Jessica DiNapoli
NEW YORK (Reuters) – Chinese shoppers are spending slightly more on diapers and some Colgate toothpastes, according to executives at those products, even as consumers worry about the country’s real estate crisis and economic slowdown.
China’s post-pandemic economic slowdown has weighed on sales of consumer packaged goods companies, which have set their sights on the world’s second-largest economy as a key source of growth.
Investors and analysts are keeping a close eye on when the economy will begin to improve significantly, which should provide a boost to consumer goods makers.
Some consumer companies, such as detergent maker Tide Procter & Gamble (NYSE:), cleaning products maker Reckitt Dettol, and food maker PepsiCo (NASDAQ:) are reporting some small signs of increased spending in China.
“Colgate’s China business had a tremendous quarter,” said CEO Noel Wallace, adding that sales of the company’s premium products such as whitening toothpaste were “strong.” About 14% of the company’s total sales last year came from the Asia-Pacific region, which includes China.
However, Colgate’s overall sales in China remain weak, largely due to declining sales from rural consumers, Wallace said.
“Clearly the consumer in China is facing more complex issues now,” he said.
Wallace said Darlie brand toothpaste is well positioned in the long term to gain market share among rural Chinese consumers.
Reckitt has begun testing online purchasing of Durex condoms in China. On a conference call with investors on Wednesday, the company’s CEO said Durex condoms in China are “working really, really well for us” thanks to new materials and other improvements.
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But both L’Oreal and P&G have noted problems with selling beauty products and cosmetics in China.
L’Oreal on April 18 took a cautious view of China, the world’s second-largest beauty market, with its CEO noting that he plans to create “a China where things aren’t going fantastic.”
P&G Chief Financial Officer Andre Schulten said in a media call April 19 that Chinese consumer sentiment toward the company’s high-end Japanese skin-care brand SK-II is improving, even though its sales fell 30% in the most recent quarter. China is P&G’s second largest market after the United States.
“We have reached the bottom of the trend and are seeing improved sentiment,” he said, adding that the company will focus its marketing on SK-II’s anti-aging claims. The company said Chinese consumers were shunning the brand due to concerns over the release of wastewater from the Fukushima nuclear power plant in Japan last August, which was hurting P&G’s overall financial results.
However, even excluding SK-II sales, P&G’s sales in China fell 3% in the quarter ended March 31, Schulten said. “We have strengths,” Schulten said, adding that P&G’s diaper and appliance businesses are growing in the country.
Ramon Laguarta, CEO of PepsiCo, which is in the process of opening factories in China and Vietnam, said Chinese consumers are “very cautious” and are saving a lot.