Investment Rating - The report indicates a slight negative trend in the FMCG sector in China, with an overall growth of 0.8% year-to-date for Q3 2024, suggesting a cautious investment outlook for the industry [8][41]. Core Insights - The FMCG growth in China has slowed, with Q3 2024 showing a decline of -1.1% and a further drop of -3.5% in September, marking the most significant deflationary trend since 2021 [8][41]. - Price deflation has accelerated, with average selling prices (ASP) declining by -5.2% in September, highlighting increased price sensitivity among consumers [8][41]. - The report emphasizes the importance of innovation and aligning product offerings with consumer needs to navigate the current market challenges [21][34]. Summary by Sections Overall FMCG Performance - The FMCG sector experienced modest growth of 0.8% year-to-date, with Q1 and Q2 showing growth rates of 2.0% and 1.6%, respectively, followed by a decline in Q3 [41]. - The ASP has seen a significant decline, with a drop of -3.6% in Q3 2024, the highest since 2019, indicating a shift in consumer spending behavior [41][43]. Consumer Behavior Trends - Shoppers' purchase frequency has decreased over time, with top brands experiencing lower engagement, as evidenced by a drop in average purchases from three times a year in 2016 to two times in 2023 [18]. - Consumers are increasingly seeking value for money, leading to a shift in spending towards service sectors like dining and travel, which saw a 6.7% increase in retail sales [41][59]. Category Performance - Home Care led growth in the FMCG sector with a value increase of 3.5%, driven by robust volume growth of 8.7% [60][76]. - Personal Care faced a decline of -4.4%, with significant ASP deflation across categories such as hair conditioner and skincare, reflecting heightened cost-consciousness among consumers [65][76]. - Packaged Food showed moderate growth of 1.4%, with instant noodles emerging as the fastest-growing category, achieving an 8% growth [78]. Channel Dynamics - Offline channels outperformed online channels for the first time since the rise of e-commerce, gaining 1% market share, driven by discount chains and club warehouse formats [29][81]. - E-commerce faced a slight decline of 0.6% in 2024, with Douyin emerging as the second-largest e-commerce channel by gross merchandise value, despite a slowdown in growth [29][85]. Strategic Recommendations - Brands should focus on innovation and aligning their portfolios with genuine consumer needs, as consumers are becoming more rational and seeking true value rather than just low prices [21][34]. - Maximizing physical availability through omnichannel strategies and capturing mental availability through targeted marketing campaigns are essential for brand growth [44][45].