China Retail Market Development
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Copyright © 2005 ACNielsen
a VNU business
Objectives
2004 Retail Census Findings
 Does Retail universe continue to expand?
 How big is our key channel (modern trade) as of today?
 Any changes to the composition of modern trade
outlet?
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Retail Development
As of 2004 Retail Market Study (Census)
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Copyright © 2005 ACNielsen
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China Retail Market Dynamics

China experienced strong economic growth in
2004 vs. 2003;
GDP climbed 9.5%
Retail Sales grew by 10.2%
Retail & Consumer Price indices grew at 2.8% & 3.9%
respectively

China fully opened up its retail market on Dec
11th, 2004 in line with the WTO commitments
vigorous development will continue across 2005
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Copyright © 2005 ACNielsen
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China Market - Summary


China’s key economic indicators provide a favorable outlook for
the overall market development, however…
Despite strong growth in these indicators there are more
significant challenges for the retail market
Modern Trade continues to grow > 30% in terms of store count, far greater
than the growth in retail sales
This has resulted in further downward pressure in comparable store sales
Intensified competition has & will continue to increase pressure on retailer
and manufacturer margins

Implication to Retailers: Now, more than ever it is essential to
understand your positioning in the market
To do so means knowing your shoppers needs better than your competitors
today
Furthermore, to keep abreast of their evolving needs is now not ‘nice to
know’ it is ‘ESSENTIAL TO KNOW’

Implication to Manufacturers: High pressure for sales team to
catch up with rapid outlet expansion
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Copyright © 2005 ACNielsen
a VNU business
2004 ACNielsen Retail Market Study (Census)


The 9th national study
Covered over 1 million FMCG outlets in 165 cities &
236 towns in China (villages excluded)
400+ sample points selected out of 20000+ cities & towns based
on stratified, disproportionate, systematic, random method.

Estimate the size, structure and sales turnover in
the universe of outlets
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Copyright © 2005 ACNielsen
a VNU business
2004 ACNielsen Retail Market Study
Key Findings

Transformation from Traditional Trade to Modern
Trade continuous
Continuous strong double-digit growth seen in MT
Polarization apparent in MT : Hypermarkets & CVS led the
growth !

Number of Grocery and Kiosk declined !
Declining trend consistent across different city types
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Modern Trade Continuously Recorded Strong
Double-digit Growth In Store Count & Turnover
While Groc/Kiosk Started to Decline !
National
4,658,256
# FMCG Stores
Monthly FMCG ACV ( Million RMB)
0% 4,661,623 -4% 4,480,940
36,205 +6%
1,384,045 +2% 1,406,637 +4%
1,466,043
2,724
+6%
38,481
2,897
+5%
0%
40,620
2,904
Others
G/K
-1%
MT
3,247,097
-1%
9,480
+18% 11,202
+21%
2002
2003
24,001
-8%
3,214,610
+2% 24,382
24,146
2,960,426
28,114 + 44% 40,375 + 35% 54,471
2002
2003
2004
Modern Trade includes hypermarket, supermarket, minimarket & convenience store
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13,570
2004
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MT Accounted For Over 1/3 Of FMCG Turnover
Nationally ; Groc/Kiosk Still Sizeable But
Declining Trend Apparent
National
FMCG ACV (%)
# FMCG Stores (%)
29.7
30.2
Others
7.5
7.5
7.1
66.3
63.4
59.4
26.2
29.1
33.4
2002
2003
2004
32.7
G/K
MT
69.7
69.0
66.1
0.6
0.9
1.2
2002
2003
2004
Modern Trade includes Hypermarket, supermarket, minimarket & convenience store
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9
In A cities, not surprising that MT became even
more dominant
A Cities
FMCG ACV (%)
# FMCG Stores (%)
25.1
28.3
Others
4.0
4.2
3.8
48.5
44.2
39.5
47.6
51.6
56.6
2002
2003
2004
33.0
G/K
MT
73.1
69.3
63.9
1.7
2.4
3.1
2002
2003
2004
Modern Trade includes Hypermarket, supermarket, minimarket & convenience store
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While in BCD Cities, G/K despite its dominance
also losing ground to MT which accounts for ¼ of
the market
BCD Cities
FMCG ACV (%)
# FMCG Stores (%)
28.5
28.6
6.8
6.7
6.5
73.5
71.6
67.9
19.6
21.7
25.6
2002
2003
2004
31.6
Others
G/K
MT
71.0
70.6
67.4
0.6
0.8
1.0
2002
2003
2004
Modern Trade includes Hypermarket, supermarket, minimarket & convenience store
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In short, MT aggressiveness is continuous even in
pioneer city like SH  MT would not be saturated (in
store count) in near future
Modern Trade Contribution
2004 Retail Census
73%
71%
60%
52%
57%
26%
4%
BJ
8%
SH
Store count
ACV
4%
1%
GZ
3%
CD
1%
A
BCD
Modern Trade Development
2004 vs 2003 (% Change)
ACV/Store
111%
84%
63%
36%
12%
BJ-17%
32%
16%
14%
28%
28%
28%
22%
-5%
-13%
SH
GZ
CD
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A
26% 23%
-3%
BCD
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Modern Trade expanding across regions, what
about the store type composition within this
channel?
Any insights?
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Polarization In MT where H’mkt & CVS led the
growth in value sales, in addition..
Monthly FMCG ACV
# FMCG Stores
FMCG ACV per store
Growth
Growth
Growth
2003
2004
Index
2003
2004
Index
2004
Index
4,661,622
4,480,940
96
38,481
40,620
106
8,263
9,065
110
40,375
855
54,471
1,175
135
137
11,202
3,525
13,570
4,446
121
126
277,444
4,123,114
249,119
3,782,658
90
92
Supermarket
2,355
3,297
140
2,001
2,336
117
849,822
708,703
83
Mini Market
24,693
30,755
125
4,646
5,492
118
188,149
178,570
95
Convenience
12,472
19,244
154
1,029
1,296
126
82,534
67,320
82
Grocery + Kiosk
3,214,610
2,960,426
92
24,382
24,146
99
7,585
8,156
108
Grocery
Kiosk
3,019,445
195,165
2,797,875
162,551
93
83
23,556
826
23,336
810
99
98
7,801
4,231
8,341
4,986
107
118
Other FMCG Handlers
1,406,637
1,466,043
104
2,897
2,904
100
2,060
1,981
96
NATIONAL
Total FMCG Handlers
Modern Trade
Hypermarket
2003
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Frequency & Spend strengthen w/i H’mkt to the
detriment of S’mkt, lifestyle trends appear to be
impacting store choice
Source: 2004 ShopperTrend
Hypermarket & Supermarket Leverage 2003 vs. 2004
HYPERMARKET
2003
Use P4W (%)
61
Used Past Year (%)
Consider Using (%)
2003
46
65
2004
43
74
36
68
88
85
81
Occasionally Use (%)
Non considerers (%)
2004
43
Spend Most Money (%)
Use Regularly (P7D) (%)
SUPERMARKET
86
94
96
96
95
96
98
98
99
97
99
98
99
2
1
Base: Random samples - All respondents (n=3372)
2
1
Ref: Q3a-d, 5a-b
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Growth in spend translates into increased shopping
frequency at H’mkt & CVS. S’mkt & more traditional
channel visits experienced little or no gain
Source: 2004 ShopperTrend
Trade Sector Average Number of Visits Per Month
20.63
2003
19
2004
43.5%
7
26%
7.35
5.74
5
5.67
4
3
Wet Markets
Supermarket
Hypermarket
Traditional Grocery
3.78
Convenience Stores
Ref:18Q6
Base: Visited in Past Year
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Loyalty to specific brands remains low or in decline
except cigarettes
Q. If you were buying <Product category> from your usual store and it’s not available,
would you…..”
Purchase Behavior in Event of Unavailability
Soft drink
4
2
4
10
4
29
2
24
3
14
4
11
44
12
12
4
10
44
10
14
73
84
72
83
53
57
80
82
3
2
4
2
14
16
4
3
Toothpaste
%
20
04
20
04
20
04
8
Moisturiser Instant Coffee Sanitary Napkins
20
04
6
20
03
20
04
45
20
03
20
04
46
Instant noodles
20
03
20
04
Cigarettes
Look for the same brand but choose something slightly different (e.g. different size/variant
Buy the same brand at another store
Buy an alternative brand
Wait until it was available
Base: Random samples - All who buy the products regularly
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Ref: Q16, 18, 20, 22, 24, (26, 28,21
30)
Conclusion




In the recent ACNielsen Retail Market Study, retail universe reported
a marginal decline (-4%) in store count resulted by the shrinkage of
Groc/Kiosk (-8%) in which Modern Trade (+35%) rapid expansion is
believed to be key drive.
As a result, transformation from Traditional Trade to Modern Trade
continues. Modern trade accounts for 1% of store count while 33%
of total FMCG sales value turnover.
Modern Trade aggressiveness observed across city layers even
Shanghai which is perceived as pioneer city, modern trade
expansion is still evidenced and didn’t seem saturated.
At the same time, polarization appears in modern trade:
In store count, H’mkt & CVS led the growth
Consumer study (2004 ShopperTrend) illustrates the increased frequency of
visits and also tendency to spend most H’mkt/CVS

Lastly, chinese consumers are having low brand loyalty that
majority will switch to other brand when the ideal one is out-stock.
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