Latest news with #Mixue
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Business Standard
8 hours ago
- Business
- Business Standard
Chinese tech giants chase expansion in Brazil amid global trade pressures
Chinese companies urgently need to find new markets. Competition is intense at home, where the collapse of the real estate market has left consumers reluctant to spend. And escalating trade tensions have made it more difficult and costly to sell things in the United States and Europe, long two of the largest destinations for Chinese exports. As a result, some of China's biggest internet and e-commerce brands have set their sights on establishing themselves as household names in other parts of the world, like Southeast Asia, the Middle East and South America. Brazil has emerged as the most coveted prize. Latin America's largest economy, with a population of more than 200 million people, is a beacon for China's delivery and ride-hailing companies looking to export their ruthlessly low-cost business models. Chinese e-commerce giants also see promise in Brazil as they seek new buyers for a flood of products after tariffs and other restrictions in the United States shut off their biggest export market. Meituan, China's largest food delivery company, said in May that it would spend $1 billion to set up operations in Brazil. Mixue, the Chinese tea and dessert company that has eclipsed McDonald's as the world's biggest fast food chain, said it would hire thousands there. TikTok Shop, facing scrutiny in the United States and Britain about its Chinese parent company, launched in Brazil in May. 'Chinese companies are finding it harder to grow domestically,' said Vey-Sern Ling, an equities adviser in Singapore at the private bank Union Bancaire Privée. 'Exports and overseas expansion is one way to support continued growth.' Chinese interest in Brazil comes as the two countries deepen their economic ties. The overall value of trade between China and Brazil roughly doubled over the past decade, as Chinese companies bought Brazilian soybeans and consumers in Brazil bought Chinese cars and electronics. Last month, while officials from Washington and Beijing were haggling over whether to roll back tariffs that had brought their trade to a standstill, Chinese companies announced plans to invest about $4.7 billion in Brazil. The investments include mining and renewable energy projects and expanded automotive manufacturing. President Luiz Inácio Lula da Silva of Brazil also met with China's leader, Xi Jinping, in Beijing. The two leaders have positioned their relationship as a counterweight to US influence. Analysts say the good will has given Chinese consumer companies confidence to bet on Brazil. 'The relationship between the two countries is really good, and they expect it to be good for a while,' said Jianggan Li, the chief executive of Momentum Works, a consultancy in Singapore. But Chinese companies are not assured of success in Brazil. Their tactics may draw scrutiny from regulators as they try to attract customers and hire local workers, said Li, who was previously an executive at Food Panda, which competes in Hong Kong with Meituan's food delivery service, Keeta. Meituan is known for its cutthroat approach. In China, it operated at a loss for years while offering shoppers steep discounts in order to undercut competitors. In 2023, the company launched Keeta in Hong Kong, its first foray outside mainland China. In less than two years, Keeta drove one of Hong Kong's main food delivery platforms, Deliveroo, out of the market. Meituan deployed similar tactics last year when it rolled out Keeta in Saudi Arabia, where it quickly became the dominant delivery platform in most major cities. How to Survive a Crisis Analysts expect Meituan to operate the same way in Brazil. The company's focus will not be on turning a profit, but instead be on becoming the delivery app used by the highest number of people. 'When the Chinese companies go abroad, making money is the secondary priority — they want to dominate the market first,' said Heatherm Huang, a co-founder of Measurable AI, a Hong Kong-based tech company that analyzes online shopping data for financial firms. Many Chinese consumer brands have already made inroads in Brazil. The country is one of the largest markets for the fast-fashion retailer Shein, which has built three warehouses near São Paulo. Didi, known for running Uber out of China, took over a Brazilian start-up called 99 in 2018 and has been one of the main ride-hailing business in the country since. Temu, the international arm of the Chinese e-commerce firm Pinduoduo, started selling products to Brazilians last year. Temu's main gimmick has been to tell shoppers that they are getting items at steep discounts, often 70 per cent or more. The push to expand in places like Brazil is driven in part by increased competition in China, and restrictions and regulatory scrutiny in other major markets. Chinese e-commerce companies like Temu and Shein took a major hit in the United States last month when the Trump administration ended a policy that had allowed low-value packages from China to enter the country tax-free. Lawmakers in the European Union are debating a similar change. In Brazil, shipments from Temu and Shein have been hit with a tax on packages worth less than $50 since last year. But at 20 percent, the tax is less than half the rate now charged by the United States. The business models pioneered by Meituan and other Chinese internet companies have also raised concerns among Chinese regulators about the handling of user data and the treatment of delivery drivers. Last year, a driver who worked such long delivery shifts that fellow drivers referred to him as the 'order king' died while taking a break between deliveries, according to Chinese social media. After another driver fainted on the job and was hospitalised, Meituan published a report that said most of its drivers did not work such intense hours and made wages comparable to average salaries. These sorts of incidents have prompted the Chinese government to issue rules for how e-commerce companies manage delivery workers. In February, competition intensified when the e-commerce giant JD launched a food delivery service in China. It and Meituan have tried to lure drivers from each other by offering increasingly generous, and costly, benefits. Meituan, Mixue and Temu did not respond to requests for comment. 'The golden time for Meituan's food delivery business in China may be over,' said Ernan Cui, a consumer analyst at the research firm Gavekal Dragonomics in Beijing. Stricter regulation and tougher competition are 'all adding pressure,' she said. China's stagnant consumer economy is another reason Chinese companies believe expanding in places like Brazil is worth the risk, said Li of Momentum Works. 'Finding extra growth in China is getting harder and harder,' he said.
New York Times
17 hours ago
- Business
- New York Times
Chinese Companies Set Their Sights on Brazil
Chinese companies urgently need to find new markets. Competition is intense at home, where the collapse of the real estate market has left consumers reluctant to spend. And escalating trade tensions have made it more difficult and costly to sell things in the United States and Europe, long two of the largest destinations for Chinese exports. As a result, some of China's biggest internet and e-commerce brands have set their sights on establishing themselves as household names in other parts of the world, like Southeast Asia, the Middle East and South America. Brazil has emerged as the most coveted prize. Latin America's largest economy, with a population of more than 200 million people, is a beacon for China's delivery and ride-hailing companies looking to export their ruthlessly low-cost business models. Chinese e-commerce giants also see promise in Brazil as they seek new buyers for a flood of products after tariffs and other restrictions in the United States shut off their biggest export market. Meituan, China's largest food delivery company, said in May that it would spend $1 billion to set up operations in Brazil. Mixue, the Chinese tea and dessert company that has eclipsed McDonald's as the world's biggest fast food chain, said it would hire thousands there. TikTok Shop, facing scrutiny in the United States and Britain about its Chinese parent company, launched in Brazil in May. 'Chinese companies are finding it harder to grow domestically,' said Vey-Sern Ling, an equities adviser in Singapore at the private bank Union Bancaire Privée. 'Exports and overseas expansion is one way to support continued growth.' Want all of The Times? Subscribe.
South China Morning Post
6 days ago
- Business
- South China Morning Post
Out with the old, in with Pop Mart: Gen Z's ‘emotional consumption' lift consumer stocks
Stock investors are capitalising on the spending power of China's Generation Z consumers, who splurge on everything from gold jewellery to low-priced drinks, delivering multifold returns on so-called new consumer stocks. The ascent of Pop Mart International Group , Mixue Group and Laopu Gold is one of the few bright spots in China's sluggish consumer industry, which has been plagued by a weak jobs market and the deflationary trend. The robust performance has come at the cost of traditional industry names, including liquor producer Kweichow Moutai, with traders pulling out of what were once their favourite stocks. Shares of Hong Kong-listed Pop Mart, a Chinese toymaker that owns blockbuster intellectual property (IP) Labubu , have surged almost 600 per cent over the past year, while Mixue, a chain store that sells low-priced soft drinks and ice cream, has seen its stock more than double since its listing in February. Laopu Gold, a jeweller that aims to brand itself as China's Hermès, has seen an even bigger eye-popping performance with a 23-fold surge in stock price over the past 12 months. 'Investors' risk appetite is changing, and the market focus is shifting to those 'new consumer' names that have the potential for valuation expansions and tell 'transition' stories,' said Zhao Wenli, a strategist at CCB International in Hong Kong. 'We haven't seen a clear growth ceiling for new consumption. It represents the new direction for consumption upgrades in the future.' The growth of the Gen Z demographic – referring to those born between 1995 and 2010, and estimated at more than 200 million in number – underscores the impact of China's younger generation on its economy and consumer behaviour. The US had a similar story, with baby boomers propelling the fortunes of a slew of big stocks, including Walmart in the 1980s. Meanwhile, China's neo-consumers have also profoundly affected the investment playbook, prompting fund managers to learn more about their mentality for clues on stock picks.
South China Morning Post
6 days ago
- Business
- South China Morning Post
Gen Z's ‘emotional consumption' fuels surge in consumer stocks as investors dump old names
Stock investors are capitalising on the spending power of China's Generation Z consumers, who splurge on everything from gold jewellery to low-priced drinks, delivering multifold returns on so-called new consumer stocks. The ascent of Pop Mart International Group , Mixue Group and Laopu Gold is one of the few bright spots in China's sluggish consumer industry, which has been plagued by a weak jobs market and the deflationary trend. The robust performance has come at the cost of traditional industry names, including liquor producer Kweichow Moutai, with traders pulling out of what were once their favourite stocks. Shares of Hong Kong-listed Pop Mart, a Chinese toymaker that owns blockbuster intellectual property (IP) Labubu , have surged almost 600 per cent over the past year, while Mixue, a chain store that sells low-priced soft drinks and ice cream, has seen its stock more than double since its listing in February. Laopu Gold, a jeweller that aims to brand itself as China's Hermès, has seen an even bigger eye-popping performance with a 23-fold surge in stock price over the past 12 months. 'Investors' risk appetite is changing, and the market focus is shifting to those 'new consumer' names that have the potential for valuation expansions and tell 'transition' stories,' said Zhao Wenli, a strategist at CCB International in Hong Kong. 'We haven't seen a clear growth ceiling for new consumption. It represents the new direction for consumption upgrades in the future.' The growth of the Gen Z demographic – referring to those born between 1995 and 2010, and estimated at more than 200 million in number – underscores the impact of China's younger generation on its economy and consumer behaviour. The US had a similar story, with baby boomers propelling the fortunes of a slew of big stocks, including Walmart in the 1980s. Meanwhile, China's neo-consumers have also profoundly affected the investment playbook, prompting fund managers to learn more about their mentality for clues on stock picks.
CNA
6 days ago
- Business
- CNA
Commentary: Why Chinese F&B companies are expanding in Indonesia
SINGAPORE: In the past decade, China's food and beverage (F&B) firms have started large-scale investments outside China, driven by domestic market saturation and the Xi Jinping government's 'going out' policy. Southeast Asia has become a prime target for this expansion due to its rapidly growing consumer base, underdeveloped F&B industry, proximity to China, and generally open investment environments. Given the variety of F&B industry offerings, mainland Chinese multinational enterprises (MNEs) are targeting market niches like ice cream and milk tea. Prominent mainland Chinese F&B firms founded in cities like Xiamen and Shenzhen are now expanding in the region, such as Mixue Ice Cream and Tea (Mixue Bingcheng), Naixue (formerly Nayuki, also known as Naicow), Joyday (Yili Product), Chagee and Luckin Coffee. However, they face competitors including earlier entrants from the US, Europe, Japan, South Korea and Taiwan, which benefit from strong brand recognition and deep-rooted consumer trust. A DIFFERENT MODE OF ENTRY The mainland Chinese companies' mode of entry is quite different from American business franchise models, such as Starbucks and Coffee Bean & Tea Leaf, which are typically owned by large local conglomerates. Franchisees in local markets bid for franchise outlets from the master franchise holder: for instance, the franchisee is PT Mitra Adiperkasa (MAP) for Starbucks Indonesia. This model is more exclusive and arguably caters to middle and upper-income segments in urban markets. Meanwhile, mainland Chinese F&B firms offer a low-cost franchise model, extending their reach to non-urban areas. This model disrupts the traditional model, which requires high initial capital and can be highly exclusive. With an initial capital of less than US$40,000, a Mixue franchise business is accessible to many aspiring entrepreneurs in the region. Among the incoming mainland Chinese F&B brands, Mixue is arguably the fastest-growing in terms of the number of outlets in Southeast Asia. Founded by Chinese businessman Zhang Hongchao in the late 1990s, Mixue first entered Southeast Asia via Vietnam in 2018 and Indonesia in 2020. Expansion into other Southeast Asian markets has been more modest, but sharp growth has occurred in economies with relatively lower income per capita and a significant young population (Vietnam and Indonesia). Its growth in Indonesia has been striking – in the first two years, Mixue opened 317 stores; within four years, this exceeded 2,000. In Vietnam, Mixue opened approximately 1,000 stores in five years. SIGNIFICANT BARRIERS Initially, mainland Chinese F&B firms sought to enter developed countries' markets but encountered significant barriers. Regulatory complexity, stringent food safety standards, higher entry costs, and the presence of well-established local and multinational brands hindered the Chinese firms' penetration into developed markets, like Australia, South Korea and Japan. In Japan and South Korea, there is also strong "local brand nationalism" or loyalty, making it harder for foreign brands to penetrate their domestic market. In contrast, certain markets in Southeast Asia offer more receptive business environments. Their ice cream and F&B sectors have considerable room for growth. Mixue's rapid expansion in Indonesia can be attributed to three key factors: its efficient supply chain, affordable product pricing, and the ease of launching a franchise. Mixue's model enables rapid expansion by relying on a network of low-cost, standardised outlets that are attractive to local entrepreneurs. As Indonesia has the world's largest Muslim population, halal certification is a prerequisite for most F&B businesses operating there. In January 2023, Mixue faced protests from Islamic groups in Jakarta, who questioned the halal status of its products and asked for a boycott. In response, Mixue's management immediately clarified that their ingredients did not contain lard or alcohol and emphasised that the company had applied for halal certification in 2022. The Majelis Ulama Indonesia (the Indonesian Ulema Council, MUI), the authority in charge, did not initially respond. This prompted public criticism of bureaucratic delays, which can discourage foreign investment. Shortly after, MUI granted Mixue a halal certificate. MANY OTHER PLAYERS Before Mixue's rapid expansion, a few other players had made inroads into Indonesia. Aice Group, established in Singapore in 2014 by new Chinese migrant Wang Jiacheng, founder and CEO, entered Indonesia in 2015. Aice gained popularity by selling low-cost ice cream products tailored to Indonesian tastes. By 2022, Aice had become one of the largest F&B firms in Indonesia, operating with three large-scale factories in Cikarang, West Java; Mojokerto, East Java and North Sumatra. Meanwhile, Yili Group, a major Chinese player, entered the market through its Joyday Ice Cream brand, thus directly competing with Aice and Mixue. The regulatory climate in Indonesia has largely supported F&B investment, particularly for firms able to adapt to local requirements, such as halal compliance and pricing sensitivities. SHAPING PERCEPTIONS OF CHINA While competition is fierce, some of the Chinese firms have localised their supply chains and adapted branding and distribution models to align with Indonesian consumer preferences. As Chinese F&B brands gain popularity, they might be shaping perceptions of China. In July 2023, a piece in The Jakarta Post commended Mixue's contribution to Indonesia's economy, noting its job creation, affordability, and resilience during economic downturns. The article argued that while 'negative perceptions of China may not be entirely eliminated by popular cheap food', brands like Mixue demonstrate that local communities can view positively aspects of China's presence. This reflects the broader soft power potential of Chinese consumer brands, particularly in a culturally sensitive sector like F&B. The sustainability of the Chinese low-cost franchise model remains to be seen. It is effective for quick market penetration, as evidenced by the rapid growth of retail outlets. However, there is no openly available evidence that such growth is associated with profitability. The Chinese F&B business model will face serious tests related to quality control and market saturation as competition heightens.
