China’s Sales of Packaged Goods Pick Up as Prices Fall, Report Says

China’s fast-moving consumer goods (FMCG) sector saw quicker sales growth in the first quarter of this year amid an uneven economic recovery. Despite this growth, average selling prices fell more sharply, as established brands faced increased competition from lower-priced alternatives [para. 1][para. 2].

The total sales value of FMCG, which includes packaged goods sold quickly at relatively low prices, grew 2% year-on-year in China’s urban areas during the period. This growth was an improvement of 0.5 percentage points from the previous year. However, it was slower than the 6.5% increase recorded in the last quarter of 2023, which benefited from a low base affected by Covid-19 in 2022 [para. 2]. The report, released by Bain & Co. Inc. and Kantar Worldpanel, noted that the momentum from 2023, which saw a year-on-year sales value rise of 2.4%, continued mainly due to increased volumes in food and beverage sectors and growth in second-tier cities [para. 3].

Analyses covered 27 FMCG categories across four main sectors: packaged food, beverages, personal care, and home care. Examples included packaged water, ready-to-drink tea, coffee, beer, chocolate, biscuits, kitchen cleaners, sanitary pads, and makeup [para. 5]. Despite the sales growth, average selling prices decreased by 1.5% in the first quarter, marking a more pronounced deflation trend compared to the stable pricing of 2023. Prices fell across 18 categories, particularly in personal and home care products [para. 6].

The report highlights that insurgent brands are challenging established players by offering cheaper alternatives, while larger brands are forced to reduce prices during campaigns. As a result, consumers are purchasing goods at lower prices, significantly influencing market growth, said Jason Yu, managing director of Kantar Worldpanel in Greater China [para. 7]. However, the report clarified that price declines in some categories, especially home care, did not necessarily indicate a preference for cheaper products. Instead, it was driven by supply factors, such as brands promoting larger pack sizes and reducing prices due to decreased material costs [para. 8]. Specific sales figures or prices were not disclosed [para. 9].

The mixed performance of the FMCG market occurred amid China’s uneven economic recovery, characterized by a prolonged real estate slump and a bleak job market. This has made consumers more cautious about spending. Sectors like luxury, retail, tourism, and aviation have felt the impact of a consumer shift towards cheaper options [para. 10]. Only the beverage sector experienced growth in all dimensions—sales value, volume, and average selling price—in the first quarter, achieving a value growth of 4.3%. Packaged foods and home care saw sales growth but declining average selling prices [para. 11][para. 12].

Despite this pricing deflation, some categories have seen premiumization, driven by innovation and demand for health, wellness, and affordability. For instance, juice, facial tissues, and toothpaste capitalized on a “trade up” trend, while skincare and makeup faced intense competition, with a focus on value-for-money options [para. 13]. Carol Liao from Boston Consulting Group echoed these sentiments at the 15th Annual Meeting of the New Champions (Summer Davos). She noted that both high-end goods and low-end necessities are in demand, but quality has become crucial for expensive purchases. Consequently, some retailers are engaging in price wars, while others emphasize the uniqueness of their brands to avoid such conflicts [para. 15][para. 16].

These findings demonstrate a clear divergence in the FMCG market, influenced by consumer preferences for both affordability and quality [para. 13][para. 15][para. 16].