China Consumer

A young market

Boom times for companies catering to kids

A young market

“Buy it for me, pleeeese...”

Call it the commercial pull of two baby generations, even though the two groups are more than a half a century apart.

The US Baby Boomer generation, well known for its affluence, is now over 60 years of age (Americans born between 1946 and 1964).

In China the baby boom demographic is a lot younger. Much of it is still in its nappies, in fact, although that doesn’t seem to have dulled the interest of the Chinese marketeers.

Other differences, apart from age? The US Boomers arrived in a demographic dash: a 70 million population spike born into American post-war prosperity.

By contrast, China’s own baby consumers are a product of population control, and the nation’s one-child policy. That is now influencing spending patterns directly. With four grandparents and two parents to dote on each child – the “one-mouth, six-pocket” family – it means offspring are being pampered like never before. “Price is the last consideration when it comes to buying things for my daughter,” 29 year-old mother Liu Yue told the China Daily this month. “I want the best for my daughter so that she can grow up in a healthy and comfortable environment.”

Liu is not alone. According to the National Bureau of Statistics, nearly 30% of the total expenditure of urban families is on their children. Boston Consulting Group reckons that the market value of China’s baby industry alone – food, garments, toys and related products – was Rmb130 billion ($19.78 billion) in 2009.

American author Steve Gillon has written that the American Boomers were one of the first to be targeted ruthlessly with professional marketing, and it looks like a generation of young Chinese will face similar attentions.

At the moment, “one mouth and six-pocket” pampering means plenty of new opportunities for companies to target proud parents, and a number of firms have been looking for the funds to expand. Last week, Dadida, a manufacturer and retailer of children’s clothing, announced plans to raise up to $500 million from an initial public offering. The plan comes less than six months after Boshiwa – another children’s clothing manufacturer whose name means Dr Frog – completed an IPO in Hong Kong, raising $369 million. Goodbaby, which specialises in baby strollers, also raised $190 million in a November IPO.

Foreign firms are trying to get in on the act too, with UK retailer Mothercare planning to open 15 new outlets a year, up from its current 11, says the China Daily. The company, which operates via a joint venture with Goodbaby, sells products priced above most local brands, and so has positioned itself more as a luxury brand, catering to high-income consumers, says Ann Leong, a Mothercare general manager. To foster a premium image, most of its stores will be located in affluent areas of cities like Beijing and Shanghai, as opposed to the more suburban locations it favours in the UK.

With parents ready to pay out for their child’s lifestyle, how might that shape expectations for the future? Landon Jones, the author who introduced the term ‘the Baby Boomers’ has likened their impact on American society to a “pig in a python”. The spending habits of these Chinese kids – as they get older – may profoundly change the Chinese economy too.

But concentrating more on their current wants is Francis Leung, the veteran Hong Kong investment banker. Leung, known as the “father of red chips” for arranging a slew of Hong Kong listings of Chinese companies in the 1990s, revealed last week that he is buying Chinese brand manager Toon Express for $104 million. The company owns the character copyrights of Pleasant Goat and Big Big Wolf, a successful Chinese animation series (see WiC87 for more on the cartoon). Leung says he hopes to expand the Pleasant Goat franchise to other consumer products aimed at children, including books, toys and games. “Disney has created Mickey Mouse. There is Hello Kitty in Japan. My plan is to turn Pleasant Goat into the national animation brand of China,” Leung told the Wall Street Journal.

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