In the third quarter financial reporting season, sales of luxury goods, beauty products, and beer companies have declined, deepening people’s doubts about Beijing’s attempts to revive the economy. Companies like Carlsberg, Estée Lauder, and AB InBev have warned that the Chinese economic recovery is slower than expected.
Since the outbreak of the pandemic, the Chinese economy has been persistently sluggish, with consumers tightening their purse strings, leading to a decrease in demand for luxury items and non-essential products.
In September, the Chinese authorities and the central bank promised to implement broad stimulus measures to boost the economy, including interest rate cuts and support for the stock market. However, Jacob Aarup-Andersen, CEO of Danish beer manufacturer Carlsberg, told the Financial Times that the current stimulus measures by the Beijing government have not “produced an impact,” as both Carlsberg and AB InBev have reported lower-than-expected sales in China.
Aarup-Andersen stated that it is still uncertain whether the Chinese economy will recover next year.
The timing of China’s recovery is difficult to predict, as Estée Lauder has cut dividends and abandoned profit expectations due to a significant decline in sales in China. The company has warned that the Chinese economic recovery is slower than expected.
Western consumer groups, including luxury, beauty, and beer companies, as well as car manufacturers, have been severely affected by the slowdown in Chinese consumer spending. They all believe that the measures announced by the Chinese Communist Party so far are not sufficient to significantly boost economic growth in the coming months.
Fernando Tennenbaum, CFO of the world’s largest beer manufacturer AB InBev, said in an interview with the Financial Times that Chinese consumers have become more cautious, reducing their outings, severely impacting AB InBev’s beer products focused on nightlife.
Aarup-Andersen stated that consumer confidence in China has “significantly deteriorated,” leading to a 6% decrease in Carlsberg’s sales in the Chinese market in the third quarter. AB InBev saw a 14.2% decrease in sales in China.
L’Oréal, a competitor of Estée Lauder, warned last week that the situation in China is “more severe” as the Chinese government’s crackdown on daigou (overseas personal shoppers) has affected sales.
French luxury giant LVMH revealed a 3% decrease in sales in the third quarter announced on October 15, lower than expected. This marks the first quarterly sales decline for the group since the outbreak of the pandemic.
The luxury conglomerate Kering warned that soft Chinese demand is hindering the recovery of its flagship brand Gucci, and annual profits may drop to the lowest level since 2016. Kering’s revenue from Chinese customers in the third quarter dropped by approximately 35%.