Mark Tanner
Mark Tanner
5 September 2018 0 Comments

Good news for brands in China’s grocery category: there was a healthy 4.7% growth for FMCG products in the second quarter of this year according to Kantar World panel. This is a positive rise from the 3.6% in 2016 and 4.3% in 2017.

One of the key future drivers of FMCG growth will be New Retail. This will allow much smarter, data driven and experience-based retailing to capture the majority of consumers who still want to buy their groceries from a physical store.

There are few conversations about New Retail in China that don’t mention Alibaba, particularly its darling Hema chain with a current footprint of just 50-odd stores. Most headlines referring to Alibaba’s 61% growth in revenue last quarter single out New Retail as its key investment area. The press about Alibaba’s arch rival Tencent hasn’t been so positive as of late. Last quarter, Tencent recorded its first drop in profit in 13 years – a notable 23% decline. Much of this fall has come from China’s freeze on gaming approvals, which has seen $170 billion wiped off the value of Tencent’s stock since January.

In spite of Tencent’s grim news, the Q2 FMCG results point to it being the standout achiever on the grocery retail front, not Alibaba. Online was again the fastest growing channel for FMCG, up 36% from a year earlier – and Tencent’s 20%-owned JD was the fastest growing platform. A large driver of JD’s growth was the enormous amount of traffic originating from WeChat. In addition, WeChat’s mini programs have become a hot new channel for brands selling online, with over 1 million mini programs and hundreds of millions of daily users.

In the brick & mortar-dominated category, it is the Tencent-backed Yonghui and Walmart supermarkets that are growing the fastest, beating out the Alibaba-backed Auchan or RT-Mart last quarter. Along with JD and the brains of the world’s biggest retailer Walmart battling for it, Tencent now has a partnership with Google, which will see it continue to strengthen in the retail space and provide a legitimate challenge for China retail supremacy.

Tencent-related growth in the grocery category in part shows the pulling power that Tencent has with WeChat. Although Tencent’s data, marketing and logistics may not be as well integrated as Alibaba’s, it is being carried by WeChat’s social influence and insights.

Which serves as a suitable reminder for you to reserve a spot for next week’s WeChat Webinar on September 12/13, which will offer actionable takeaways to help you win on WeChat in China. If you let us know what you’re specifically looking for, and your industry before this Friday, we’ll tailor content where we can to your needs. Click/tap here for more information. Go to Page 2 to see this week’s China news and highlights.

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