No matter how much China’s growth might slow or its stocks stumble, the country’s consumers will not stop washing their clothes or eating cup noodles anytime soon.
But multinational makers of fast-moving consumer goods are finding it harder to rely on China to take up the slack for other regions.
Growth in sales of necessities has tumbled, even before the latest market gyrations, which could exacerbate the slowdown, retail analysts say.
With local brands grabbing share for items from toothpaste to fruit juice, multinational consumer companies are finding it harder to compete, especially in lower-tier cities that account for much of the growth in the sector.
Growth in China’s FMCG market by value has slowed from nearly 12 per cent in 2012 to 4.4 per cent in the first quarter of 2015 year on year, according to a report by Bain & Co and Kantar.
FMCG sales volume was flat in 2014 compared with 2013, while average prices rose 5.4 per cent — more than twice the rate of inflation.
“The economic slowdown is the main factor triggering the decline,” says Chen Ke, partner at retail consultancy Kurt Salmon in Shanghai.
Mainland car sales fell in June for the first time in nearly two years, with carmakers also blaming slowing economic growth.
“It’s a different game for FMCG brands in China,” says Bruno Lannes, a partner in Bain’s China consumer products practice. “Without the advantages of volume growth or premium pricing, FMCG companies are seeking new ways to compete.”
Foreign brands lost market share in 2014 for the third year in a row, according to Bain, with local rivals gaining share in 18 of the 26 categories surveyed for the report, including the four largest consumer goods sectors: personal care, homecare, beverages and packaged food.
Domestic brands account for about 70 per cent of the market in those categories, Bain says, adding that what growth did occur in the sector primarily went to local brands. (www.chinainout.com)
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