FMCG trends emerge as sector shows signs of vitality

Domestic players continued their long-term rise, gaining share from foreign brands in nearly half of the 27 categories tracked. Since 2012, when the report began tracking this trend, domestic brands have steadily gained ground and claimed 76 percent of the total FMCG market in 2024, said the report.

The 2025 pricing environment continues to be challenging, said Bain's report. Brands will face a strategic choice: specialize in the premium segment, even if it is declining relative to the overall market, or determine how to compete in the mass/mainstream segments, or compete in both, said the report.

Data from Kantar show that in the first quarter the sales of modern trade (hypermarkets, supermarkets, convenience stores) increased by 2.4 percent compared to the same period last year, driven by small supermarkets.

"During Spring Festival, population mobility and the gifting occasion drove the growth of small supermarkets in lower-tier cities," the Kantar report said, with significant gains in both sales volume and penetration.

Modern trade also made a divergent growth in early 2025 with community grocery stores standing out, according to Kantar. Community grocery stores grew 8.1 percent year-on-year in the first quarter, benefiting from proximity to residential neighborhoods and high-frequency purchase patterns.

Among the top 10 modern retailers, Walmart, Spar Group and Hema Fresh increased their market shares. Hema Fresh's penetration rose by 1.3 percentage points in the first quarter, while Hema neighbor business, which is a discount community store of Hema Fresh, gained 1.6 points in eastern China.

Discount retailers also surged. In the first quarter, HotMaxx recorded more than 25 percent year-on-year sales growth, with its reach in upper-tier cities expanding by 1 percentage point.

Aldi's China operations also gained traction, penetrating 20 percent of Shanghai households in the first quarter and growing sales by 56.2 percent. In April, Aldi expanded into Suzhou and Wuxi of Jiangsu province, where it opened two stores and launched a regional warehouse to streamline supply chains. Its Wuxi launch set a new opening-day sales record for Aldi China, according to Kantar.

Online, Douyin maintained rapid momentum, especially in non-food categories like personal and home care where price competition remains fierce. Other platforms experienced slower growth. The Bain report also highlighted a divide between food and non-food online purchases, with food still mainly bought offline due to consumer safety concerns.

Rachel Lee, general manager of Kantar Worldpanel China, said that consumers have embraced online grocers with reliable, on-time delivery.

"Leading platforms expanded while optimizing profitability through initiatives like category diversification and private-label offerings," Lee said.

Chinese consumers now shop across an average of seven different channel types annually. "Virtually, all Chinese consumers can be considered omnichannel consumers," Lee added. "Both online and offline channels are continuously evolving into new formats to meet consumers' core needs. Value and convenience are the key drivers behind each channel choice."

As China's FMCG sector enjoyed positive momentum during the first half of the year, both brands and retailers are urged to stay closely attuned to consumer demand.

"Brands and retailers need to start from consumer needs, fully recognize the characteristics of 'fragmented consumption occasions and pursuit of cost-performance', and adopt omnichannel strategies to respond to market changes," said Kantar.