Sector Report

China consumer – Small happiness

by Jisheng Liu / Oct 16, 2019

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As pressure and fatigue rise with economic conditions and disposable income, a better quality of life eases the daily stress and re-energises Chinese consumers after an intense day at work. We see multiyear growth opportunities in areas where attractive products engender happiness and well-being.

Happiness generator
Products under the small appliance and lighting categories are typically discretionary in nature, have a short life cycle, lower ticket size and more occasions to be seen during social gatherings. Thus, product focus is on new or upgraded functionality and an attractive appearance, as well as healthy lifestyle and social elements. We expect multiyear growth opportunities driven by penetration, premiumisation, market consolidation and category expansion.

Joy of cooking
Cooking is believed to be one of the primary sources of happiness at home in China. We forecast a 5% industry Cagr and more than 10% Cagrs in select sub-categories over 2019-23, mainly driven by penetration, product upgrades and category expansion. We prefer leading players with true R&D capabilities.

Glamour and grooming
The desire for a more attractive appearance rises along with disposable income among male consumers. We forecast a 6% 2019-23 Cagr in shaving equipment, mainly attributable to penetration and premiumisation. Expansion into new categories could be a catalyst while deterioration in competition is a major risk.

The perfect ambience
A relaxing lighting environment at home is important for people who spend all day at work. We see ample consolidation potential and further penetration upside for LED products. We expect B2B business to be a major driver and margins to improve from current levels.

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