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Weekly #17: The rising star of China’s sports drink is no Gatorade🤾♀️, Made-in-China films V.S. Barbie👙, Budget hotels are high in demand💸| Following the yuan
Essential China trend stories from July 18-25 -- this issue covers the beverage, film and tourism sectors.
In a truly altruistic manner, I’m happy to see that my favourite sports drink ELECTRO X announcing to have closed their Pre-A round this week. Despite being only two years old and offering just four SKUs, I believe this domestic brand's growth trajectory is worth learning from.
I particularly like the two products flavored grapefruit + peppermint and grape + jasmine tea, both enhanced with L-carnitine, an amino acid derivative that turns fat into energy. which makes me feel like my body fat is melting after having it (OK I know it’s not). But it tastes so good, refreshing and guilt-free, that I was willing to pay 12 yuan for each bottle in this economy. (It's the same price as a bottle of Perrier in China, btw.)
Also, bear in mind that this is not 2016 where Chinese CPG brands get money thrown at them. In the economic climate of 2023, consumer VCs in China are seen as the underdog. With all above in mind, let’s take a closer look:
1. The rising star of China’s sports drink is the opposite of Gatorade 🤾♀️
ELECTRO X is the brain child of LI Yu, who previously founded Tang Hotpot and noodle bar The Tang in NYC. As Tang Hotpot closed doors under Covid impact, Li came to China in 2021 and founded ELECTRO X. The sports drink brand recently closed its Pre-A round, securing tens of millions yuan from EverYi Capital and Tohkin Group.
“In China, sports drink brands grow among the community,” Li said to fitness business publication GymSquare. “In the long term, we are dedicated to promoting fitness culture … this will become our core competitiveness in 5-10 years." The brand has established long-term collaborations with over 100 sports communities from frisbee to cycling, and well-known brands such as On, Nike and Lululemon.
Dig Deeper: I believe that China has seen exponential growth in sports since 2010 due to the below factors:
Major policy push like National Fitness Plan (2021-2025) and the economic goals preceding this that provides the physical infrastructure;
Global & local fitness brands such as Decathlon and athleisure brand Maia Active that make sporting goods accessible;
Growing awareness of health & fitness, and work life balance upon the anti-996 movement, which provides incentives for individuals;
Widespread use social media on platforms such as Xiaohongshu that drives trends and participation.
What’s clever about the brand is that instead of traditional marketing, the team decided to prioritize sports communities, which sees a new rise amid Covid as the most popular social format. PWC China listed two major opportunities for the 53.7-billion-yuan market in a 2022 report [Chinese]: “innovation in effects, ingredients and function” and the opportunity to tap into an audience that wants low calorie, zero sugar energy drink. ELECTRO X has ticked both boxes.
Since founding ELECTRO X in 2021, Li uses his acumen on consumers from the U.S. to China. And this is a great example of insight arbitrage, if that’s a word.
2. Made-in-China films V.S. Barbie 👙
As Mission Impossible 7 felt the hit from the “Barbenheimer” weekend globally, in China, its box office also underperformed, as Barbie rose above the rank to No. 4 in the country’s box office on business intelligence platform Maoyan today. '
By the end of Tuesday, the top 3 high-grossing movies are all domestic films: Creation of the Gods Ⅰ, Chang An, which are both based on traditional fantasies, and Never Say Never, which is based on a 2017 news story about orphaned teenagers in a Chengdu fight club.
While Barbie received praise on social media, especially among female moviegoers, the audience's response to Mission Impossible 7 was largely indifferent. One viewer commented on Douban: “Mission Impossible is the epitome of old Hollywood. Too old for everything.” The franchise earned over 300 million yuan after 12 days.
Some cinemas have reported that they generally consider foreign titles to underperform in China, and as a result, they are offering fewer scheduling slots for such movies.
Dig Deeper: Maoyan shows that Barbie has a scheduling rate 排片率 of less than 10%, while that of Creation of the Gods Ⅰ is 22.7%. The scheduling rate represents the percentage of movie screenings in China that are dedicated to each film, and indicates that Barbie is getting less opportunities to be presented on the big screen.
I won’t say that foreign film titles are in a even battle field, as China boasts cultural rejuvenation 文化振兴 after Xi took the helm, and party affiliated organizations perhaps have quota for schools or their subordinate agencies to bump up the numbers. Along with the rising cultural confidence, this has led to a significant growth in the proportion of domestic titles: made-in-China films reached 25.5 billion yuan, or 84.85% of the total box office in 2022, according to the China Film Administration. In 2017, the shares between domestic and non-Chinese movies were nearly half/half. A lot has changed since then.
3. Budget hotels are high in demand 💸
Budget hotels in China are no longer as budget-friendly as they used to be this summer, leaving some travelers disappointed and frustrated. The soaring demand and pre-Covid business decisions have resulted in significant price increases for supposedly economical budget hotels like 7 Days Inn 7天 and Ji Hotel 全季, especially during the summertime in major cities.
China’s three major hotel groups Huazhu Hotels Group (NASDAQ: HTHT；01179.HK), Beijing Tourism Group (SHA: 600258) and Jin Jiang International (SHA: 600754) have stated in recent years that they will focus on developing mid-to-high-end products. In 2022, Huazhu and BTG altogether have closed hundreds of economical hotels.
Dig Deeper: In the process of industry transformation, the number of budget hotels has continued to decrease. Around 2020, I’ve personally noticed that BTG-owned Home Inn 如家 upgraded their offerings amid the ‘consumption upgrade’ era.
These days, most middle-class Chinese consumers are not trading down, rather, after having experienced the wide array of offerings and quality services, they would gravitate toward value. At the same time, the renewed interest may have make practitioners to pedal back on their pre-Covid decisions.
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