‘Little sisters’ army of young women in China reshaping mergers and acquisitions as they drive spending
- Young women in China are the biggest consumers of pet products and services; women make three out of four purchases
- Deal makers are studying young women’s buying habits as they consider M&As
Mergers and acquisitions are being shaped in China by a new force: the army of so-called “little sisters”, women between the ages of 20 and 40 who hold huge sway over spending decisions in the world’s second-largest economy.
Women are breaking out beyond products traditionally associated with them to drive corporate decisions about online games, streaming TV shows, and high-end beer and even baijiu, the fiery Chinese liquor, according to new reports.
‘Little sisters’ army of young women powering China’s consumption
“The [pet M&A] market has tripled over the past five years, and is expected to continue at such a rate. Also, pet food shows very high resilience during Covid and is one of few markets where consumption remains very strong,” he said. “Females are key to the industry … and very willing to spend.”
These changes are already shaking up deal making and deal thinking, analysts said. And that will grow.
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In first half of the year, for example, China saw eight merger and acquisition deals worth around US$809 million in the health care and mobile gaming sectors, where women are increasingly the drivers, according to data from Mergermarket. That is down some from the comparable period last year, but deal making hasn’t escaped the turmoil of the virus.
“As a market, China holds huge potential for companies that want to focus on female consumers and better serve them,” said Gianfranco Casati, CEO of growth markets at Accenture.
“The sheer size of China’s female consumer population makes it the third-largest consumer market in the world, nearly the same as the combined retail markets in Britain, France and Germany,” Casati said.
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The “sheconomy” is valued at up to US$1.5 trillion and made up of some 400 million women consumers aged 20 to 60 years of age, according to a 2019 report by Accenture.
“Many investors, from private equity to corporate venture capital, as well as large consumer goods companies have been eyeing this promising and booming market and that’s why we’ve seen this recent activity in the M&A front. As women’s purchasing power and influence continue to rise, the ‘sheconomy’ provides many profitable scenarios for consumer enterprises,” Casati said.
China saw four merger and acquisition deals related to the personal care sector in the first half of 2020 worth US$161 million, according to data from Mergermarket. They included Shanghai Yuyuan Tourist Mart Group’s acquisition of a 74.93 per cent stake in Fosun Jinmei (Shanghai) Cosmetics for US$54 million on June 4.
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On May 19, Frog Prince (Fujian) Baby & Child Care Products was acquired by private investor You Weidong for US$7 million.
Founded in 2009, Bilibili has become the biggest video-comics-and-gaming entertainment platform for China’s fast-growing Generation Z market segment, made up of those born between 1990 and 2009.
A slew of marquee deals have followed “the similar investment thesis of targeting young, wealthy white-collar female Chinese consumers with increasing spending power”, said Zhou Hao, a partner at Bain.
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“Covid-19 has only accelerated this further and pushed more mass local brands to grow faster, potentially becoming attractive M&A targets,” said Zhou.
“Over the last two years, cosmetics skin care for example has been growing significantly. Many assets along the value chain have been hot M&A targets.”
The women-driven economy attracted US-based private equity firm Warburg Pincus’ investment into China’s 299 billion yuan cosmetics market.
In July, it bought a majority stake in mainland cosmetic e-commerce company Afiona, according to a statement by Warburg.
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Founded in 1995, the Shenzhen-based cosmetic firm, which also attracted investment from Tencent, had opened more than 130 directly operated stores in more than 40 cities across the country as of June 30.
“In recent years, the domestic cosmetics industry has developed rapidly, and China has become the world's second-largest consumer of cosmetics after the United States,” Jerico Zhang, managing director of Warburg Pincus said in the statement.
“We are very optimistic about the Chinese cosmetics market, which is expected to grow into a trillion-level market in the future.”
Sales of cosmetics in China rose 15.7 per cent in the second quarter of the year to 82 billion yuan from a year earlier, according to the latest government figures from the National Bureau of Statistics.
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“Category wise, skincare could be the one that recovered relatively fast after Covid and driven mainly by female consumers,” said Veronica Wang, partner at OC&C Strategy Consultants.
The expanding budgets of younger women in China have had a strong impact on demand for all sorts of products and services, according to Wendy Liu, head of China strategy at UBS Global Research who came up with the “little sister” moniker.
“Post-Covid, we just see a rise in that trend, because this turns out to be the most resilient market of consumption in China,” said Liu.
“In mainland, there’s a saying that the spending power of the woman is higher than the children, then it’s higher than the dog, then followed by married men,” said Liu.
