Weekly #16: Can Pop Mart be Mattel? 🎀 Keep needs to keep up🏃🏻‍♀️, China reacts to Aspartame warning ⚠️ | Following the yuan

Every toy company either has a dream to be Disney — as Pop Mart’s CEO Wang Ning once aspired — or, I suppose, Barbie's IP owner Mattel.

Good morning, good afternoon and good evening! Today, I realized that I messed up with the Twitter Space schedule 😱 but that’s Ok. I tell myself that only few would tune in anyway.

BUT if you want to be the selected few, and listen to a replay on the conversation of me with

Baiguan - China Insights, Data, Context

’s editor Mu Chen on some parallel trends between China & the U.S., you can click here! I’ve also recently talked to Yishu Wang, the co-founder of China marketing consultancy Half A World about ‘What does being canceled mean in China’ here. With the plug sorted, let’s dive into the weekly news roundup:

1. Can Pop Mart be Mattel? 🎀

The Fact: Chinese top toy maker Pop Mart International Group (9992.HK), which went public in Hong Kong in December 2020, recently faced distraint from a Beijing court and was required to pay over 17 million yuan (US$2.35 million). Despite Pop Mart saying it already made full payment, Chinese domestic media including Yicai and SK News Agency used the opportunity to analyze its underwhelming performance in recent years. 

Once propelled to fame by the Japanese-pop-culture-inspired blind box fanatic, Pop Mart is now dedicated to distancing itself from this label, as its market cap shrunk from HK$150 billion while being listed to around HK$25.77 billion, or ⅙, almost three years later. It has been aggressive with its overseas expansion but the revenue from non-China market only accounted for around 10% of the group wide 4.6 billion yuan (US$638.9 million).

Dig Deeper: Every toy company either has a dream to be Disney — as Pop Mart’s CEO Wang Ning once aspired — or, I suppose, Barbie’s IP owner Mattel.

Mattel, which made Barbie the movie a super successful branded content, does not just own its achievement to relentless marketing from launching inclusive dolls and collaborations with brands from food to fashion to cars, it also comes from the topnotch storytelling skills.

So far, Pop Mart has only managed to copy the last part with collaborations over its to-selling IPs Skullpanda, Molly and Dimoo. They recently launched their first mobile game, "Party Arena", in May, and announced that it will open a theme park in Beijing on September 1. But without storytelling and narratives, The toys would always just be seen as dolls. After the initial hype, what would make people still want to buy 59-kuai figurines in this economy? 

Pop Mart x Haagen Daz collaboration in 2021. Image: Xiaohongshu

2. Keep needs to keep up 🏃🏻‍♀️

China’s largest online fitness platform, Tencent and SoftBank-backed Keep Inc. (3650.HK), began trading in Hong Kong last Wednesday and raised $30 million from its initial public offering. Its stock price has been hovering around HK$29 since then.

In the online fitness business that’s highly correlated with seasons and time of people spent indoors, Keep has struggled to keep users engaged as China re-emerges from zero-Covid restrictions. The prospectus reveals that the average monthly active users declined for three consecutive quarters, and the current MAU dropped to 26.26 million, or down by 36%, from Q2 2022, where citywide lockdowns took place across China.

Keep’s equipments for home gyms. Image: Screenshots via Chaping

Dig Deeper: Similar to Peloton and Lululemon’s Studio team (the athleisure brand’s dedicated upon fitness tech startup Mirror acquisition), China’s Keep is now facing challenging times as consumers have grown to be more keen to opt for IRL activities. In the past two years, it has had successional product launches including the medals that Keep users who achieved milestones could purchase, as well as affordable equipments for home gyms. But it’s hard to picture what the next growth point is. Keep Studio? I mean, Peloton has already tried that.

Keep’s medals for its users. Image: Internet

3. China wants nothing to do with Aspartame ⚠️

The Fact: Chinese companies and beverage drinkers seem unfazed by the World Health Organization’s cancer warning on Aspartame, which is not because they don’t care about health, but because the market has largely replaced it with other natural substitutes like erythritol and Stevia. 

With the rise of a healthy eating mindset and an active lifestyle, Chinese consumers are gravitating toward natural substitutes for sugar, which gives rise to the sugar substitutes market. Zheshang Securities estimated that the sector for beverages and baking could reach 1.4 billion yuan by 2030 with a CAGR of 30%.

Chain milk tea shops such as Hey Tea 喜茶 and Nayuki 奈雪的茶 are using Stevia in their drinks, while bottled beverage producer Chi Forest 元气森林, which popularized sparkling water in 2018 and electrolyte water in 2022, uses erythritol. At the same time, Aspartame is considered safe for consumption within specified limits (daily intake of 40 mg/kg body weight) by the WHO, and it is still allowed to be used in China, per a recent notice by China National Center for Food Safety Risk Assessment.

One of Chi Forest’s ambassadors Jackson Yee. Image: Chi Forest

Dig Deeper: The cancer warning is a nuanced story that comes with specific limits, but consumers don’t buy into nuances and can be easily misled, which is why we see the domestic beverage giants and public-listed substitute producers rushing to keep their distance from Aspartame.

The likes of Hey Tea and Bailong Chuangyuan 百龙创园 (which supplies sugar substitutes for U.S. health food brands Halo Top and Quest Nutrition) may have dodged a bullet this time, but they should be wary of the next phase of consumer preferences, which is that people would prefer natural foods as more health-related research findings appear, as seen in the U.S. CPG market. 🔚