Investment Slowdown in China’s Consumer Goods Market in 2011

Date:2011-09-14     Source:hangmeiwangxin  Text Size:

Consumer goods market is a large market closely related with the daily life of common people, which may be significantly impacted by such factors as downward or upward national economic situation, decrease or increase in people's income, decline or rise in population size, and even neonates and aging. Longitudinal sections of food, clothing, shelter and transportation, and transverse flow from raw material planting, procurement, production and circulation are a mirror of consumer goods market. Facing such a huge market, from clothing, shoes and hats to home appliances, from foods and beverages to household articles and, from characteristic restaurants to chain supermarkets, how will capitals perform? And how will they flow?

Consumer Goods Sector Was Attractive for Capital Market during 2009 and 2010 Due to Its Strong Anti-inflation Feature

The latest data from the data bank of Zero2IPO Research Center showed that during 2005 to the first half of 2011, there were 372 investment events disclosed in China’s consumer goods sector. And 285 of them disclosed the investment amount of US$8.45B in total or US$29.64M on average. Compared with other industries, Chinese consumer goods industry witnessed frequently investment events, especially from 2008 to 2010 more investment events concentrated in China’s consumer goods industry, which was mainly resulted from the fact the investments in some industries were greatly affected by the global financial crisis. In comparison with other industries, the consumer goods industry was more flexible against the financial crisis and inflation and faced relatively little risk in capital investment, which was decided by its traits. In fact, this was the main cause that led to booming investments in China’s consumer goods market.

Judging from the amount of individual investment disclosed, 37.0% investment deals sized below US$10.00M, but there were still a larger number of investment deals that disclosed huge amounts. On the basis of the statistics of Zero2IPO Research Center, 18 of the investment deals with disclosed investment amount made an individual investment exceeding US$90.00M, accounting for 4.84% of the total. Some of enterprises that obtained an individual investment with huge amount participated in PE or PIPE projects, mainly focusing on the food & drinks industry, such as the investment of SAIF in Huiyuan Juice, investment of Temasek and Hopu in Yurun Food Group, investment of Shenzhen Capital in Hsu Fu Chi, investment of Hopu in Mengniu.

In terms of investment round, investment deals taking place in Chinese consumer goods sector concentrated in round A, with 215 financing events that disclosed a total in vestment amount of US$3.61B. Some consumer goods enterprises closed a total of 44 round-B financing events, with a total disclosed investment amount of US$1.02B. As for some consumer goods enterprises, there were 17 round-C financing events altogether, disclosing a total investment amount of US$434.00M. Four round-D investment events also took place among some consumer goods enterprises, with the investment amount totaling US$41.27M. Additionally, there were also two events taking place respectively in round E and round F. Apart from them, there were another 88 investment events without disclosing the investment rounds it belong.

From the data released by Zero2IPO Research Center, we learned that during 2005 and H1’11, investment events in part of Chinese consumer goods sectors concentrated in such areas as Shanghai, Jiangsu, Beijing, Guangdong (excluding Shenzhen), Zhejiang, Shenzhen and Shandong. Of them, Fujian attracted a relatively large number of investment events, with a total of 36 disclosed investment events, 30 of which disclosed a total investment amount of US$473.00M in total and US$15.76M on average. In term of the investment amount disclosed, Beijing ranked first with a total investment of US$1.09B and an average one of US$54.56M.

However, as for geographical distribution, the investment events mainly took place in the provinces and cities in South China and East China. But there were still 99 investment deals distributed in such places as Hubei, Liaoning, Chongqing, Guangxi, Helongjiang, Jilin, Jiangxi, Inner Mongolia, Shanxi and so on. This reflects that part of Chinese consumer goods sectors are relatively scattered to some extend.

The data of Zero2IPO Research Center showed that from 2005 to H1’11, the investments in China’s consumer goods industry were mainly denominated in RMB. There were 171 RMB-denominated investment events disclosed, and 159 of them disclosed investment amount, i.e. US$3.33B in total and US$20.90M on average. In addition, 124 foreign currency-denominated investments were disclosed, including 122 deals disclosing the investment amount of US$4.92B in total or US$40.35M on average.

Unlike other industries, the majority of investments in Chinese consumer goods sector were RMB-denominated ones. On the one hand, as Chinese consumer goods industry is a traditional market, more enterprises usually choose to go public at home and thus prefer RMB-denominated funds; on the other hand, most of investment events in China’s consumer goods market took place from 2008 to 2010 when RMB-denominated funds witnessed a rapid growth and were relatively active in traditional industries.

Investments in Chinese Consumer Goods Market Slowed down in H1’11

The year 2011 saw VCs/PEs paying less attention on Chinese consumer goods market. The major reasons are as follows: First, the food & drinks sector that led investments in consumer goods market was severely spoiled by food safety incidents, which caused credit crisis to Chinese foods and more investment risks; second, some segments of consumer goods market, such as home appliance and automobiles, were too developed to have access to capital; third, capital market was more keen on emerging fields, such as mobile Internet and the Internet of things, but attach less attention to traditional fields.

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