FMCG in China: How local insurgent brands are winning the war

In China, FMCG is a USD 190 Billion market.

The big chunk of its sales still comes from offline with a vast network of over 6 million brick&mortar stores. It is estimated that FMCG brands in China have to throw a sum around RMB200 billion every year into these traditional channels either to promote or distribute their products, which accounts for at least 10-15% of their annual revenues. Meanwhile, lots of B2B vendors and agencies are mouth-watering to have a bite on this gigantic meat of RMB200 billion.

Anyhow the industry can be divided into four major sectors, which represents 80% of China’s FMCG purchases:

  • packaged food
  • beverages
  • personal care
  • home care

In 2018, China FMCG experienced overall slower growth, around 3.3%.

What is truly interesting here is local Chinese FMCG brands have been stealing turfs (stand for 98% of market share growth) from foreign brands across most product categories.

So welcome the family of local insurgent brands based on the latest report from Bain&Company.

So far half of these upstarts are still small players, with annual revenues fall into the range between RMB100 million and RMB 500 million. But they grow quickly, delivering nearly 20% of the revenue growth from 2015 to 2017. 

Although insurgent brands rise fast, they tend to die faster as well. The competitive dynamic is waves of upstarts coming and going, constantly bashing against the territory of big or multi-national incumbents.

Bain&Co’s research tries to uncover the secret formula of insurgents’ rapid success. It might be worthy of highlighting that:

  • Insurgent brands usually narrow the product assortment, leveraging just one or two “killer SKUs” to gain a speedy market penetration

  • Without established offline distribution network, they shift their focus online and become hyper-digital in terms of embracing non-traditional marketing channels and implementing very localized engagement campaign.

At the end of the day, winning the battlefield of the FMCG seems to be more or less about the speed. Innovate product design fast, adopt a new online marketing channel/partner swiftly and especially no substantial amount of time should be wasted for decisions to travel from the local to regional to headquarters for approval. 

By: Cecilia Wu