Europe’s biggest FMCG firms signal slowdown in China

Bloomberg

Two of Europe’s biggest consumer-goods companies signalled a slowdown in China, whose consumers have driven global demand for everything from baby formula food to shampoo.
Nestle SA said sales in the country were flat for the first nine months, while Unilever said business there “slowed a little” in the latest period.
Nestle shares fell as much as 1.6% in Paris and Unilever little changed.
The latest updates add to questions over foreign brands’ prospects in the world’s most dynamic consumer market.
China has indicated that growth this year could be the slowest on record as the country grapples with challenges ranging from the trade war with the US to an outbreak of African Swine Fever. Foreign brand owners from the National Basketball Association to Christian Dior SE are wrestling with repercussions from offending political sensitivities in China, where tensions are running high as anti-Beijing protests rage in Hong Kong.
Although China hoped that domestic consumers would take up the slack and reduce the nation’s dependence on exports, signs are pointing to a pullback in spending as confidence wanes. Sales of big-ticket items such as autos and home appliances have slowed, and companies including Haier Electronics Group Co and Henkel AG, which makes cosmetics and adhesives, have noted weaker demand in smaller purchases.
“Weakness in China is an issue for all consumer companies amid a squeeze on mid-tier products and traditional retail channels,” said Jon Cox, an analyst at Kepler Cheuvreux.
A lot is riding on the outcome. In the third quarter, Unilever’s sales fell by 0.1% in developed markets, where consumers have been turning away from big brands and favoring smaller labels with more artisanal cachet.
For the luxury industry, including high-end fashions and handbags, China has been the primary engine of growth. Here signals have been mixed, with Louis Vuitton and Dom Perignon owner LVMH reporting unabated growth despite a slump in Hong Kong.
Nestle reported “softness” in China for categories like infant formula, which slowed to low single-digit growth.
Chinese births have slumped after a short boom a few years ago on the relaxation of the one-child policy.
“In China overall, we’re seeing a bit of a softer year here when it comes to consumer products, and that includes food and beverage,” the Swiss company’s chief executive officer, Mark Schneider, said.