FMCG trends emerge as sector shows signs of vitality

The country's fast-moving consumer goods sector is showing signs of vitality in 2025, as emerging cities, premium product categories driven by innovation and health benefits, and new retail formats propel consumption, according to industry reports.

According to the China Shopper Report 2025, released in June by Bain & Company and Kantar Worldpanel, the sector started the year on a strong note with FMCG value sales growing 2.7 percent year-on-year in the first quarter.

The uptick was supported by seasonal boosters from strong spending during Spring Festival and government policies aimed at boosting domestic consumption.

"The FMCG market in urban China had a positive start in the first quarter of 2025, with sales increasing by 4.2 percent year-on-year," according to the latest report by Kantar Worldpanel China.

Behind the growth momentum lies a broadening base of consumption in lower-tier cities. "We've seen a tremendous growth engine of consumption for new emerging cities in the country," said Derek Deng, senior partner and head of consumer products practice in Bain & Company Greater China.

Deng said that a demographic shift is driving this trend. "We saw an interesting trend last year, which was how the aging population and resident flows from bigger cities, drove material value growth in tier-3 and 4 cities, which significantly outperformed the bigger cities. This is in contrast with 2020-23 trends, where tier-2 cities led FMCG growth."

In the first quarter, consumption in lower-tier cities rose 5.9 percent, with town-level markets surging over 10 percent, according to Kantar Worldpanel China. The north region registered the highest growth by geography, increasing by more than 7 percent year-on-year, fueled by festive spending and increased family visits, according to Kantar.

According to Bain, on the product front, home care essential and health-oriented categories continued to perform well. In 2024, home care remained the fastest-growing category, expanding 2.4 percent for the year after a robust performance in 2023. It maintained momentum in the first quarter of 2025 with 6.1 percent value growth, followed by packaged food (up 3.2 percent) and personal care (up 4.0 percent), according to Bain.

The Bain report found that "the biggest driver affecting total household spending in 2024 and in the first quarter of 2025 was product choice, as consumers were able to increase volume by seeking more affordable alternatives to products they used to purchase". In 2024, total volume grew by 4.4 percent, but average selling prices declined 3.4 percent, according to the Bain report.

However, even as consumers pursued more affordable options, premium segments thrived in categories that delivered innovation and catered to specific lifestyle needs.

Still, juice, instant coffee, toothpaste and sanitary pads stood out for strong growth in their premium segments. Juice enjoyed both volume and average selling price gains, driven by the popularity of nutritious and healthy beverages.

Instant coffee saw significant average selling price increases as Chinese consumers gravitated toward high-quality, convenient formats. Toothpaste sales were bolstered by whitening products, which have higher price points, while premium sanitary pads benefited from product upgrades.

Last year saw intensified brand competition across the FMCG landscape, according to Bain. "Brand competition was still intense in 2024, with the top five brands losing share in more than half of FMCG categories," the report said.

Insurgent brands in categories like juice, instant coffee, facial tissue, nutritional supplements and ready-to-drink tea captured market share from traditional players by highlighting health benefits and delivering innovations.