China's fast-moving consumer goods market saturating

(Xinhua) Updated: 2014-09-01 14:07

BEIJING - China's fast-moving consumer goods market is becoming saturated with a wide variety of good products for consumers and it was more difficult for new product launches to achieve incremental growth, a latest research has found.

Fast-moving consumer goods (FMCG) refer to food and non-food everyday consumer products that are sold quickly and at relatively low cost.

FMCG brands should aim for innovations that can bring incremental growth, rather than launch the biggest seller in the market, according to the research, sent to Xinhua on Saturday.

The research was jointly conducted by research company Kantar Worldpanel China and pollster TNS, which analyzed 210,000 new products launched in 77 categories over the past three years in China.

Growth of the FMCG market continued to slow in China over the last 12 months. With the growth of disposable income also decreased, China's consumers are being more tight-fisted with their money.

Almost all categories are introducing new products, just over half of them in the premium range. New product launches used to contribute about 8 percent of a company's overall growth.

But by 2013, that contribution had fallen to 6 percent. It's increasingly harder for marketers to get growth from innovation, according to the research.

That is particularly true for multinational companies. The research found they are having more difficulty achieving incremental growth, even in premium sectors, and they are struggling more than local companies in China.

The success ratio of local companies' new premium goods is 30 percent higher than those of multinationals. That's because local players tend to have a better understanding of the market, and they're launching products that fit the needs of Chinese consumers better, it said.

One new product launch strategy commonly seen in multinational companies is "search and re-apply." That means simply introducing products from other countries into China.

"The problem is that China is so unique that simply copying the success from another market often doesn't work," it said.

Chinese consumers are willing to try new products, but they want trusted recommendations from friends and family.

The research showed that 45 percent of new products launched in China stayed on the shelf after three years, 19 percent brought incremental volume of which only 4 percent would be big winners.

New FMCG products don't necessarily need to have the biggest sales volume. "Bigger is better" seems to be losing some of its appeal when it comes to splashy product debuts, it said.

It's crucial to measure the potential incremental growth and the potential cannibalization with existing products rather than simply going after being the biggest seller on the market, according to the research.