Less noodles, beer and movies? Clouds on Chinese consumption horizon

Lianhua Supermarket Holdings Co

03/04/2017 24:00

By Donny Kwok and Adam Jourdan 
    HONG KONG/SHANGHAI, April 3 (Reuters) - Official numbers may 
suggest a rosier 2017 for China, but the bottom lines of the 
country's top consumer firms - from brewers to noodle makers and 
cinema chains - paint a patchy picture of spending in the 
world's second-largest economy.     
    Tsingtao Brewery Co Ltd  600600.SS , China's number two 
brewer, posted its steepest drop in net profit in 20 years last 
week, blaming tough competition and weak demand. Noodle maker 
Tingyi  0322.HK  saw profits drop by a third.  urn:newsml:reuters.com:*:nL3N1H425H 
    China's top cinema operator Wanda Cinema Line  002739.SZ  
saw 2016 profits rise 15.2 percent - down from growth of nearly 
50 percent the year before, as broader box office sales stalled. 
IMAX China's  1970.HK  profit tumbled, too.  urn:newsml:reuters.com:*:nL4N1G91HL   
    "There's still a tonne of room for growth, but these markets 
are much more competitive now and even bigger brands are 
starting to struggle," said Ben Cavender, Shanghai-based 
principal at China Market Research Group. 
    "Consumers are becoming more cagey about how they're 
spending their money, (from) food to clothing and movies." 
    Increased caution - and sophistication - will push companies 
to innovate, and to spend more to fend off competitors, if they 
are to survive, analysts said. 
    After growing at the slowest pace in 26 years in 2016, 
official data have indicated a strong start to the economy this 
year, supported by bank lending, a government infrastructure 
spree and a much-needed resurgence in private investment. 
    But China's consumption trends have been less clear. 
    Retail sales in December rose at their fastest pace in a 
year, thanks to cars and cosmetics, but they disappointed in the 
first two months of this year. urn:newsml:reuters.com:*:nL3N1GN3QR 
    Consumption contributed the bulk of China's growth last year 
at nearly 65 percent, but income growth didn't pick up, and a 
measure of China's income inequality rose slightly last year. 
    A private business survey last month showed growth in the 
services sector slowed to a four-month low as increasing 
competition made it harder for companies to pass higher input 
costs on to consumers. urn:newsml:reuters.com:*:nS7N1DC00F 
    To be sure, the picture from recent earnings reports is not 
comprehensive nor uniform. 
    But the drop in profits of some of China's best-known names 
flags the uneven nature of the country's gradual shift to a 
consumer-driven economy, and the challenge for both brands and 
Beijing, which needs to stoke domestic consumption and private 
investment to fuel growth. 
    Of course there were bright spots. 
    In areas like sports apparel, firms such as Li Ning Co Ltd 
 2331.HK  and ANTA Sports  2020.HK  predicted a boost as China 
looks to build its sports industry and consumers become 
increasingly health conscious. Li Ning's profits rose sharply. 
    But global uncertainties - from the impact of trade policies 
under new U.S. President Donald Trump to political uncertainty 
in Europe - are expected to cloud the year. 
    "In 2017, great uncertainties in the economic outlook remain 
in view of the changes in political and economic policies in 
some key regions," China Resources Beer  0291.HK  said. 
    The brewer reported sluggish sales growth, but also its 
first annual profit in three years this month.  urn:newsml:reuters.com:*:nL3N1GY246 
    Retailers also reported a mixed outlook, although a slowdown 
in e-commerce was creating opportunities elsewhere. 
    White goods maker Qingdao Haier  600690.SS , which posted 
annual net profit growth of 3.1 percent, said China was in a new 
normal of consumer growth - but expects sales to eventually 
accelerate with rising salaries and demand for high-tech homes. 
    Others bore the cost of change: home appliance retailer GOME 
 0493.HK  posted a 73 percent drop in full-year profit as it 
spent on a strategic shake-up.  urn:newsml:reuters.com:*:nL3N1H13NQ 
    "Looking into 2017, it is expected that (the Chinese) and 
global economy will continue to face downward pressure, leading 
to sluggish market demand," said Chairman Li Dongsheng of 
television maker TCL Multimedia  1070.HK . 
 
 (Reporting by Adam Jourdan in SHANGHAI and Donny Kwok in HONG 
KONG; Editing by Kim Coghill) 
 ((adam.jourdan@thomsonreuters.com; +86 21 6104 1778; Reuters 
Messaging: adam.jourdan.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA CONSUMER/