its share of the FMCG market in the last two years
- Hypermarkets declined by 2 percent and supermarkets or minimarkets decelerated to 2 percent, barely more than inflation, compared to convenience stores which increased by 7.4 percent
- Categories perceived as healthy or hygiene-related achieved high and growing penetration, as well as personal care categories and more generally most premium SKUs as Chinese shoppers who can afford it demonstrate that they’re willing to pay for higher-quality goods
- As in previous years, when looking at the top 20 brands in 26 categories that have been analyzed in greater depth, local brands grew by 8.4 percent, while foreign brands grew by only 1.5 percent
- For several food and beverage categories, convenience and grocery channels have huge sales potential for out-of-home consumption
- Food delivery grew by 44 percent, while out-of-home dining rose by 10 percent from 2013-16, fueled by (O2O) food delivery, which has achieved 40 to 50 percent annual growth over the past three years
The research has identified three ways which companies and brands can align with this two-speed growth and embrace the major retail changes impacting the market:
- Review their business portfolios to examine their high-speed and low-speed mix of product categories and channels
- Adapt their product ranges to capture new consumer needs towards healthy, high quality and OOH consumption
- Continue efforts to develop digital capabilities and more broadly design their business functions with a full-channel vision
Retailers can also take a few key actions:
- Adapt their customer strategy to capture high-speed growth of the digital and O2O business
- Restructure their store portfolio, with a reduced average size more focused on fresh, prepared and ready-to-eat food
- For convenience and grocery channels, Revamp store designs to prepare for the huge potential in out-of-home consumption
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