China to overtake US as the world’s largest grocery market by 2023

CHINA – China is set to become the world’s largest grocery market by 2023 in value terms, overtaking the US which has been benefiting from a strengthening economy.

According to the latest statistics from international researcher IGD Asia, the country’s total market size will reach CNY11.0 trillion (US$1.8 trillion), bigger than the Asia’s next four largest grocery markets (India, Japan, Indonesia and South Korea) combined.

Expansion of the market is attributed to factors such as development of modern trade in China over the next few years backed by store expansion as well as strong contributions from the online and convenience channels.

The market is expected to have a CAGR of 5.5%, on par with Sri Lanka and Thailand, but slower than markets such as India, Vietnam, Indonesia and the Philippines, where the economy is growing faster.

“Less than half of grocery sales in China currently go through traditional trade and as the market continues to mature, we expect traditional trade to continue losing share to modern trade,” said Nick Miles, Head of Asia-Pacific at IGD.

“As the total market size expands, traditional trade will still grow, but at a much slower pace over the next five years (forecast CAGR of 0.8%), compared with the growth rate of modern trade (forecast CAGR of 8.5%).”

Convenience stores to grow faster

The market is dominated by Alibaba and JD.com which are expected to be the fastest-growing physical stores in the convenience segment.

Online and offline integration are expected to drive online growth, a segment that is estimated to contribute up to 11% of sales in 2023.

Hypermarkets on the other hand, will see their share of China’s total grocery retail market reduce from 22% in 2018 to 18% in 2023, while that of supermarkets will remain steady at about 20%.

Both JD.com and Alibaba are set to grow significantly boosted by online and offline channels to become the second- and third-largest grocery retailers in China, respectively.

Other retailers such as Sun Art, Yonghui, Walmart, CRV and Carrefour will benefit from ongoing expansion, partnerships with ecommerce and tech companies, improved efficiencies and investment in small formats while regional players such as NGS and Wumart will continue to focus on profitability.

The market will also grow based on expansion through local partners and strong alliances between ecommerce players and bricks and mortar retailers.

“With such strong market growth to 2023, trading in China has vast potential, whether supplying directly to physical stores or via online marketplaces.

“However, there are huge changes taking place that suppliers need to consider.

“Online giants are reshaping China’s retail landscape with their strong logistical and technical capabilities, so suppliers should understand this new path of purchase and design meaningful ways to reach their shoppers,” said Nick.

IGD notes that traditional trade should not be neglected as it will account for about one-third of FMCG sales in 2023.

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