Va­ri­ety of forces tug on shop­pers’ purse strings

The govern­ment aus­ter­ity drive and a slow­ing econ­omy have dealt blows to the sale of con­sumer goods, par­tic­u­larly lux­ury brands and high-end prod­ucts, Wang Zhuoqiong re­ports

China Daily (Canada) - - BUSINESS -

China’s slowi ng econ­omy, as well as the govern­ment anti-cor­rup­tion cam­paign, have weak­ened the growth of many in­ter­na­tional com­pa­nies. Ex­perts pre­dict dimmer prospects for con­sumer spend­ing this year.

Zhao Ping, deputy di­rec­tor of the depart­ment of con­sumer eco­nom­ics at the Chi­nese Academy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion, said re­tail sales growth stood at 13.1 per­cent in 2013, down from the 14.3 per­cent growth logged in 2012 and 17.1 per­cent in 2011.

Ja­son Yu, gen­eral man­ager of Kan­tar World­panel, a global re­searcher of shop­ping habits, said the sales of fast-mov­ing con­sumer goods rose by 7.4 per­cent in 2013.

Al­though the f ig­ure seemed pos­i­tive com­pared with the slug­gish mar­kets of Europe and the United States, they re­flect an ob­vi­ous slow­down from the dou­ble-digit growth of pre­vi­ous years, he said.

Ac­cord­ing to China Me­dia and Mar­ket Trends of 2014, re­search con­ducted by CTR Mar­ket Re­search, sales growth for fast-mov­ing con­sumer goods sank to 7 per­cent from 11 per­cent in the fourth quar­ter of last year.

“Such weak­ened growth has had a ma­jor im­pact on many con­sumer businesses,” Yu said.

The aus­ter­ity cam­paign de­signed to curb con­sump­tion of lux­ury prod­ucts us­ing pub­lic funds greatly af­fected the sales of high­end prod­ucts and lux­ury brands in the coun­try, Yu said. He cited for­eign al­co­hol, wine and tobacco as ex­am­ples.

“The macroe­con­omy has more or less curbed the

Such weak­ened growth has had a ma­jor im­pact on many con­sumer businesses.” JA­SON YU GEN­ERAL MAN­AGER, KAN­TAR WORLD­PANEL

de­sire to pur­chase,” he said. “Con­sumers are re­luc­tant to spend.”

He ob­served that the buy­ing of house­hold items from State-owned en­ter­prises or govern­ment in­sti­tu­tions for em­ployee wel­fare also has dropped sig­nif­i­cantly.

Food mar­keter Nes­tle and liquor seller Pernod Ri­card SA at­trib­uted their weak re­sults in part to strug­gles in emerg­ing economies.

Many Euro­pean com­pa­nies had re­lied on sales in mar­kets such as China, Brazil and Mex­ico to main­tain rev­enue mo­men­tum while de­vel­oped mar­kets re­mained slug­gish.

“The macro-en­vi­ron­ment in 2013 was one of soft growth, min­i­mal in the de­vel­oped world and be­low re­cent lev­els in the emerg­ing mar­kets,” Nes­tle Chief Ex­ec­u­tive Paul Bul­cke said. “2014 will likely be the same.”

Nes­tle, based in Vevey, Switzer­land, the world’s largest food maker by rev­enue, said growth in its Asia Ocea­nia Africa re­gion, which con­tains the Chi­nese mar­ket, cooled to 7.4 per­cent in 2013 from 10.3 per­cent a year ear­lier.

Nes­tle, maker of Kit Kat choco­late bars and Nescafe in­stant cof­fee, said its ful­lyear profit fell 2.2 per­cent to a worse-than-ex­pected $11.16 bil­lion. The com­pany cited Hsu Fu Chi, a con­fec­tionery maker in China, as a weak point, be­cause of the slow­ing down of the coun­try’s sweets mar­ket.

Spir­its man­u­fac­turer Pernod Ri­card has seen its sales slide over the past year af­ter China’s anti- cor­rup­tion cam­paign curbed lav­ish ban­quets and the prac­tice of gift-giv­ing among of­fi­cials and ex­ec­u­tives.

The Paris-based com­pany warned that a sales de­cline in China would weigh heav­ily on the group’s prof­its go­ing for­ward.

“There will be a re­cov­ery, but we don’t know when and how,” Chief Ex­ec­u­tive Of­fi­cer Pierre Pringuet said.

Pringuet said he re­mains hope­ful the group will re­turn to dou­ble-digit growth in China but the glory days of Chi­nese con­sumers sip­ping $2,000-a-bot­tle brandy may be over.

In Jan­uary, Unilever Plc, which makes Ben & Jerry’s ice cream and Dove soap, warned of un­cer­tainty in emerg­ing economies that likely will hold back growth.

The An­glo-Dutch com­pany, which gets nearly 60 per­cent of its rev­enue from China, In­dia and other emerg­ing mar­kets, said un­der­ly­ing sales growth fell to 4.3 per­cent from 6.9 per­cent a year ear­lier, the first drop recorded since 2009.

Snack maker Mon­delez In­ter­na­tional Inc, based in Chicago, said or­ganic sales grew 1 per­cent in Europe in the fourth quar­ter but dropped 6.1 per­cent in the Asia-Pa­cific re­gion be­cause of lower pric­ing across most of the re­gion and a de­cline in China, where rev­enue had a mid-teens per­cent­age de­cline.

De­spite the pol­icy shift and stag­nant macro-con­sump­tion en­vi­ron­ment, Yu of Kan­tar World­panel cited a lack of com­pet­i­tive strat­egy

3.1

as the ma­jor cause for weak­ened growth in the for­eign con­sumer in­dus­try.

Ac­cord­ing to Kan­tar World­panel, in the past quar­ter, lo­cal re­tail­ers con­tin­ued to see stronger per­for­mances than their for­eign ri­vals.

But brick-and-mor­tar re­tail­ers con­tin­ued to strug­gle as shop­pers in­creased their vis­its to other chan­nels, such as e-com­merce, where prices and con­ve­nience are more com­pet­i­tive.

Among hy­per­mar­kets and gro­cery stores, the growth rate of in­ter­na­tional chains lagged be­hind lo­cal out­fits with more adapt­able strate­gies.

French gro­cer Car­refour SA re­ported a 1.4 per­cent in­crease in its fourth-quar­ter fi­nan­cial re­sults, which was lower than its third-quar­ter re­sults.

Be­cause of a slow­ing con­sumer en­vi­ron­ment, sales gen­er­ated by stores open for at least 12 months were down 3.1 per­cent. Car­refour’s 2013 sales grew by 2.5 per­cent to 84.3 bil­lion eu­ros ($115 bil­lion).

Yu sug­gested merg­ers and ac­qui­si­tions would boost the rev­enue of in­ter­na­tional con­sumer com­pa­nies in China. Last year, Yinlu, bought by Nes­tle, en­joyed a par­tic­u­larly strong year, helped by its new pre­mium con­gees.

Pur­chas­ing power was re­leased in the fourth quar­ter of last year. Yu ex­pects the over­all fast con­sump­tion mar­ket will slowly re­cover this year if there are no fur­ther neg­a­tive poli­cies.

Ur­ban­iza­tion and China’s new sec­ond­child pol­icy should stim­u­late the con­sumer mar­ket, he said.

“The fast con­sump­tion mar­ket of 2014 is ex­pected to grow 8 or 9 per­cent based on the in­crease of con­sumers’ in­comes,” Yu said.

Ac­cord­ing to the Min­istry of Com­merce, in Jan­uary, the con­sumer mar­ket was fu­eled mostly by hol­i­day shop­ping.

Based on 5,000 key re­tail­ers mon­i­tored by the min­istry, sales of food and bev­er­ages have in­creased 19.6 per­cent and 22.4 per­cent. The growth rates are 8.3 per­cent­age points and 12.2 per­cent­age points higher than that of a month ago. Sales in ap­parel have been up 13 per­cent, 9.5 per­cent­age points more than those a month be­fore.

Su­per­mar­kets and depart­ment stores have seen sales grow month-on-month by 16.5 per­cent and 14.6 per­cent, re­spec­tively.

Most of the re­cov­er­ing forces of the con­sumer mar­ket last year were high­lighted on com­mu­ni­ca­tion prod­ucts such as smart­phones and e-com­merce with strong Sin­gles’ Day sales, she said.

The im­prov­ing con­sumer mar­ket also was boosted by sales in ba­sic sec­tors such as food, bev­er­age and ap­parel, which kept a growth rate of be­tween 30 and 40 per­cent.

Zhao Ping said con­sump­tion growth will hover at around 13 per­cent this year as a re­sult of the lack of short-term pol­icy stim­u­lus and mild gross do­mes­tic pro­duc­tion.

Chal­lenges in rais­ing salaries and hir­ing rates also will cut into the spend­ing power of con­sumers, she said. Con­tact the writer at wangzhuo­qiong@ chi­nadaily.com.cn

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.