Chic ice cream and craft beers in vogue as Chinese cut back on love of luxury

SHANGHAI, Oct 14 (Reuters) – Chinese consumers are generally known for spending lavishly on high-end handbags, clothes and accessories that underpin Western luxury brands.

This year, however, economic headwinds have sapped much of their urge to splurge and it’s life’s little luxuries – artisanal food and drink as well as trendy smart devices – that have caught their eye. Warning.

Brands that have jumped on the trend include Kweichow Moutai (600519.SS), best known for its $300 bottles of baijiu, the Chinese spirit popular at banquets. It debuted baijiu-infused ice cream at $10 a cup in May, racking up 2.5 million yuan ($350,000) in first-day sales.

Budweiser Brewing Asia-Pacific (1876.HK), a Hong Kong-listed unit of Anheuser-Busch InBev (ABI.BR), notes that premium and craft beer as well as specially-wrapped beer gift sets at prices of hundreds of dollars are selling surprisingly well.

Sales of gaming gear and home appliances, from water-efficient showerheads to smart toothbrushes to printers, quadrupled from last year’s levels at JD’s 618 shopping fest .com (9618.HK), according to data from the e-commerce giant showed.

Chinese consumers “indulge in these little things and they love something new,” said Mark Tanner, founder of marketing agency China Skinny.

The shift in consumer trends, which has seen some segments of the population become ultra-frugal, comes amid great economic gloom.

The country’s COVID-zero policy and resulting frequent shutdowns have dampened business activity and normal outlets for spending such as tourism. The real estate sector is also in crisis, while the tech and tutoring industries have severely curbed hiring after regulatory crackdowns, contributing to a spike in youth unemployment.

The economy narrowly escaped contraction in the second quarter and retail sales rose a meager 0.5% from January to August compared to the same period a year earlier, a far cry from the growth of about 8 to 9% observed in recent years.

Western luxury brands, in particular, are suffering. Burberry Group (BRBY.L) and French conglomerate Kering (PRTP.PA), home to brands such as Gucci and Yves Saint Laurent, both reported a 35% year-on-year drop in sales in China during the term April-June.

Lucy Lu, a 31-year-old Shanghai resident who works in marketing for a national fashion brand, says she is one of many consumers making amends.

“Before, let’s say with a handbag or cosmetics, if I liked it I would buy it without hesitation, now I really check if I need something before buying it.”

“Dining out is now my main pleasure,” Lu added.

For some craft food and beverage vendors, this new shift in consumer behavior represents an ideal time to expand.

Gerard Low, founder of Shanghai-based ice cream brand Dal Cuore, where a scoop costs around 40 yuan ($5.60), plans to open a fifth store in the megacity, encouraged by the rapid return of footfall to normal levels after a draconian two-month lockdown was lifted earlier this year.

He also notes that more families, instead of mostly young people, are heading to his stores to treat themselves.

“When times aren’t so good, people want to feel better, guilty pleasures like ice cream can help,” Low said.

($1 = 7.1584 Chinese Yuan)

Reporting by Casey Hall; Editing by Edwina Gibbs

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