Page 294 - 2019 White Paper on the Business Environment in China
P. 294
9 White Paper on the Business Environment in China
2.11 Consumer Goods
Background three companies together accounted for nearly half of
the sector’s recent revenue growth. Despite the growth,
China’s ever-growing middle class however, which for China Agri-Industries and Yili Group
continues to seek premium, were recorded at a respective 16 and 13 percent, the
healthier products. Pleasure, health and wellness, report points to an overall industry slowdown, with
lifestyle or gifting were the main motivations behind strong competition and a continuing focus on shifting
the premiumization trend observed. Local brands grew traditional markets variously constricting growth. Still,
by 7.7 percent in 2017, contributing to 98 percent share the remaining companies outside of the three leading
of market growth, while foreign brands increased by players (WH Group revenues grew by 5 percent) achieved
a mere 0.4 percent in 2017 (Bain, China’s Consumer). an average growth rate of 8.6 percent, with the sixth
Once again, on an aggregate basis, foreign brands lost biggest company, Chinese liquor producer Kweichow
share to local brands. 2018 was the seventh year in a row Moutai, registering a staggering 53 percent hike in
that local brands won against foreign brands. There are revenues. The jump was due to international expansion,
multiple reasons for this, but a major one is speed and strengthening both the domestic brand and capturing
an agile operating model. Both are critical in this quickly new customers. Meanwhile, Kweichow Moutai has been
changing market. E-commerce sales now represent ranked as the seventh most valuable Chinese brand of
about 10 percent of the fast-moving consumer goods any sector according to market research analysts Kantar,
(FMCG) market, twice as much as two years ago, while rising 43 percent year-on-year to a value of over US$23
online penetration growth is shifting from higher-tier billion – with the firm now estimated to have an overall
to lower-tier cities. Bain & Co and Kantar Worldpanel value of more than US$145 billion, making it the most
suggested that companies and brands develop high- valuable liquor producer in the world (Consultancy).
value and personalized products to make the most of
the trend toward premium products while becoming In May 2018, the total retail sales of consumer goods
data-driven and consumer-centric (Xinhua, China’s Fast- reached 3,035.9 billion yuan (US$471.46 billion), up
Moving). Online spending remains robust, with sales by 8.5 percent year-on-year (nominal growth rate),
surging 30.1 percent to reach 4.1 trillion yuan in the according to National Bureau of Statistics of China. Of
first half of 2018. During the period, final consumption the total, the retail sales of consumer goods of units
expenditure contributed to 78.5 percent of China’s above designated size reached 1,147.7 billion yuan
economic growth, up from 77.8 percent in the first (US$178.23 billion) (CIW).
quarter. China’s GDP expanded 6.8 percent year on year
in the first half of 2018, with a 6.7-percent growth in the Trends
second quarter (Xiang).
The top 20 Chinese FMCG company’s combined Alibaba and Tencent each is valued at around US$500
revenue was in excess of a 720 billion yuan (US$100 billion)
in 2018. Of this sum, the privately-owned meat and food billion on public markets, and both act as the SoftBank
processing company WH Group was well out ahead in of the new Chinese economy, investing in hundreds of
the top spot, contributing 144 billion yuan. Joining the companies at all stages. With their mounting arsenals
WH Group were the market’s other clear giants in the of digital and physical assets, each has created its own
oil and grain company China Agri-Industries Holdings closed-loop opportunity capture as much information
Food and Beverage (68.65 billion yuan in revenues) as possible about a consumer. The two companies have
and the state-owned Inner Mongolian dairy producers a combined 80 percent market share of the world’s
Yili Group Food and Beverage (67.48 billion yuan). The largest e-commerce market and stakes in four of the top
five hypermarket and supermarket chains in China. In
China there are two decisions that guide any retailer. The
294
2.11 Consumer Goods
Background three companies together accounted for nearly half of
the sector’s recent revenue growth. Despite the growth,
China’s ever-growing middle class however, which for China Agri-Industries and Yili Group
continues to seek premium, were recorded at a respective 16 and 13 percent, the
healthier products. Pleasure, health and wellness, report points to an overall industry slowdown, with
lifestyle or gifting were the main motivations behind strong competition and a continuing focus on shifting
the premiumization trend observed. Local brands grew traditional markets variously constricting growth. Still,
by 7.7 percent in 2017, contributing to 98 percent share the remaining companies outside of the three leading
of market growth, while foreign brands increased by players (WH Group revenues grew by 5 percent) achieved
a mere 0.4 percent in 2017 (Bain, China’s Consumer). an average growth rate of 8.6 percent, with the sixth
Once again, on an aggregate basis, foreign brands lost biggest company, Chinese liquor producer Kweichow
share to local brands. 2018 was the seventh year in a row Moutai, registering a staggering 53 percent hike in
that local brands won against foreign brands. There are revenues. The jump was due to international expansion,
multiple reasons for this, but a major one is speed and strengthening both the domestic brand and capturing
an agile operating model. Both are critical in this quickly new customers. Meanwhile, Kweichow Moutai has been
changing market. E-commerce sales now represent ranked as the seventh most valuable Chinese brand of
about 10 percent of the fast-moving consumer goods any sector according to market research analysts Kantar,
(FMCG) market, twice as much as two years ago, while rising 43 percent year-on-year to a value of over US$23
online penetration growth is shifting from higher-tier billion – with the firm now estimated to have an overall
to lower-tier cities. Bain & Co and Kantar Worldpanel value of more than US$145 billion, making it the most
suggested that companies and brands develop high- valuable liquor producer in the world (Consultancy).
value and personalized products to make the most of
the trend toward premium products while becoming In May 2018, the total retail sales of consumer goods
data-driven and consumer-centric (Xinhua, China’s Fast- reached 3,035.9 billion yuan (US$471.46 billion), up
Moving). Online spending remains robust, with sales by 8.5 percent year-on-year (nominal growth rate),
surging 30.1 percent to reach 4.1 trillion yuan in the according to National Bureau of Statistics of China. Of
first half of 2018. During the period, final consumption the total, the retail sales of consumer goods of units
expenditure contributed to 78.5 percent of China’s above designated size reached 1,147.7 billion yuan
economic growth, up from 77.8 percent in the first (US$178.23 billion) (CIW).
quarter. China’s GDP expanded 6.8 percent year on year
in the first half of 2018, with a 6.7-percent growth in the Trends
second quarter (Xiang).
The top 20 Chinese FMCG company’s combined Alibaba and Tencent each is valued at around US$500
revenue was in excess of a 720 billion yuan (US$100 billion)
in 2018. Of this sum, the privately-owned meat and food billion on public markets, and both act as the SoftBank
processing company WH Group was well out ahead in of the new Chinese economy, investing in hundreds of
the top spot, contributing 144 billion yuan. Joining the companies at all stages. With their mounting arsenals
WH Group were the market’s other clear giants in the of digital and physical assets, each has created its own
oil and grain company China Agri-Industries Holdings closed-loop opportunity capture as much information
Food and Beverage (68.65 billion yuan in revenues) as possible about a consumer. The two companies have
and the state-owned Inner Mongolian dairy producers a combined 80 percent market share of the world’s
Yili Group Food and Beverage (67.48 billion yuan). The largest e-commerce market and stakes in four of the top
five hypermarket and supermarket chains in China. In
China there are two decisions that guide any retailer. The
294
