Weekly #7: Luckin makes bank 🤑, Shein & TikTok keep hiring ⬆️, P&G China runs global supply chain 🎛️ | Following the yuan

Some light and essential China consumer news, publishing every Tuesday EST

I’m no fan of blockbuster three-hour movies.

I find them long, monotonous, and sleep inducing. Avatar confirmed this and left me with a stiff neck to boot. So when my parents suggested we watch a movie last week, I picked The Wandering Earth II 流浪地球, which some have labeled ‘nationalist sci-fi’. It recently hit No.2 at the Chinese New Year box office, which is a big deal.

As someone who despises nationalism and went in with the lowest expectation possible (I was actually ready to take notes to make fun of it), it was pretty good.

Why? Tune in on Thursday (EST am) for a little commentary. 🤓

The cast of The Wandering Earth II attended China’s Golden Rooster Award last Nov. Image source: Douban

1. Luckin makes bank in lower-tier cities 🤑

I confess, when I’m back home, a so-called third-tier city of 1.5 million people, I sometimes (just sometimes) quite like a little Luckin in my life. 

And I’m not the only person, after a bumpy 2020, Luckin is on the up. If you recall, Luckin Coffee Inc. was charged $180 million by the US Securities and Exchange Commission and forced to delist from the Nasdaq after fabricating more than $300 million in sales between April 2019 and Jan 2020. It replaced senior management in May 2020.

Even before facing fraud charges, Luckin, a low-cost mobile-first chain, was looked down upon by many coffee drinkers in first-tier cities who enjoy a wealth of caffeine options.

That’s not the case in lower-tier cities. By May 2022, Luckin had 117,300 coffee shops, 15,000, up 12.8 percent year-on-year, according to a report from Meituan and Kamen, a trade journal. Substantial growth, the report stated, is coming outside tier-one and tier-two cities in less saturated markets.

According to industry professionals, a regular cafe needs to sell 100 cups to break even. I came across a Xiaohongshu user claiming to have received 900 orders on the first day of opening and media reports noting that Luckin is outperforming boutique cafes in lower-tier cities. Sounds about right to me. 

I randomly clicked on a ‘county’ named Anfu in Jiangxi Province on Dianping, China’s review app, and this is one of the 11 Luckins in the region with 421k people. There is only 1 Starbucks.

2. Hiring spree from Shein, Anker and TikTok Shop sellers ⬆️

What do Shein, Anker, and TikTok have in common? They’re all heralded as role models in the movement for Chinese businesses to ‘go abroad’.

As global tech companies lay off thousands of employees, this trio is keeping up momentum. Anker has 900 positions listed on Liepin, a job search site, across product, research & development, and operation areas. Shein may be past peak growth, but home and abroad it’s hiring for more than 800 roles across global operation, supply chain, and international logistics teams.  

TikTok Shop recently arrived in the U.S., after 2019 testing in Indonesia and the U.K. Domestic research firm iiMedia reported that China’s cross-border e-commerce market was worth 1.44 trillion yuan ($213 billion) and will likely more than double in 2024. 

I got a sense of TikTok Shop’s global potential last year when I spoke to Liky Li, a live streamer who works from midnight to 8am to cater to the U.K. market. 

Liky has since moved on from the exhausting job to a different company. Image source: Liky Li

3. P&G to move supply chain control center from Europe to China 🎛️

Procter & Gamble Company, one of the world’s largest personal goods companies, is doubling down its investment in China by planning to shift its supply chain control center from Europe to southern Guangzhou, which already hosts its Greater China headquarters. 

As many multinational companies decouple or reduce their reliance on China, it’s certainly an intriguing move.

The person who announced the news is Jasmine Xu, P&G’s Greater China president and the first local CEO for the region

A cursory search, however, shows that during Davos last year, P&G Europe President Loic Tassel announced P&G plans to make more than 90 percent of the goods it sells in Europe on the continent. 

The reason, as Tassel alludes to below, are supply chain lessons learned from pandemic. 

“The price to pay, the time to wait to get some of our products from China to Europe is not compatible anymore with our industry that's called FMCG (fast-moving consumer goods). F stands for fast. If your container is stuck in Shanghai, it is not fast moving anymore.”

China accounts for 10 percent of P&G’s market in 2022. Perhaps the bigger question is how are multinationals more generally preparing for a post-Covid China in terms of their supply chains and political roadbumps? 🏁

Copy Editor: Richard Whiddington