M&A eyes China's booming sheconomy as women lift spending

04 September 2020 Consultancy.asia 4 min. read

Women now account for 75% of all consumer purchases in Mainland China, and the merger and acquisition (M&A) landscape has been quick to recognise this opportunity.

China’s M&A market is Asia’s largest deal market, and one of the key drivers of growth. Last year, estimates suggest that China saw well over 7,000 deals generating a cumulative value of nearly $500 billion. While at the top of the Asian M&A landscape, China’s deal activity has taken a significant hit from the Covid-19 crisis for one, and is also facing pressure from a variety of other market forces.

Racing to stay ahead of the curve, investors in the country are often well versed with the latest market trends – most recently the emergence of China’s sheconomy (or, SHEconomy). The country’s female population of nearly 700 million by itself is larger than most consumer markets across the globe, and this economic segment is increasingly active and spending money.

For one, rising levels of economic prosperity are driving female purchasing power up in tandem with the broader consumer market. In addition, as a growing share of China’s female population enters the educated and working demographic, their consumption patterns are expanding to a diverse range of economic segments.

The sheconomy is on the rise in Asia

Three out of four purchases in the country are now made by women, in segments ranging from gaming, alcohol and streaming to cosmetics and personal care products. According to experts, this expanding and increasingly active consumer base is a tremendous opportunity for businesses across the globe.

A $1.5 trillion market

In a report last year, professional services firm Accenture revealed that China’s Sheconomy is currently valued at $1.5 trillion, composed of 400 million women between the ages of 20 and 60. Gianfranco Casati, CEO of growth markets at Accenture, pointed out to the South China Morning Post (SCMP) that investors have recognised this as a tremendous opportunity.

“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,” said Casati.

China’s luxury goods market is already among the largest in the world, and the female population segment is driving growth in the sector. According to partner at Bain & Company in China Zhou Hao – who also spoke to SCMP – financiers are following an “investment thesis of targeting young, wealthy white-collar female Chinese consumers with increasing spending power.”

The hotbeds of M&A activity have been shifting in accordance with preferences in this economic segment. “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,” Zhou told SCMP. According to him, the Covid-19 crisis has only accentuated these trends, as “mass local brands” have been driven towards faster growth.

Veronica Wang, partner at OC&C Strategy Consultants, holds a similar assessment of the market. She told SCMP that “Category wise, skincare could be the one that recovered relatively fast after Covid-19 and driven mainly by female consumers.” In fact, the cosmetics market is currently worth nearly 300 billion yuan, and has registered nearly 16% year-on-year growth in the second quarter of this Covid-19 ridden year.

The highly lucrative market has attracted a lot of attention, including from US-based private equity firm Warburg Princus, which bought a majority stake in e-commerce cosmetics company Afiona last month. In June, Shanghai Yuyuan Tourist Mart Group acquired a 75% stake in Fosun Jinmei (Shanghai Cosmetics), in a deal worth more than $50 million. Indeed, the entire deal value in China’s personal care segment since the start of this year has added up to more than $160 million.

That being said, personal care is not the only sheconomy-driven sector. Jacky Lui, a partner at Big Four giant PwC, points out that the same is the case for the pet products market, where nearly 90% of the consumers are female.

“The 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. Females are key to the industry, and very willing to spend,” he told SCMP.

Then there are the gaming, streaming and comic entertainment segments, which caters to both the rapidly expanding GenZ consumer market, as well as an ever rising share of female consumers. In April, Chinese streaming platform Bilibili drew a $400 million investment from Sony Corporation for just under 5% of the company – indicating the scale of opportunity in the segment.