How China’s slowing consumer spending is affecting the recovery of F&B firms

Tepid consumer spending and escalating competition are weighing on the performance of China’s food and beverage (F&B) chains, with analysts warning that chances of a sustained recovery remain slim in the absence of policy support targeted at the sector.

Mainland fresh drinks maker Nayuki is expecting an adjusted net loss of up to 970 million yuan (US$134 million) for 2024, compared with a profit of 20.9 million yuan the previous year, according to a filing to the Hong Kong stock exchange this week. The company attributed the loss to consumption headwinds, intensifying competition and losses from the closure of underperforming stores. It also said it plans to continue shutting down locations nationwide.

Hotpot restaurant chain Xiabu Xiabu said in a filing to the Hong Kong exchange this week that it could record a 20 per cent decline in revenue to about 4.8 billion yuan for 2024, alongside a net loss of up to 410 million yuan. It specifically noted that a consumption downgrade continues to put pressure on its mid-to-high-end brand, Coucou.

While Beijing’s historic stimulus package unveiled in September has helped boost sales in certain sectors such as cars and household appliances, sales of liquor, beverages, and catering services – areas outside the purview of last year’s campaign – have worsened since then, according to Guo Shan, a partner at Hutong Research, an independent advisory firm for multinational companies in China.

“Subsidies to encourage trade-in of household appliances and cars have incentivised sales but also squeezed spending elsewhere,” Guo said. Overall retail sales grew by only 3.5 per cent in 2024 from a year earlier, she added, citing official data. Retail sales grew 7.2 per cent in 2023.

China’s consumer price index fell 0.7 per cent in February from a year earlier, reversing from January’s 0.5 per cent increase, according to official data released this week.

  

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