China’s dependable growth in the overall value of fast-moving consumer goods (FMCG) took a pause in 2020 amid dramatic shifts in consumer behavior caused by the Covid-19 pandemic. There was a

sharp decline in overall spending in the early months of 2020, as cautious consumers stocked up on necessities, sought out lower-priced goods and held off on anything deemed unessential. Overall, FMCG spending did recover in the second and third quarters (see Figure 1). However, those recent gains were not enough to outweigh the significant slowdown earlier in the year. Sales were essentially flat in the first nine months of 2020 after three straight years of more than 5% annual growth.

While volume growth remained steady at the same 2% level of 2019, the biggest contributing factor to the flat sales performance was a major decline in average selling prices (ASP). Those prices dropped

by an average 2.1% in the first three quarters, with consumers buying more mass-market products and making more of their purchases online, where products typically are sold at promotional rates. The ASP loss represents more than a 5% drop when you consider the 3.4% increase in 2019 (see Figure 2). Indeed, after years in which selling prices outpaced inflation, the long run of premiumization—or the

ability to increase ASP above the rate of inflation—ended this year, another victim of Covid-19.