FMCG market charts new growth path

THE fast-moving consumer goods (FMCG) market in China is entering a structurally slower but more complex growth phase, as value-seeking behaviour, demographic ageing and rapid channel disruption reshape how households spend, according to an industry report.

The findings in the 2026 China Shopper Report — tracking the evolution of urban FMCG consumption jointly by Bain & Company and Worldpanel by Numerator — portray a market that is no longer driven primarily by income expansion or population growth, but instead by reallocation of demand across cities, age groups and retail formats.

Total urban FMCG spending in China rose just 0.9% year-on-year (y-o-y) in 2025, according to the report, as a 3.6% increase in volumes was largely offset by a 2.6% decline in average selling prices.

The pattern underscores a persistent “trading down” dynamic, in which consumers are buying more units but paying less per unit, reflecting both intensified competition and a heightened focus on affordability.

Early 2026 data suggest that volatility has persisted well into the new year.

In the first quarter, volumes continued to expand 1.3% y-o-y.

A rebound in April pushed FMCG sales back into positive territory.

For the full year, the report expects conditions to broadly resemble 2025, with low single-digit growth and continued structural divergence across categories, channels and consumer segments.

The country’s demographic transition sits at the centre of the outlook.

The report estimates that the population aged 60 and above has reached roughly 320 million, while single-person households now account for nearly a quarter of all households.

Together, these shifts are altering consumption baskets and shopping priorities, with older consumers and smaller households increasingly shaping overall demand patterns.

Against this backdrop, “value for money” has become the dominant consumer lens.

Rather than simply opting for the lowest price, households are increasingly evaluating trade-offs between price, quality, pack size and channel convenience.

“Changes in the country’s FMCG market reflect a broader reconstruction of the entire consumer landscape,” said Derek Deng, a senior partner at Bain.

He said demographic shifts, value prioritisation and channel transformation are “collectively rewriting consumer shopping habits and decision journeys”.

According to him, companies must respond more quickly to evolving demand signals to capture new growth opportunities.

Tier 4-5 cities drive growth

The report highlights a widening divergence between the country’s large metropolitan centres and lower-tier cities.

In 2025, Tier 4 and Tier 5 cities emerged as the primary engines of incremental growth.

These markets are benefiting from ongoing urbanisation, improved logistics infrastructure and rapid expansion of both modern retail and digital commerce channels, which together have significantly broadened product availability.

Within these lower-tier cities, older households recorded faster FMCG spending growth than younger households in Tier 1 and Tier 2 cities.

Households with children in Tier 5 cities also stood out, maintaining relatively high consumption intensity despite broader value-consciousness, particularly in categories tied to childcare and daily necessities.

Online sales dominate

Digital channels continue to reshape the retail landscape.

ECommerce accounted for 38% of urban FMCG sales value in 2025, reinforcing its position as the single largest channel in the market.

However, offline retail is not disappearing; several emerging offline models expanded rapidly.

Online-to-offline (O2O) reached a turning point in 2025.

In the third quarter alone, O2O FMCG sales grew nearly 8% y-o-y, supported by faster delivery networks, platform-led promotional coordination and expansion beyond fresh food into broader grocery and household categories.

Warehouse membership clubs gained traction by emphasising bulk value and curated assortments.

For example, Sam’s Club and Costco membership stores continued to gain traction in China, with Sam’s Club reaching 63 stores by the end of 2025.

Snack-focused discount chains expanded rapidly, particularly in lower-tier cities where price sensitivity remains high but modern retail penetration is still increasing.

Leading players have scaled rapidly, with Busy Ming Group and Wanchen Group reaching about 22,000 and 18,000 stores, respectively, in China by the end of 2025.

Discount stores also gained importance as consumers increasingly consolidated routine purchases into value-orientated formats.

HotMaxx has led the format’s expansion and is the largest player by scale, with around 900 stores by the end of 2025, followed by HitGoo, Hema NB and Aldi.

Local brands do well

Domestic brands continued to strengthen their position across multiple categories, often outperforming multinational competitors in segments where local insights, faster product cycles and sharper pricing strategies proved decisive, according to the report.

Private label products are also emerging as a structural force in retail strategy.

Sales rose more than 57% y-o-y in 2025 to reach 32.7 billion yuan (US$4.82bil), accounting for about 2% of total urban FMCG sales.

While still relatively small, the growth rate signals accelerating retailer investment in in-house brands as a tool for differentiation and margin management.

“Emerging formats — including O2O, warehouse clubs, snack discount chains and hard discounters — are reshaping how consumers fulfil needs across different occasions,” said Bruno Lannes, a senior partner at Bain.

He said brand owners must move away from one-size-fits-all approaches and instead tailor strategies to specific shopping missions, channels and price expectations.General Manager of Worldpanel by Numerator China, Li Rong, said Chinese households are becoming increasingly sophisticated in how they evaluate value.

“Seeking value for money does not equate to simply choosing the cheapest option,” she said.

Consumers, she added, are still willing to pay for differentiated products when benefits are clear but are more deliberate in weighing trade-offs across brands, stores and channels.

Product innovation

Despite slower growth, the report finds that product innovation remains highly active.

New stock-keeping units (SKUs) accounted for roughly 40% of total SKU counts between 2022 and 2025, reflecting continued experimentation by brand owners and retailers.

However, the effectiveness of that innovation remains limited.

Only 3.9% of new products launched in 2024 achieved penetration of at least 1% within their first year, underscoring a significant gap between product launches and scalable success.

To address these challenges, Bain recommends that companies adopt a revised “core” framework.

This includes re-anchoring demand planning around “circumstances” shaped by value-for-money expectations, redesigning “offerings” for localised relevance, optimising “routes” through channel-specific strategies, and strengthening “execution” capabilities to operate in a low-growth, high-volatility environment. — China Daily/ANN