Emerging local brands sped up in gaining market share in China over the past three years, underscoring the evolution of the country's booming retail sector, according to industry observers.

China's fast-moving consumer goods (FMCG) industry saw its expansion moderate in the first half of 2018, while posting a two-speed growth trajectory, with personal and home care growing at a much faster rate than food and beverage, according to the latest annual China shopper report from market research firms Kantar Worldpanel and Bain & Company.

Sixty-seven percent of the 46 local FMCG emerging brands the report tracked grew at least two times faster than their category average.

While representing roughly a 6 percent market share across the 33 categories they are in, these new players delivered nearly 20 percent of revenue growth from 2015 to 2017 in these categories, the report showed.

"We are seeing local emerging brands continue to grow in China, and it demonstrates just how unique and fascinating the landscape is, as well as how challenging it is to navigate effectively," said Jason Yu, managing director of Kantar Worldpanel Greater China and co-author of the report.

Bruno Lannes, a partner in Bain's Greater China Consumer Products practice, said these fledgling companies demonstrate an entrepreneurial mission, innovations focused on Chinese consumers, and more speed and agile operating models, which give them a leg up in taking market share from established global and local brands.

The report suggested that incumbents - especially multinationals - need to localize everything from product design to branding to marketing, delegate innovation, marketing, distribution and other decisions affecting their China business to their China teams, and boost their ability to act quickly on market opportunities.