Foreign companies bet on China's consumers

A super whopping burger at a McDonald's store in Wangfujing area in Beijing. The fast-food giant has renovated this flagship outlet and made it China's first smart McDonald's restaurant. [Photo/China Daily]

Coffee shops, burger bars, tissue makers and clothes stores thrive even as industrial companies suffer due to economic slowdown

Coffee shops, burger bars and clothes stores are among the foreign businesses in China that say they are thriving despite the economic slowdown that is hurting the manufacturing sector.

A Reuters examination of comments or recent statements from 34 large publicly traded foreign companies that updated investors on their China operations shows a diverging experience between sectors.

Eighteen of the companies had products focused on consumers, and 13 of these said sales grew in the fourth quarter or full year with just three down and two flat. Of the eight industrial companies in the search, six reported weakness in China or falling sales.

Coffee shop chain Starbucks, Sweden-based tissue maker SCA, fashion group Hennes & Mauritz and fast-food seller McDonald's are seeing strong growth despite the economy expanding at its slowest pace since 2009 in the fourth quarter.

"The success we are enjoying in China is really kind of highlighted by this past quarter," said Howard Schultz, chairman and CEO of Starbucks, which like many foreign companies does not break out China operating results in its accounts. He was speaking on a Jan 21 call with investors.

"We opened over 150 stores in China this past quarter, the most we've ever opened in our history."

McDonald's said its fourth-quarter comparable sales increased 4 percent in China, and it plans to open more than 250 restaurants this year, the highest in any of its markets.

"We remain confident in the potential of this important market and in the strategies we have in place to expand the brand even further," Steve Easterbrook, McDonald's corporation CEO, told investors on Jan 25.

Magnus Groth, CEO of SCA, which makes diapers, said the rate at which China's population was shifting from being poor and rural to an urban middle class, was unmatched in other emerging markets, creating huge opportunities for his business.

But in the industrial sectors, the outlook was less rosy.

Construction goods maker Caterpillar and Germany's Siemens are among the industrial companies that suffered last year. US-based United Technologies Corp, which makes elevators and refrigeration units, predicted even lower sales in 2016.

"Short-cycle (industrial) business was affected by double-digit decline in China," Siemens CEO Joe Kaeser told investors last week. "China is going to be slow and it remains to be seen whether we see a sustainable demand-related pick-up."