Luxury, fast-moving goods sellers plan expansion to cash in on nation's growth

Fashion house Jil Sander, known for its minimalist design, opened a pop-up store recently at a historic mansion in Suzhou, Jiangsu province, a follow-up to its expansion of directly operated stores in the country since last year.

The brand opened five stores in China in 2022, entering four new cities including Shenzhen, Guangdong province and Wuhan, Hubei province. Jil Sander's parent company, OTB, an Italian fashion and luxury group, opened 24 new stores for its luxury brands last year in China.

The group opened its largest retail store at the JC Plaza luxury mall in Shanghai in July. The location houses Jil Sander, Maison Margiela, Marni and Amiri stores, which are owned by OTB.

The company plans to open 80 new stores in the country by 2025, according to market information platform Jiemian Fashion.

Bain & Co's new report reveals that a positive market is expected to return before the end of the first quarter for the luxury sector in China. Compared to other emerging markets, China is a behemoth for luxury growth, said the report. The market has a larger number of middle- and high-income consumers, and these populations are projected to double by 2030, according to Bain's report.

Bruno Lannes, a Shanghai-based senior partner at Bain & Co, said, "Ultimately, brands that understand the nuances of the China luxury market will succeed over time."

Meanwhile, international fast-moving consumer goods brands have also joined in heated competition to attract middle-income consumers in China.

Cherry blossom-flavored latte coffee is the recent seasonal innovation from Nestle China — one of the 200 newly created products on the agenda for the booming consumer market in China this year.

Zhang Xiqiang, CEO of Nestle Greater China, didn't hide his passion for coffee, a category with massive potential. So are petcare products, health sciences and infant formula milk as well as confectionaries, the CEO said, which are contributing to the company's continued efforts in achieving revenue of 100 billion yuan ($14.43 billion) by 2030.

"We are very optimistic about consumption and the economy in China. The Chinese economy has strong resilience and vitality," Zhang said.

Kraft Heinz Co, a food and beverage firm from the United States, is banking on the strong recovery of the catering industry in China this year, rolling out a healthier and more high-end product portfolio and strengthening its digitalized marketing efforts, according to the company.

One of the priorities in the Chinese market for Kraft Heinz in 2023 is to continue penetrating Western sauces in lower-tier cities, revitalizing its Chinese sauce brands and boosting solutions for catering distribution channels by collaborating with chain restaurants with more customized products, said Yvonne Zhang, head of corporate and government affairs at Kraft Heinz China.

For example, the company is aiming to expand market share for its Heinz-branded sauces by developing more local flavors and developing more low-sodium Chinese sauces.

Budweiser APAC, which is the largest beer company by sales in Asia, has faith in China's consumer market, having witnessed its channels in the country back on the normal track since Spring Festival.

"We experienced great recovery in a lot of our business but especially in the premium and super-premium segments in 2022 … these segments were still higher than pre-COVID," said Jan Craps, CEO and co-chair of Budweiser APAC, which has more than 50 brands.

He said their business is resilient and a sign of the underlying strength of the premiumization movement in China, which is driven by growth in disposable incomes.

Speaking on the increase of middle-income households, which are the target audience for super-premium beer products, the CEO added that they are bullish on that to continue.

"We project that it (the number of middle-income households) will quadruple by 2030 — that's what makes us quite excited," he added.