Weekly #24: The Li Jiaqi aftermath 🌋, National liquor Moutai halts collabs 🖐, Forecasting holiday tourism spending🔮| Following the yuan

Drawing inspiration from the often misguided forecasts of Michael Burry and Cathie Wood, I'm inclined to believe that the forthcoming tourism spending (esp. in global travel), will disappoint.

I’m going to start today’s newsletter with a rant, or you could see it as constructive feedback.

As I’ve been broadcasting (for attention) in recent weeks — I’m still recovering from pneumonia, I initially attributed the reason to me not resting enough. But after listening to the latest episode of Bumingbai (translated to “I don’t understand”) podcast, hosted by New York Times Tech Columnist YUAN Li, I suspect part of the reason may have something to do with the problematic commission system of China’s medical industry.

When asked whether China’s recent medical crackdown means that doctors are wary of prescribing medicines, the doctor said, “Traditional Chinese medicine and supplements have more profit…patients won’t die from it, there are no side effects, and you can earn more.” That was the main reason why he did that when he was a young doctor, he hasn’t prescribed TCM for over 10 years because he doesn’t believe in it.

I’m reminded that I was a bit surprised when I had a common cold a month ago; the doctor only prescribed me TCM but didn’t probe further. I took it for a week, did not fully recover, but I chose to ignore the minor symptoms. That developed into high fever and pneumonia. Had it been the modern medicine that I usually get, I would’ve recovered in 3 days. I’d like to give the doctor the benefit of the doubt, but after Bumingbai, I started questioning her incentive. Perhaps it’s because she believes in TCM, perhaps it’s because she’s a nationalist or, more realistically, she gets more commission from prescribing it.

If this is the case, I think the crackdown and the 14th five year plan for TCM development will affect not only the medical industry but every other industry as well. TCM, from how I see it, is not used to treat symptoms but to improve underlying issues. If doctors are prescribing TCM for minor illnesses that would normally be resolved quickly with modern medicine, then that’s productivity lost for these patients, their companies and their industries. 😤

1. The Li Jiaqi aftermath 🌋

What happened: Every time Li Jiaqi makes a mistake, traffic shifts to other livestreamers and away from Alibaba’s Taobao Live.

Last June, when he was temporarily banned after a tank-shaped ice cream cake appeared in his livestream before the Tiananmen anniversary, it helped revive New Oriental Education & Tech Group (NYSE: EDU) to survive after its pivot to a livestream company from China’s education crackdown. This time, the traffic is directed to Chinese brands including shampoo producer Bee & Flower 蜂花, MSG brand Lotus 莲花, and Power28 活力28, a 70-year-old state-owned detergent brand.

The three brands went viral for the same reason of offering value deals of 79 yuan after Li’s endorsement of a “cheap” 79-yuan eyebrow pencil caused backlash. After consumers found out that the makeup product from Florasis costs more per gram than gold, they were easily swayed by other brands that offer them value — Bee & Flower sells 2.75kg of shampoo for 79 yuan, while Power28 sells 15.5kg worth of powder detergent for 79 yuan.

Inside Shanghai-based Bee & Flower’s factory. Image: Bee & Flower

Dig deeper: The recent trend underscores a consumer mindset: underdogs have a unique ability to resonate deeply with audiences. Take Power28, for instance. Hosted by its own executives, endearingly named “Three Little Old Men” (三个小老头直播间), they initially appeared awkward on camera. Yet, on their first day, they drew an impressive peak of over 270,000 viewers on Douyin.

The narrative is amplified by the media, which uses fear-mongering titles like “Young people are ditching Li Jiaqi for ‘Three Little Old Men’” and “Li Jiaqi lost a million fans, and Bee & Flower picked up half of them”. In reality, the viewerships are hardly comparable: even after a drop of over one million, Li retains around 30M Weibo followers and averages 10M nightly viewers on Taobao. It's also worth noting that Taobao Live, Kuaishou, and Douyin cater to slightly different audience demographics.

Looking deeper, a worrying trend for Taobao’s livestreaming is becoming more evident than ever. It lost top livestreamers Viya and Cherie to tax evasion in late 2021; can it afford to lose Li Jiaqi? Notably, after its meteoric success in 2022, New Oriental launched on Taobao Live last month, highlighting its importance in the market, but will that prominence last?

2. China's national liquor Moutai halts collabs 🖐

What happened: As coffee chain Luckin (OTCMKTS: LKNCY) celebrated the return of its previously sold-out Moutai latte, the liquor company decided to hit the brakes after a tepid collaboration with Mars-owned Dove.

On September 16, Moutai held a press conference for the launch of liquor-filled chocolate, which later faced a lukewarm market reaction. Ding Xiongjun, the chairman of Moutai Group, said that the company has completed the product layout of drinking Moutai liquor, eating at the Moutai banquet, tasting Moutai ice cream, enjoying Moutai latte, and liquor-filled chocolate. And that there won’t be any further collaborations.

Moutai x Dove, which sells for around 20 yuan/candy in three sizes. Image: Moutai’s Twitter

Dig Deeper: Beyond formal collaborations, there's a rising trend of capitalizing on trending news/newsjacking. (A recurring theme in today's top two stories is the knack Chinese businesses have for this approach.)

On September 16, Alibaba's travel platform, Fliggy, announced its ‘partnership’ with the renowned liquor brand by introducing the themed rooms at 999 yuan and 2,999 yuan per night, offering guests a chance to savor a 500ml bottle of Feitian Moutai with either deal. Yet, Moutai quickly clarified this wasn't an official collaboration. The offering was subsequently pulled from the platform a day before its scheduled launch.

Recent data from business intelligence provider Tianyancha reveals a surge in applications to trademark the name “Moutai Latte” 酱香拿铁 in Chinese. Intriguingly, three distinct companies have already locked in this name across various cities, all within September.

Auction house Christie’s offers rare Moutai, in case you are in the market for it. Image: Christie’s Moutai Guide

3. Forecasting Tourism Spending for the 8-Day National Holiday 🔮

What Happened: With the combined Mid-Autumn Festival and National Day holiday spanning from Sep. 29 to Oct. 6, the projected passenger count is an impressive 1.9 billion. The China Railway Group forecasts a daily railway traffic nearing 16 million passengers—almost double the average flow seen during the Spring Festival, which is often deemed as the largest human migration on earth annually. The number of visits to the official travel booking 12306 platform has reached 53.2 billion times recently.

Dig Deeper: Inspired by how financial pundits like Michael Burry and Cathie Wood often make egregiously incorrect predictions lately, I’m confident to predict that the upcoming holiday's tourism spending to be even more skewed than the five-day May holiday, when tourism spending growth didn't keep pace with traffic (traffic grew by 19% compared to pre-Covid levels while spending was on par). I think the gap will further diverge this time.

Admittedly, I haven’t done my quantitative research (though with a few more paid subscribers I might be able to 🫣). A pre-holiday report by China’s largest online travel agency Trip.com (NASDAQ: TCOM) didn’t help. It reported an optimistic 20-fold spike in outbound trip orders from last year, yet omits last year's actual figures—a typical move observed among Chinese firms and officials.

Masked reports from Trip.com. Image: WeChat

So, here’s the context I based my thoughts on:

Global travel for Chinese tourists is hampered by prolonged visa waits (2-6 months for Schengen Europe), unsettling crime reports and negative media portrayal in Southeast Asia, and diminished enthusiasm post the initial post-Covid rush. More over, an economic downturn is now widely recognized as reality rather than just speculation. As such, the holiday might center more on spending time with family and friends rather than long-distance travel.

Factor in the recent uptick in youth employment and mass layoffs, and younger generations may shun peak-time travel for more budget-friendly off-peak options.

Given the aforementioned dynamics, I foresee a dip in holiday spending. If I were wrong, let’s just never mention it again and move on. 🔚

I’m NOT going anywhere for the upcoming holiday, so I may be biased. Image: VCG via DTCaijing