The COVID-19 Impact in China (so far)

Like many, we innovated this week by turning our 2nd floor dining area in the Nielsen Shanghai office area into a digital studio to host a webinar for 30+ China CEOs. Was nice to lose the masks for 45 minutes!

The webinar summarised much of the research we have been doing over the past weeks looking at the impact of COVID-19 on consumers, markets, channels and organisations, especially as it relates to Consumer Packaged Goods.

Here are 10 of the highlights we shared:

1. Unlike the rest of the world, the suddenness of the COVID-19 outbreak meant there wasn’t time for the proactive health management & pantry stocking/panic buying phases we saw in other countries. Relatively speaking, Chinese consumers remained calm.

2. The speed of the lock-down also created huge supply issues - for example 57% grocery stores were closed for whole of February & 60% of stores that remained open had significant out of stocks. Retailers have learnt from this experience with 43% saying that post COVID-19 they will strengthen supply chains, 53% saying  they will expand “health” shelf space and 67% saying they will expand O2O and home delivery options.

3. Restricted living created a new “homebody” economy - 78% people worked from home, 80% were actively learning, 85% cooking, 66% using live video. This unexpected time at home gave people a chance to think & re-evaluate.

4. In February, in line with store closures and fear of venturing outside, brick and mortar CPG sales declined by 21%, whereas online grew +50%. However these figures are exaggerated due to CNY timing (it was in January this year, February last year). If you look at Jan/Feb combined then brick and mortar sales declined by 4% and online grew by 29% online. Overall there was still 3.4% growth.

5. This growth was largely  driven by in-home dining (eg frozen dim sum +36%, Instant noodles +22%) and health management (eg antiseptic liquid +351%, wet tissues +54%, household cleaning +45%). People were cooking and cleaning.

6. Conversely the most challenged areas were impulse and gifting (eg biscuits -21%, chocolate -7%) and personal care (eg facial cleanser -21%, oral care -8%). No socialising and hence less concern about how you look. The bigger losses were felt in key cities, largely because consumers living in those cities typically have more discretionary purchasing. 

7. When we surveyed consumers at end of February, 92% felt confident about the outcome of COVID-19 as a result of the governments sharp response. We have seen weekly sales increase over March suggesting confidence is returning.

8. Part of the Chinese government economic stimulus will be investing heavily in 5g infrastructure. This is smart as consumers have used their time at home to become more tech aware, 93% for example are saying they would like to switch to a 5g phone and 67% becoming interested in AR/VR. 

9. The new normal is still being defined and will be about overcoming fears. Only 40% are currently saying they will use as much public transport and 14% are saying they will travel as much. 75% of us however will do more exercise! Although we do expect these numbers to change quickly over time, it is clear that out of crisis comes opportunity, in this case possible boosts for automotive, domestic tourism and gym memberships respectively.

10. Despite the challenges, leaders of big businesses in China have become more agile and are optimistic. But they are adjusting their strategies - more digital, better innovation and cash flow are high on their list of priorities.

The next weeks and months will remain critical to the rebound in China, and will undoubtedly also be influenced by events elsewhere in the world. We'll continue to unravel what's happening, stay tuned as the story develops.