CHINA has become the largest grocery market in the world, overtaking America for the first time after its consumers spent almost US$1 trillion in supermarkets last year, new research suggests.

The collective shopping basket of China's mainland totaled US$976 billion in 2011 compared with US$919 billion spent in the US, according to IGD, the UK-based market analysts. The firm includes in its research all goods sold by supermarkets and other retailers that sell predominantly food.

The Chinese grocery market is set to expand at a compound annual rate of 10.9 percent a year between 2011 and 2015, according to the researchers, double the 4.2 per cent growth seen in the US market, although sales are still accelerating in America, IGD said. In four years time it believes China's grocery market will be worth almost US$1.5 trillion, compared with US sales of slightly more than US$1 trillion.

The speed at which China has leapfrogged the world's biggest economy in grocery sales has surprised market watchers, who predicted two years ago that China would reach the milestone in 2014.

"It's happened earlier than everyone thought, partly because of the prolonged slowdown in the US," said Joanne Denney-Finch, the chief executive of IGD. "Some people are sceptical about the China growth story, but the country is still defying analysts' forecasts with strong data."

However, the strength of the Chinese grocery market lies mainly in the sheer collective buying power of a 1.3 billion-strong population four times bigger than that of America.

The value of the average Chinese shopping basket, a critical factor for supermarkets, is still only a quarter of that in America, which also spends vastly more in fast food outlets and restaurants.

While the potential is vast, China's grocery market is a fickle and fragmented landscape where domestic chains compete fiercely with Western brands for a share of a low margin market.

"It is much more competitive than in the US or Europe. It is incredibly hard to make money," said Paul French, chief China analyst at Mintel. "People are very price conscious and do not spend on the variety of goods that they do in the West. They are terrible for loyalty - it's been a massive problem for supermarkets in the past."

While Carrefour, which was swift to adapt to Chinese tastes with live fish and rice cookers, is widely regarded as having had the greatest success in China – "they got here first, and fastest" Mr French said - Tesco is expanding rapidly and is on track to grow the fastest globally in the next four years, according to IGD.

Western supermarkets have been experimenting with different strategies in a bid to win in China, which is forecast to have more than 200 cities with a population of more than a million people by 2025 – a population increase equivalent to the whole of America.

Source:shanghaidaily.com