5 Things You Must Do Better Than Your Competition in the FMCG Market

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5 Things You Must Do Better Than Your Competition in the FMCG Market

  1. 1. Five things you must do better than your competition in FMCG market Jason YU, Kantar Worldpanel China
  2. 2. What happened in 2010?Five things you must do betterClosing thoughts
  3. 3. JanCh ina as  by uar y foec onomy  10. od rtakes  ear 3% fro price r ove lier o in J m a ye se Japan anu ar ary China cities competing to  Wa l- to in mart m attract migrant workers 360 vest in oves amid labor shortage buy .com Families in Macau are  facing infant milk  powder shortage
  4. 4. What happened in 2010?
  5. 5. New picture from 40K scanning urban panelTop 4 cities (BJ, SH, GZ, CD)A Cities (Provincial Capitals)B Cities (Prefecture Cities)C Cities (County-level Cities)D Cities (Counties)North 1 (Heilongjiang, Jilin, Liaoning)North 2 (BJ,TJ, Heibei, Shandong, Shanxi)East 1( SH, Jiangsu, Zhejiang)East 2 (Anhui, Henan)South 1 (Guangdong, Fujian)South 2 (Hunan, Jiangxi, Hubei)West 1 (Sichuan, Chongqing, Shan’xi)West 2 (Yunan, Guizhou,Guangxi)
  6. 6. CPI picked up again throughout 2010… 8.7 5.1 Jul Jul Jul Jul Apr Apr Apr Apr Oct Oct Oct Oct 07Jan 08Jan 09Jan 10Jan JanSource: China Statistic Bureau
  7. 7. Consumers are seriously concerned In the coming 6 months, do you expect inflation to …Get worse 73% expected inflation continues …Stay the same 17% expected inflation maintains …Get better 10% expected inflation to be subduedSource: Kantar Worldpanel Online Survey, based on 5,400 completions
  8. 8. Consumers are cautious about future income In the coming 6 months, do you expect your household income to …Worse off 6% expected income to drop …Stay the same 60% expected income remain the same …Better off 34% expected income to increaseSource: Kantar Worldpanel Online Survey, based on 5,400 completions
  9. 9. Overall market growth half price driven China Urban FMCG  China Urban FMCG  Spend Growth % Average price %  16% 10% 8% 5% 2009 Vs.  2010 Vs.  2009 Vs.  2010 Vs.  2008 2009 2008 2009Source: Kantar Worldpanel China, National Urban key cities + ABC cities
  10. 10. Emerging categories or developed categories with  Premiumization trend are the growth spots  26 18 17 16 14 10 7 Total FMCG Beverage Culinary Dry Grocery Dairy Household Toiletry products Tea,  Chewing gum,  Household  colorants,  Cheese,  functional &  Spreads,  crispy snacks,  cleaning,  mouthwash,  butter, UHT  soybean drink,  curry, sesame  biscuits,cereal,  bleach,  body wash,  milk, milk  RTD Tea   oil, olive oil instant  laundry liquid,  eye care,  powder wine,sprits,  noodle, soup  paper product deodrant Source: Kantar Worldpanel China, National Urban key cities + ABC citiesvalue growth rate 2010 vs 2009
  11. 11. High Income families driving market growth, while there was lack of growth from bottom end of market High income group (HH income > RMB 5000) +27% (+19%) Medium income group (HH income RMB 3000‐4999) +13% (+11%) Low income group +6%(HH income < 3000 RMB) (+3%) Fonte: Kantar Worldpanel Source: Kantar Worldpanel China, National Urban key cities + ABC cities value growth rate 2010 vs 2009 (2009 vs. 2008)
  12. 12. The five things you must do better  
  13. 13. 1. Be adaptive with your strategy in each market cluster in China
  14. 14. Purchasing powers varied substantially, but not  strictly along the line of administrative definition Past 10 mth Top 4 A Cities B Cities C Cities D Cities Spend per HH (RMB) Cities East 1 7,082 6,155 4,449 4,683 3,770 East 2 ‐ 4,089 3,640 3,594 3,342 South1  5,327 4,575 3,939 3,505 3,211 South 2 ‐ 5,484 4,250 4,561 3,923 West 1 5,247 4,793 3,735 3,640 3,494 West 2 ‐ 4,110 3,809 3,785 3,329 North 1 ‐ 4,416 3,696 3,396 2,821 North 2 7,296 5,559 4,164 4,042 3,319 Legend <85 85‐95 95‐105 105‐115 >115Source: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  15. 15. Shopping behavior varies by those market clusters,  calling for tailored shopper marketing approach  70 65 East 1 Beijing Shanghai Basket spend (RMB) 60 Chengdu South 1 South 2 Top 4 cities 55 A cities West 2 C cities North 2 50 D cities B cities East 2 Guangzhou West 1 45 North 1 40 35 50 60 70 80 90 100 110 120 130 No. of Trips in past 10 monthsSource: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  16. 16. 2. Lower tier cities as your next growth engine    
  17. 17. Huge opportunity for food categories like Coffee, Biscuit,  Cereal to develop in low tier cities  Spend Share % 5.3 15.6 17.2 14.9 13.3 12.3 12 6.1 20.2 11.2 8.9 13.1 12.3 12.4 16.8   D Cities  12.6 14.1 27.4   C Cities 31.2 33.0 20.3 32.4 35.8 36.0   B Cities 36.0 27.2   A Cities 23.9 24.3 24.0 23.1 51.6 4 KEY 22.0 20.4 19.2 19.3 24.5 9.3 14.9 12.5 13.6 POP% FOOD MILK FLAVOR BISCUIT CEREALS COFFEE RTD COFFEE POWDER POWDERSource: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  18. 18. Local players are more consistently penetrated, with  Wahaha noticeably defying the traditional pattern 100 KSF COFCO 80 Coca Cola Penetration % Yili 60 PepsiCo Mars 40 Kraft 20 Nestle Bright 0 Wahaha  Top 4 A Cities B Cities C Cities D Cities CitiesSource: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  19. 19. D level cities – the fast growing hinterland 30.8 million households (a population of over 92 million) If counted as a country, D level cities would be ranked 12th in  the world (larger than Germany) A whopping 3.8 billion shopping occasions in a year  Consumers adapt quickly to emerging categories showing great  potential to upgrade their FMCG spending And what would happen when they are offered modern store  format such as hypermarket?
  20. 20. 3. Modern trade entering new phase of development–are you helping retailers to differentiate?
  21. 21. Top 5 banners only reached 10.4% (from 8.3%) share, and 57.5% of urban shoppers 2.8% 2.4% 2.4% Combined  Retailer Share share 3.7% 1.5% 1.3%  RT‐MART    CARREFOUR    WAL‐MART    VANGUARD    TRUST‐MART  Source: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  22. 22. Different stage of modern trade development in  different market clusters – consolidation in key cities  calling for differentiation 70 Top 4 cities Guangzhou 60 City Tiers Chengdu Beijing Sub‐regions 50 South 1 Shanghai 40 Level of South 2 East 1 North 1 West 1 Consolidation 30 Top 4 Cities A Cities Top 5 Retailer West 2 North B Cities share of MR % 20 East2 C Cities 10 D Cities 0 30 35 40 45 50 55 60 Modern Trade Development Hyper/super share of trade %Source: Kantar Worldpanel China National Urban, 40 weeks of Dec 31st, 2010
  23. 23. Shoppers in the 7 most  developed cities are on  average only 28% loyal to  a top 5 retailer compared to  Average Penetration of Top 5 Retailer Average Loyalty of Top 5 Retailer 42% in the UK 60.5 57.4 51.2 51.2 52.8 50.5 43.1 36.5 35.1 27.7 29 24.1 22 21.4 Beijing Guangzhou Shanghai Chengdu Nanjing Hangzhou ShenzhenSource: Kantar Worldpanel China National Urban, 52 weeks to Sept 2010
  24. 24. 4. Embrace the $$$ opportunity of Internet shopping  
  25. 25. On November 11th, 2010 936 Mil. RMB in one day 10,000RMB per second 21 million people (shopped)
  26. 26. Internet shopping for FMCG in 2010 15% families shopped 346 RMB Spent Per HH 2.6 (average frequency) 133 RMB per transaction
  27. 27. Internet shopping share of trade in FMCG National Key +A B Cities C Cities SH BJ GZ CD Urban Cities Total FMCG 0.9 0.9 0.8 0.9 1.7 1.1 0.7 0.6 Baby Diaper 6.7 10.4 4.5 1.9 25.3 13.7 2.3 7.4 Make Up 5.1 4.4 5.2 6.4 5 6.5 2.8 3.4 Facial  5.1 3.9 5.4 7 4.7 5.4 4.2 3.4 Moisturizer Milk  Powder  4 5.8 2.6 3 15.1 7.8 4.5 3.1 (Incl. IMF) Health  1.4 1.7 1.1 1.4 2.9 2.1 1.9 0.6 SupplementSource: Kantar Worldpanel China – National Urban Panel, 2010, Value‐based
  28. 28. 5. Consumers have the desire to trade up to quality offer.  Are you prepared to ride the wave?
  29. 29. New generation feeds on imported milk powder 81% International  Brands Local Brands 19%Source: Kantar Worldpanel China – Beijing Baby Panel, latest 52 weeks
  30. 30. Consumers are moving to affordable luxury, particularly  in beauty market  Cosmetic Price Tier Movement ( Spend %)  12.8 20 250+ RMB / UNIT 6.8 11.2 7.2 200‐249 RMB / UNIT 9.6 16.5 15 150‐199 RMB / UNIT 20.5 100‐149 RMB / UNIT 18.1 50‐99 RMB / UNIT 32.1 30.0 0‐49 RMB / UNIT 2009 2010Source: Kantar Worldpanel China – National Urban Panel, 2010
  31. 31. Premiumisation trend more noticeable in some  categories beyond inflation 15 RMB/Kg + 15.2%  ‐>    23.4% Liquid Milk 160 RMB/Kg + 40 RMB/Kg + 27.5%  ‐>    32.5% 36.0% 26.4%  ‐>    Chocolate BiscuitSource: Kantar Worldpanel China – National Urban Panel, 2010
  32. 32. In conclusion Develop winning strategy for each market cluster Embrace growth opportunities in lower tier cities Help retailers differentiate as they enter next phase Be ready with your e‐commerce strategy Meet trading up needs with quality offer
  33. 33. Closing thoughts
  34. 34. 1. Penetration, penetration, penetration…2. Change the rule of game3. China is greying – be prepared4. Bottom of pyramid – never ignore them 5. Be bold and experiment
  35. 35. 虞坚 Jason Yu 021-6170101 Jason.yu@ctrchina.cnCTR项目执行遵循ISO20252标准 For more information,visit us at www.ctrchina.cn CTR项目执行遵循ISO20252标准 For more information,visit us at www.ctrchina.cn
  36. 36. 洞察中国市场的专业品牌

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