Monday, April 15, 2024

To boycott foreign brands, Chinese consumers choose local brands | Business and Economic News

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He Shuang, an American university student stranded in the southwestern city of Chongqing in China during the pandemic, added more than 300 domestic brands to the list of favorites on Alibaba’s Taobao online store.

Like He, Chinese brands are sought after by most shoppers and have spurred billions of dollars in investment, because consumers are increasingly making patriotic choices amid China’s growing resistance to foreign brands.

After people were forced to stay indoors due to COVID-19 last year, online shopping surged, and the market has since recovered. Infrastructure that allows suppliers to rapidly scale up has also driven demand for local brands.

19-year-old He said: “After you taste it, you will find that the quality of local products is as good as foreign products.” He likes local brands from Carslan eye shadows and Feiyue sneakers to Bestore Co snacks and MINISO household products.

Maia Active, a sportswear manufacturer backed by Sequoia Capital, stated that its products are designed based on the body measurements of Asian women, and therefore provide local customers with products that are more fit and more comfortable than their Western counterparts.

New capital

In keeping with demand, investors have also been injecting capital into local consumer brands this year.

According to data from China’s boutique investment bank Cygnus Equity, in the first five months of this year, Chinese consumer goods companies raised 69.7 billion yuan ($11 billion) from primary market investors, more than double the amount in the same period last year.

“Beauty products, food and beverage brands are the most popular. Recently, hot pot and ramen brands are particularly coveted,” said Jin Ming, managing partner of Cygnus.

Bankers and investors said that as many as 200 brands are currently seeking new capital from investors.

“China is the easiest market to establish products with sales targets ranging from zero to 100 million yuan,” said a private equity investor in tea chain operator Nayuki, who declined to be named because he was not authorized to speak to the media.

Nayuki’s listing in Hong Kong last week raised US$656 million, which is valued at US$4.4 billion, more than double the funding round in December last year.

Weilong Delicious Global Holdings’s Flour Spicy Bars sells for less than RMB 5 (US$0.77) per pack. In May, they raised funds from well-known investors such as Tencent, Jack Ma’s Yunfeng Capital, CPE, Hillhouse Capital, and Hillhouse Capital. 3.56 billion yuan (550 million US dollars). Sequoia Capital China. The snack food manufacturer’s valuation is close to 70 billion yuan ($10.8 billion).

Genki Forest, which seeks to challenge Coca-Cola’s soft drink brand backed by Sequoia, said that after financing in April, its valuation was $6 billion, 10 times that of 18 months ago.

Its fundraising activities attracted investors such as the private equity arm of Louis Vuitton owner LVMH and Singapore national investor Temasek.

Nationalist fanaticism

During the JD Online Shopping Festival this month, the sales growth of Chinese brands was 4% higher than that of international brands. JD.com said that their number of customers has grown 16% more than international brands.

Chris Mulliken, a partner at the consulting firm Ernst & Young in Shanghai, said that nationalism is a factor in promoting the popularity of local brands, including being proud of China’s recovery from COVID-19, despite several others. The country is struggling with high infection rates.

“People are traveling, even if they are traveling within the country, and take this opportunity to rediscover their country, return to their customs and discover new Chinese brands,” he said.

The recent Xinjiang cotton ban imposed by several global brands including H&M, Nike and Adidas is another catalyst because the province is suspected of violating human rights and offending many Chinese consumers. China strongly denies claims of abuse and forced labor, and stated that all labor in Xinjiang is voluntary and contractual.

The share prices of domestic sportswear manufacturers Xtep, Li Ning and Anta have risen 196%, 60% and 38% respectively since April.

Traders warned of the sharp rise in valuations, and they also said that the demand trend will continue for a long time.

“Consumers no longer worship international and multinational brands. They like the products and brands they endorse,” said Nina Gong, managing director of the private equity firm Carlyle Group in Beijing.




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