As 2024 unfolds, the fast-moving consumer goods (FMCG) sector is witnessing a whirlwind of activity within the capital markets, particularly on the Hong Kong Stock Exchange (HKEX). This bustling environment is characterized by both triumphs and setbacks as companies navigate the complex landscape of public listings and market demands.

Several brands have successfully made their debut on HKEX, including notable entrants like Cha Baidao, China Resources Beverage, Xiaocaiyuan, and Maoge PingAdditionally, newer tea brands like Gu Ming and Hu Shang Ayi are racing towards their listings, reflecting a trend among beverage companies to tap into public financingContrarily, others such as Vinda International, Baobao Tree, Christine, and La Chapelle have chosen to bid farewell to the exchange, with Goldlion announcing its plans for privatization late in 2024. This duality of emerging successes and exits outlines the ongoing capital war within the FMCG industry this year.

According to incomplete statistics compiled by reporters, over twenty FMCG companies have submitted applications for listing on the HKEX since the start of 2024, spanning across varied sectors such as food and beverage, textiles and apparel, dining, and personal care productsThese ventures embody a sweeping wave of listings that primarily focus on consumer essentials—those synonymous with our daily needs.

The momentum towards listings in 2024 is evident, especially among companies providing essential goods and servicesWan Yong, Chairman of Sullivan Jieli Cloud Technology and CEO of Jieli Trading Treasure, highlighted in a recent speech that early in 2023, regulatory restrictions were imposed on various industries, effectively stifling applications from sectors designated as "red light" industries—such as alcohol production, pandemic-related businesses, and educational institutionsConversely, enterprises in the clothing, furniture, household appliances, food, and restaurant chains categorised as "yellow light" sectors can only be listed if they are leading entities within their respective markets.

This suggests that within the realm of “food, clothing, shelter, and transportation,” it has become increasingly challenging for general consumer goods companies to find pathways to the A-share market

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Presently, these enterprises predominantly seek alternative funding avenues in markets like Hong Kong and the United States, with a notable preference for the HKEXComprehensively, during the first seven months of 2024, the number of IPOs on the HKEX rose by 14% year-on-year, though the capital raised saw a decline of 13%.

However, amidst this excitement, there are underlying tensions brewing in the market, with some new tea brands attempting to dominate the capital landscape ahead of their competitorsIn a notable move at the beginning of 2024, Gu Ming and Mi Xue Bing Cheng submitted their prospectuses to the HKEX on the same day, igniting competitive fervorHu Shang Ayi quickly followed suit, signaling a fierce rush into capital markets.

Rumors swirl around other brands aiming for IPOs, including Ba Wang Cha Ji and Cha Yan Yue SeWhile neither has publicly confirmed its intentions, speculation about their forthcoming filings continues to circulate, indicating the dynamic nature of this market.

April 2024 marked a successful listing on the HKEX for Cha Baidao, making it the second publicly traded company in the fresh tea beverage marketYet, the performance of pioneering companies in the capital arena has not been as prosperous as anticipatedOn its debut, Cha Baidao's share price plummeted, and “the first tea drink stock,” Naixue's Tea, experienced a drastic reduction in market capitalization following its listing.

Though the hurdles are significant, entering the capital markets does bestow certain competitive advantagesIndustry experts indicate that being listed provides essential funding for growth, enabling businesses to enhance their market share and brand presenceAs noted by Pan Jun, Global Goods Strategy Consultant at Bain & Company, successful IPOs facilitate access to increased capital, allowing companies like Cha Baidao to widen their market reach and bolster brand influence.

The contrast between triumph and tribulation in this merchant sector is stark

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On December 20, 2024, Xiaocaiyuan officially marked its entry onto the HKEXOn the very same day, the Green Tea Group submitted its fifth prospectus to the exchange, an endeavor that has seen them make four previous listings attempts since March 2021.

The sentiment among restaurant brands regarding capital markets is also evolvingAccording to Wen Zihong, a partner at Hejun Consulting and head of the chain operation division, having robust cash flow and backing is increasingly viewed as critical for enhancing a restaurant's capacity to withstand market pressures and ensure long-term sustainability.

A notable shift in perspective is embodied by Jia Guolong, founder of Xibei CateringHe once staunchly opposed public listing but has recently reconsidered his stance, recognizing the necessity of leveraging capital market pressures to revitalize his business strategy in light of changing market dynamics.

Conversely, the landscape is fraught with challenges; both Laoxiangji and Laoniangjiao withdrew their A-share applications in August and November 2023, respectivelyA number of other dining enterprises, including Laowang, Qixin Tian, Yang Guofu, and Xiangcun Ji, have seen their applications for the HKEX lapse without successful listings.

This scenario illustrates that maneuvering through the capital markets is not a seamless journey for many dining enterprisesSong Xiangqing, vice president of the Chinese Commercial Economic Society and founder of Huadebang, highlights three critical challenges for prospective dining IPOs: the need for distinctive branding and innovation, standardization of production that aligns with current consumer habits, and a shift towards modern, humane management practices that reduce over-reliance on back-end operations.

In stark contrast to the frenzy of listing attempts, several brands are exiting the capital landscapeOn December 12, 2024, Christine, heralded as the “first baking stock,” made its official exit from the market.

Moreover, a number of apparel brands, including La Chapelle, Brose, and Goldlion, announced their withdrawal from the exchange in the latter half of 2024. This wave of exits coincides with mounting pressure on their financial performance

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For instance, Goldlion Group reported total revenues of HKD 603 million for the first half of 2024, a decline of 9% year-on-year, with attributable net profits plummeting by approximately 26%. Similarly, La Chapelle saw a 17.4% drop in revenue, recording losses of HKD 40.4 million; Brose also faced losses of HKD 51.98 million during the same period.

BabyTree, operating in the maternal and infant sector, struggled significantly after an 18-month trading suspension and ultimately had its listing status revoked in the final month of 2024. Company reports indicate that since 2019, BabyTree's performance has consistently spiraled downward, accumulating losses of approximately RMB 1.8 billion over four years.

Internal conflicts contribute as well to the challenges facedChristine has had turbulent governance, with internal disputes making headlines as early as 2017, when a shareholder coalition sought to remove an executiveIn 2019, a series of executive changes failed to stabilize the company, indicating a chaotic management structure.

Similarly, BabyTree encountered internal strife, with reports in April 2023 revealing a dismissal of its CFO, attributed to poor performance as evaluated by the boardFollowing this, allegations emerged regarding the company's potential fraudulent listing activities, further undermining confidence.

Core operational issues undoubtedly form the bedrock of companies' market exits, as evidenced by BabyTree's challenges in content creation and user engagementAnalysis suggests that emerging competition from platforms like Xiaohongshu and Douyin significantly undermines BabyTree's unique value proposition, underscoring the need for differentiation in content delivery.

As the intertwining themes of consumption and capital resonate through the industry, the support that capital provides cannot be overstatedHowever, this also brings a set of risks that investors must navigate with cautionThe nascent new tea drink sector, for instance, grapples with volatile post-listing stock prices influenced by market tendencies and investor expectations, often rooted in broader economic cycles.

On the other hand, even brands that remain unlisted can retain investor interest in the broader financial landscape, suggesting promising future prospects for the consumer goods sector

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