Chinese shoppers desire premium fast-moving consumer goods

Despite growth deceleration in China's fast-moving consumer goods market, customers' desire of upgrading to premium products is set to be the sector's driving force, consumer insight company Kantar Worldpanel said in a report on Thursday.

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

Data showed that following China's economic slowdown, fast-moving consumer goods volume growth and value growth both dropped.

But value will outgrow volume by between 8 to 9 percent in 2014, because Chinese consumers are increasingly inclined to buy premium products, the report said.

For example, among milk products, premium goods -- those sold for more than 16 yuan (2.6 U.S. dollars) per liter -- accounted for only 26 percent of total sales in 2011. But it was 38 percent in 2013.

Premium toothpastes, which refer to more than 16 yuan per 100 gram, contributed to 20 percent of total toothpaste sales in 2011 and grew to 26 percent in 2013.

While in the biscuits category, premium products (priced at more than 80 yuan each kg) jumped from 15 percent in 2011 to 23 percent in 2013.

This phenomenon is most apparent in dairy product categories, where Chinese customers have not fully recovered their confidence in milk, formula, yogurt and butter made in China, Kantar said in a statement.

The fast growth of premium dairy products is mostly contributed by imported UHT milk. They were first introduced to China via foreign supermarkets, and then B2C (business to consumer) websites launched marketing campaigns to sell the imported milk and won customers.

China's domestic dairy companies have also set up sub brands for their premium dairy products, such as Momchilovtsi under Bright Dairy. In future, domestic dairy companies will have to compete with imported brands on availability and marketing. They now are very strong in distribution.

In the end, domestic companies will dominate the dairy market, Kantar said.

Chinese consumers do not necessarily need to drink more milk, but they definitely want to drink better and safer milk. In these categories, they believe expensive products are better products, according to Kantar.

E-commerce has played an active role in introducing premium products, and it will play a bigger role in the future.

To avoid cannibalizing among their own products, fast-moving consumer goods companies should design different product lines for online and offline channels. Offline can sell more low-cost products for ordinary consumers, while online is the major channel driving premium product sales.