March 22, 2024
“A Long and Tiring Journey”: Companies Disappointed by China’s Prospects

Reuters reports that some of the world’s leading companies in the food, beverages, and food technology sectors have expressed pessimism regarding demand in China. This amplifies investor concerns about the damage inflicted on firms operating in the country.

Disheartening remarks were made by Starbucks, Pandora, Carlsberg ahead of the Chinese New Year—a typically intense period for consumer spending.

They highlight the scale of challenges faced by companies selling everything from phones to cars and necklaces, as Chinese consumers tighten their belts amidst uncertain job prospects, especially for the youth, a stock market slump, and declining real estate values.

These issues have undermined expectations of a strong post-pandemic recovery last year.

“I think it’s going to be a long and tiring journey,” Pandora’s CEO in China, Alexander Lacik, told Reuters after fourth-quarter sales fell short of expectations.

Carlsberg’s CEO, Cees ‘t Hart, said he is “cautiously optimistic” about the stabilization of adverse conditions throughout the year, which should also boost the economies of other Southeast Asian countries. However, he would not predict when a recovery in China might begin.

Starbucks CEO Laxman Narasimhan commented, “In China, we remain very confident in the long-term outlook. The market is going through a transition period as we see an increase in competitors in the mass market, which we believe will phase us out over time.”

Insiders agree that Chinese consumers prefer domestic brands over global ones, and it seems the government is indeed comfortable encouraging this trend.