How can China’s FMCG brands move beyond discounts?

Simply increasing supply and lowering prices are no longer enough.

China’s fast-moving consumer goods (FMCG) market is shifting focus from traditional supermarkets and discounting to revised store formats, e-commerce, and delivery services as brands chase growth.

Retailers are targeting smaller cities and younger consumers with specialty outlets and online-to-offline (O2O) platforms to reach shoppers more efficiently.

“Brand growth can no longer rely on increasing supply or deepening discount strategies,” according to a report by Bain & Company and Worldpanel by Numerator released in December.

It noted that brands should understand why consumers choose a product in different channels and identify the key moments that drive purchases.

Emerging store formats are performing strongly. Membership stores grew 40% in 2025, now representing 18% of hypermarket sales, whilst snack collection outlets expanded 51%, especially among younger shoppers in lower-tier cities, according to the report.

Discount stores surged 92% as consumers sought affordable household essentials. E-commerce penetration reached 39% last year, with Douyin Group (HK) Ltd. and PDD Holdings, Inc. accounting for over 40% of FMCG online sales.

O2O platforms grew almost 8% in the third quarter, driven by nonperishable items such as bread, juice, and nutritional supplements.

Total FMCG spending rose 1.3% in the first three quarters of 2025, largely driven by higher volumes, even as average prices fell 2.4%.

Tier 3–5 cities contributed roughly 80% of market expansion, benefiting from urbanisation, new retail formats, and broader brand availability.

In contrast, Tier 1–2 cities had flat growth, with some consumers trading down amidst slower macroeconomic recovery, it added.

Category performance was uneven. Packaged food and home care products grew 3.4% and 3.3%, respectively, whilst personal care rose 1.1% and beverages fell 1.1%.

Instant noodles and nutritional supplements led packaged food gains, whilst chocolate and candy lagged, affected by rising health awareness and a shrinking child population.

Analysts said brands that integrate offline stores, digital channels, and O2O delivery whilst tailoring pack sizes, prices, and product offerings are best positioned to capture growth.

“Channels are no longer simple points of sale—they have evolved into active, data-driven ecosystems that both capture and shape consumer demand,” according to the Bain & Company and Worldpanel report.

Convenience, data-driven promotions, and seamless digital operations are key for retailers to lead the market.

China’s FMCG market now shows a two-speed pattern, with hygiene, home cooking, and functional nutrition categories growing quickly, whilst beverages and traditional staples lag.

Retailers that focus on attracting shoppers and building loyalty—rather than just closing sales—and that invest in personalised services, convenience, and digital tools are likely to lead the market.

Questions to ponder:

• How can brands use emerging store formats like membership, snack collection, and discount stores to drive repeat purchases?
• What is the best way to integrate online, O2O, and offline channels to reach consumers?