Chinese grocery market set for solid growth, says IGD

A report released by the international grocery research organisation IGD has forecast growth of 32.6 per cent in the Chinese grocery market by 2022, preserving its status as the largest grocery market in Asia. Grocery retail sales in China are set to rise to CNY 11.4 trillion (US$1.637 billion), more than India, Japan and Indonesia combined.

The market is expected to see a CAGR of 5.8 per cent over the next five years, on par with Thailand but slower than markets such as India, Vietnam and Bangladesh, where the economy is growing faster.

Globally, China will remain the second largest grocery market in the world by 2022, behind the US in terms of value.

Shirley Zhu, programme director for IGD’s Asia-Pacific research, said China continues to be an exciting market to watch with its significant size and rapid growth. “Retailers with nationwide networks such as Sun Art, Yonghui, Walmart, CRV and Carrefour will reap rewards from ongoing expansion, partnerships with e-commerce players, improved efficiency and investment in small formats.

“Similarly, e-commerce giants such as Alibaba and JD.com will see significant growth from both online and offline channels and become the second and third largest grocery retailers in China, respectively. Regional players such as NGS, Wumart and Bailian will continue on their journey of transformation and consolidation and focus on profitability.”

Market share for hypermarkets and supermarkets will remain steady, close to 40 per cent of the market up until 2022. However, the supermarket channel will overtake hypermarkets as the largest sales channel with a market share of 20.7 per cent, says IGD.

“Convenience will be the fastest-growing physical store channel”, said Zhu. “This will be driven by Alibaba and JD transforming traditional mom-and-pop stores, retailers opening smaller format stores and both local and overseas players expanding their networks through partnerships. Online and offline integration will drive online growth. As the fastest growing channel, we forecast online to contribute up to 11.1 per cent of sales in 2022.”

Less than half of the grocery sales in China currently go through traditional trade. As the market continues to mature, traditional trade will keep losing share to modern trade, which currently accounts for about 57 per cent of total grocery retail sales and is predicted to grow to 66 per cent by 2022.