China: Grocery market to reach US$1.62tn by 2022

Market growth driven by spend rather than inflation

With GDP growth ahead of inflation, the economic growth in China has been, and is forecast to be, driven by real increase in output rather than rising prices. The market is expected to see a CAGR of 5.8% from 2020 to 2022, ahead of South Korea and Japan, but slower than India, Vietnam and the Philippines. Most of the country has been virus free since April 2020. The growth of China’s grocery market is forecast to remain robust in the next two years but slightly lower than historical levels.

Online will see the biggest market share increase of all channels

It is the fastest growing channel. We predict it to grow at a CAGR of 22.3%. Its value will almost double, up by 49.7% between 2020-2022. This channel will see the biggest market share increase of all channels. Alibaba and JD.com are leading the development of unlocking growth potential in underserved cities. Market share will increase from 6.9% in 2020 to 9.2% in 2022.

Traditional trade plays a key role

With 45% of the total population living in rural areas, nearly half (48% in 2020) of grocery sales in China currently go through traditional trade, such as wet markets, fishmongers and butchers. Traditional trade will continue to be critical for providing food security in rural areas and many smaller cities. As the market continues to mature, we expect traditional trade to lose share slowly to modern trade over time.

Hypermarkets to lose market share

Hypermarkets will continue to face challenges from online and smaller store discount formats, with market share declining from 20.0% to 18.2% by 2022.

Supermarkets, discounters and convenience will strengthen positions in the market

Supermarkets will strengthen its position in the market, with the channel reaching a market share of 17.5% in two years’ time. Convenience is also expected to see market share increase, up from 7.8% in 2020 to 8.8% in 2022.

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