It's been a difficult couple of years in China for many big brands as the cycle of high economic growth has slowed. While many Western brands have always faced an uphill battle in the country, tougher market conditions – and the rise of competitive local brands - have brought on new challenges.
According to Stephen Maher, President of Mondelez China, distribution and margins are slowing down in China's Tier 1-2 cities, which is where the big MNCs and companies have concentrated their growth strategies.
But things are beginning to change: global FMCG giants such as Mondelez are refocusing to target increasingly connected and brand-savvy consumers in Tier 3 and 4 cities –the heart of China's provinces – where consumption is increasing, as Tier 1 megacities such as Beijing and Shanghai reach brand saturation point.
All-category volume data shows that consumption of FMCG has declined from 28 per cent in 2012 to 26 per cent in 2016 in Tier I cities and remained flat in Tier 2 cities in the same period. Tier 3 and 4 cities, and smaller towns, on the other hand, recorded a growth in demand.