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China to become biggest grocery market within five years

China will become the world’s biggest grocery market in value terms within five years, overtaking the US, according to the IGD.

Forecasts from IGD Asia predict that by 2023 China’s grocery market will be worth CNY11.0tn (US$1.8tn). This is more than the next four largest grocery markets in Asia (India, Japan, Indonesia and South Korea) combined.

The growth provides opportunity for international retailers and brands, and explains the opening of stores by groups such as ALDI, which last week opened two stores in Shanghai.

“China will not only retain its position as Asia’s largest grocery market by 2023, it will also overtake the US to become the world’s largest,” says IGD head of Asia-Pacific Nick Miles.

“Less than half of grocery sales in China currently go through traditional trade and as the market continues to mature, we expect traditional trade to continue losing share to modern trade. As the total market size expands, traditional trade will still grow, but at a much slower pace over the next five years (forecast CAGR of 0.8%), compared with the growth rate of modern trade (forecast CAGR of 8.5%).”

Ongoing expansion of store numbers in China is expected to continue, with strong performances from online and convenience channels.

“Convenience will be the fastest-growing physical store channel, driven by Alibaba and JD.com transforming traditional mom-and-pop stores, retailers opening smaller format stores and both local and overseas players expanding their networks through partnerships. Online and offline integration will drive online growth. As the fastest-growing channel, we forecast online to contribute up to 11% of sales in 2023,” says Miles.

Hypermarkets are expected to lose market share over the next five years, going from 22 per cent to 18 per cent, with the share held by supermarkets set to remain steady at around 20 per cent.

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