LDN - Business

Chinese spend more on diapers and Colgate despite economic woes

[April 29, 2024] By Jessica DiNapoli

NEW YORK (Reuters) - Chinese shoppers are spending a little more on diapers and some Colgate toothpastes, according to executives at the makers of these products, even as consumers fret about the country's property crisis and faltering economy.

China's economic slump after the pandemic has weighed on sales at consumer packaged goods companies, who had targeted the world's second-biggest economy as a major source of growth.

Investors and analysts are keeping close tabs on when the economy starts to significantly improve, which should be a boost for makers of consumer goods.

Some consumer companies like Tide detergent maker Procter & Gamble, Reckitt, which manufactures Dettol cleaning solutions, and food producer PepsiCo are reporting some small signs of stronger spending in China.

"The Colgate business had a terrific quarter in China," said CEO Noel Wallace, adding that sales of the company's premium products like whitening toothpaste are "robust." About 14% of the company's total sales came from its Asia Pacific region, which includes China, last year.

But Colgate's overall sales volumes in China are still soft, mostly due to rural consumers cutting back, Wallace said.

"Clearly that consumer is a bit more challenged in China right now," he said.

Wallace said the company's Darlie brand toothpaste is well-positioned in the longer term to gain market share with rural Chinese shoppers.

Reckitt has begun testing livestream shopping, or live video shopping, of Durex condoms in China. On Wednesday, in its conference call with investors, its CEO said Durex condoms in China are "really working very well for us," thanks to new materials and other enhancements.

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A salesperson arranges toothpaste products on a shelf at a supermarket in Shanghai, China, March 10, 2016. REUTERS/Aly Song/File Photo

But both L'Oreal and P&G flagged problems selling beauty products and cosmetics in China.

L'Oreal on April 18 gave a cautious outlook about China, the world's No. 2 beauty market, with its CEO noting that he is planning for a "China that is not doing fantastic."

P&G Chief Financial Officer Andre Schulten said in a call with media on April 19 that Chinese consumer sentiment is improving around the company’s high-end Japanese skincare brand, SK-II, although sales of it were down 30% in the last quarter. China is P&G's second-biggest market after the United States.

“We reached the bottom of the trend and see sentiment improving,” he said, adding the company would focus its marketing on SK-II’s anti-aging claims. The company has said that Chinese consumers shunned the brand over fears about the release of wastewater from the Fukushima nuclear plant in Japan last August, weighing on P&G’s overall financial results.

Even excluding sales of SK-II, however, P&G sales in China were down 3% in the quarter that ended March 31, Schulten said. “We have pockets of strength,” Schulten said, adding that P&G’s diaper and appliance business grew in the country.

At PepsiCo, which is in the process of opening factories in China and Vietnam, CEO Ramon Laguarta noted that Chinese consumers are being "very cautious" and saving a lot.

(Reporting by Jessica DiNapoli in New York; Editing by Josie Kao)

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