Consumer brands in China are facing an increasingly challenging market, with ongoing deflationary pressures making it more difficult to maintain profitability. According to a recent study by Bain & Co and Kantar Worldpanel, international and local consumer brands will need to adopt low-price strategies to remain competitive in the mainland Chinese market.
Adjusting to Deflation and Shifting Consumer Behavior
China’s fast-moving consumer goods (FMCG) sector is under significant strain. The average selling price of essential products, such as toothpaste, bottled water, and snacks, dropped 2.4% in the first three quarters of 2025 compared to the previous year. However, this price reduction has driven an increase in buying volume, which grew by 3.8% year on year. Despite this, total FMCG spending rose only modestly by 1.3% over the same period.
Lower-Tier Cities and Emerging Channels for Growth
To combat the pressures of deflation, consumer brands in China are focusing on lower-tier cities, where there is still room for growth. With consumers becoming more conscious of value, convenience, and experience, brands must adapt to local market trends and adjust their strategies accordingly. Companies are increasingly turning to online-to-offline (O2O) channels, which blend digital and physical shopping experiences, to expand their reach in these markets.
Moving Forward with Strategic Partnerships
Rachel Lee from Kantar Worldpanel highlighted the importance of collaboration, with international brands increasingly partnering with small-format retailers like snack stores and community supermarkets. By doing so, they aim to increase sales while keeping prices affordable for cost-conscious shoppers.
