The FMCG market in China is ever expanding, with the food and beverage sectors leading this growth. In recent years, this industry has shown significant momentum, especially within the packaged food market in China and the premium beverage categories. However, despite this booming demand, around 70% of new product launches fail to achieve their expected success. Understanding the local market dynamics and consumer preferences is crucial to succeeding in this competitive market.
The China food and beverage market continues to grow, driven by urbanization, a rising middle class, and evolving consumer preferences. Some key consumer trends include:
Health and Wellness Demand
Chinese consumers are becoming more health-conscious, with a growing preference for functional foods and beverages that offer added health benefits. Clean-label, organic, and plant-based products are gaining popularity, especially in urban areas. Consumers are increasingly looking for products that support their wellness goals, from immune-boosting beverages to low-calorie snacks.
Premiumization and Value-Seeking Behavior
Despite an overall trend of price deflation in certain FMCG sectors, premiumization remains a strong trend, particularly in categories such as premium pet food and specialized beverages. Consumers are willing to pay more for products that deliver higher quality and benefits. At the same time, value-seeking behavior is also prominent, especially in the lower-tier cities, where cost-conscious consumers are more likely to choose affordable options.
Rise of eCommerce and Social Commerce
eCommerce growth remains robust in China, with platforms such as Alibaba, JD.com, and Douyin driving online FMCG sales. Interestingly, Douyin (China’s TikTok) surpassed JD.com to become the second-largest eCommerce platform for FMCG products, seeing a 46% growth in Q1 2024. Social commerce is also booming, with livestreaming and influencer marketing becoming essential tools for brands to engage consumers and drive sales.
Local competitors in China often introduce new FMCG products faster than foreign brands, thanks to their deep understanding of local consumer preferences and the market’s fast pace. Brands like Yili (a leading dairy producer) and Haitian (a well-known sauce brand) are agile, continuously innovating their product lines to align with evolving consumer demands, whether for health-conscious products or flavors that resonate with regional tastes. This speed-to-market advantage makes it challenging for international brands to compete unless they streamline their product development and launch processes to match the pace of local competitors.
focusing solely on millennial consumers in Tier 1 cities is no longer sufficient. For instance, while Tier 1 city consumers may be drawn to premium products such as imported health-focused beverages, consumers in Tier 2 and Tier 3 cities may prioritize affordability and accessibility. Additionally, regional preferences differ significantly, with some areas favoring local flavors or eco-friendly packaging. Brands need to refine their segmentation strategy by considering geographic diversity, local tastes, and price sensitivity to tap into niche markets and maximize growth opportunities in the China food and beverage market.
In the China food and beverage market, many foreign FMCG brands face difficulties aligning their marketing mix with local consumer preferences. What works in Western markets—whether it’s product packaging, pricing, or brand messaging—often fails to resonate with Chinese consumers. Brands like Haitian and Mengniu have successfully tailored their packaging and product messaging to appeal to health-conscious and traditional Chinese tastes. Foreign brands must also adapt their pricing strategies to account for the more price-sensitive consumers in lower-tier cities, where value-driven purchasing is more prevalent. Tailoring these elements to fit regional and cultural preferences is critical for foreign brands to gain consumer trust and achieve long-term success in the competitive Chinese FMCG market.
In 2024, packaged food and beverages were the fastest-growing categories in the FMCG sector, expanding by 2.7% and 4.3%, respectively. As consumers increasingly demand premium and functional products, these segments are expected to continue their upward trend. Home care and personal care products also saw substantial growth in terms of volume demand.
Offline channels regained momentum in Q1 2024, with a 2.4% growth. However, eCommerce growth, though slower than previous years, remains strong at around 2%. As Douyin continues to grow, achieving an 18% market share in Q1 2024, brands must leverage both online and offline channels effectively to reach diverse consumer bases.
Tier 2 cities are emerging as major growth drivers in the FMCG market in China, with over 8 million people moving to these areas in the past four years. Brands targeting these cities can capitalize on the growing demand for both premium and value-seeking products, especially in categories like packaged food and beverages.
With consumer preferences constantly shifting in China’s dynamic FMCG landscape, brands must leverage data-driven strategies to fully understand what resonates with their target audience. For instance, we collaborated with Nestlé to accelerate its product launch success by using customer discovery and marketing-mix optimization techniques. Through digital experiments and real-life feedback via Chaoly’s Alibaba store, we helped Nestlé align its product offerings with local consumer preferences, reducing the time to market by half compared to its competitors. You can read more about the case study here.
Whether you are in the China food and beverage market or exploring opportunities in packaged food and premium products, our tailored approach ensures your success.