China Deal? Rich Chinese Must Think So?
Last week, reports from two of the world’s premier luxury brands suggest that wealthy Chinese consumers have returned. This is important because midway through 2018, companies like Louis Vuitton (LVMH) and Swiss watchmakers pointed to a weakness that preceded the peak in the market. More recently, however, Louis Vuitton management has stated that demand is increasing in China.
That could be the case once again.
Pernod Ricard (PDRDY) is a global seller of premium liquor brands, including Martell cognac. Last week, the company gave an update on fourth-quarter business trends:
Note: the early Chinese New Year helped boost sales. However, the company was able to raise prices on Martell in China last year with a hike again this year, as it introduces an even more expensive version for wealthy Chinese consumers endorsed by Kris Wu.
Martell Distinction is specifically for the Chinese market.
According to Martell’s Cellar Master, “Distinction” is to be a ‘tribute to the essence of the vine,’ and this is shown in the creation on the front of the simplistic bottle.
Hermes (HESAY), home of the $100,000 Birkin bag among other iconic products and symbols of wealth, saw a nice quarter-to-quarter rebound in the pace of sales.
The company, which gets more than a third of its revenue from China, saw sales outpace overall global sales in the fourth quarter.
There is no way wealthy consumers in China would exhibit this type of confidence without very strong feelings there will be a trade deal. In fact, considering the mounting economic weakness in China, it’s very impressive to see this uptick in spending.
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