As the Covid-19 limitations are lifted, China’s consumer markets begin to recover
New York, Milan, Frankfurt, and London: Since Beijing lifted its COVID-19 curbs, the world’s leading consumer and luxury goods companies have seen increases in sales of everything from condoms to cosmetics in China. Two, the economy is recovering from the pandemic.
After data showed that China’s factory sector grew at the fastest rate in more than a decade in February, positive statements were made on Wednesday by Reckitt Benckiser, the company that makes Nivea, Beiersdorf, Moncler, and Puma.
According to Vincent Warnery, the chief executive officer of Beiersdorf, the company had observed the initial signs of recovery in China and the global travel retail industry as a result of the country’s reopening.
“We see a clear recovery in retail sales beginning in February,” he said in an analyst conference. “We expect a strong rebound in retail sales after a highly turbulent January, with traffic still substantially hit by the announcement of COVID limitations in December.”
“China is returning to growth, not only online but also offline,”
At a recent industry conference, executives from the US toothpaste manufacturer Colgate-Palmolive Co. stated that China travel is back to pre-pandemic levels and that they anticipate significant improvement in the coming months. In China, Colgate recently launched new premium whitening toothpastes aimed at wealthy city dwellers.
Yves Briantais, a marketing executive for Colgate’s Asia-Pacific region, predicted that “the second half of the year will be far better.”
At the conference, finance chief Andre Schulten stated that Procter & Gamble Co., whose second-largest market is China, is closely monitoring its high-end SK-II skincare line as China reopens.
According to Warnery of Beiersdorf, growth in the premium La Prairie skincare line as well as the less expensive Eucerin and Nivea skincare lines was likely fueled by Chinese demand. He added that Chinese tourists were increasing sales in neighboring Macau, Hong Kong, Taiwan, and even Japan.
After volumes decreased as a result of lockdowns, Reckitt Benckiser, which manufactures Nurofen tablets, the cold remedy Lemsip, and Durex, saw a rebound in China.
Nicandro Durante, interim CEO, stated, “I have no doubt that the intimate wellness (business) in China is going to perform well,” referring to the division that includes KY Jelly and Durex condoms.
The optimistic remarks are in line with those made by other executives during earnings season, particularly from luxury brands that are betting on a strong rebound fueled by Chinese shoppers using savings from pandemic lockdowns.
Tapestry Inc., which makes Coach handbags, and Ralph Lauren Corp., two high-end US companies, announced last month that demand had begun to rise in China.
Tapestry Chief Financial Officer Scott Roe stated last month that “we certainly have seen a meaningful trend change in Greater China,” and Ralph Lauren executives stated that they were witnessing an increase in foot traffic at their brick-and-mortar stores.
Jane Nielsen, the operating chief of Ralph Lauren, stated, “We expect China to come back resiliently in the quarter.”
Companies struggling with rising energy and wage costs, particularly in Europe, would benefit from stable sales in China. This would come at a time when consumers are being forced to be more selective about what they buy due to rising costs of food, energy, and rent.
As long as the US Federal Reserve maintains its policy of raising interest rates for a longer period of time, stronger indications that Chinese factories are regaining their footing following the lifting of COVID restrictions at the end of last year could also dampen an anticipated contraction in the global economy.
Since reopening, the nearly 400 Chinese retail and wholesale stores owned and operated by US retailer Walmart Inc. have seen significant foot traffic.
“We have seen people returning more to stores, which is what you would expect,” Walmart International CEO Judith McKenna stated on a call last week. “We have also seen people wanting to celebrate events.”
GROWING CONFIDENCE Retail shares rose on global equity markets on Wednesday, despite broader indexes losing ground as inflation worries increased.
After the Italian luxury group, which is known for its warm puffer jackets, reported a strong start to the year, shares of Reckitt rose 1.5% in London, while shares of Moncler rose 3.3%.
During a call with analysts on Tuesday evening, chief marketing and operating officer Roberto Eggs stated that the company experienced double-digit sales growth in China prior to and following the Lunar New Year holiday in January.
He stated, “The impact is really positive when we always look at the results two weeks before and one week after the Chinese New Year.”
The company said that a 10% price increase at the start of the winter season had no effect on demand, which added to the growing confidence in the luxury industry.
In February, Reuters reported that Louis Vuitton, LVMH’s leading fashion brand, was anticipated to increase prices in China by as much as 20%.