Emerging consumption brands lure more investment

Investments in China's newly emerging consumption brands saw a big surge in June, with the catering sector gaining increasing favor while those in the cosmetics sector dropping, a recent report said.

The report was issued by Linkshop, a research institute on retail information platforms, and it showed that in June, there were a total of 69 investment deals in the country's newly emerging consumption brands.

The total amount of investments reached 5.6 billion yuan ($806.7 million), up 9.8 percent on a monthly basis, with the food and beverage sector attracting more to 41 percent and the cosmetics sector less at 10 percent. Investments in the pet, baby and maternity, and restaurant sector also increased, it said.

"With the improvement of infrastructure such as cold-chain logistics and digitalization in the catering industry, a more mature system is there to help companies reduce costs. Many new catering brands emerged to tap consumers. Meanwhile, through business mode innovation, many brands have found room for growth in more subdivided tracks, and single-category tracks have emerged one after another," said Lin Ping, an expert at the research institute of Linkshop.

Lin said the retail trend in the catering industry has been strengthening in the post-COVID era. Whether it is pre-made dishes, seasoning, snacks, fast food and other chain brands－all have witnessed growth.

The reason for the investment decline in the cosmetics industry, Lin said, was because "the industry has the shortcomings of homogenization and single business modes, and there is serious competition among brands. Low gross profit, low research and development input, and heavy marketing are still problems among China's newly emerging cosmetics companies."

With an eye on upgrades in China's consumption environment and consumers' consumption habits in recent years, numerous new brands have emerged.

A report from Beijing-based Ebrun research institute said China's newly emerging consumption brands expanded rapidly since 2018. In 2019, the brands' penetration rate reached 72 percent, and the rate grew to 91.4 percent in 2020.

"China's consumption market is evolving into a refined, diversified and personalized stage. Consumers born after 1990 are turning into a major consumption power. Traditional brands may find it increasingly hard to please consumers, while newly emerging consumption brands take advantage of internet-based innovations in commodity, brand, marketing, service and business modes to satisfy consumers' new needs in the new consumption era," Lin said.

For example, Shanghai-based coffee brand Manner is using innovative marketing strategies to attract consumers. On July 8, the company worked with Shanghai-based flower brand The Beast to offer panda-themed coffee products, such as a cup of latte with panda-shaped latte art. Consumers also have chances to get free panda-themed perfume samples, bags and coffee cups.

The co-branding was a huge success. The mini program to order coffee in WeChat experienced system crashes several times on the very first day. Manner also announced it would extend the free gift-delivery period for three days.

"In the internet era, newly emerging consumption brands take advantage of online communities for brand communication, which contributes to the rapid rise of brands. However, they also face pressure for future development," said Lai Yang, a member of the expert committee of the China General Chamber of Commerce.

"When brands gain consumers' recognition, whether they continue to consume the products depends on whether they have good user experiences. Newly emerging consumption brands should make efforts to ensure product quality, constantly innovate, increase cost performance and diversify product varieties to sustain growth," he said.