Comparison of Social Attributes of New and Old Consumer Goods: Labubu and Traditional Baijiu

Recently, an analysis report compared the similarities and differences between the emerging toy IP Labubu and traditional liquor giants, attempting to explore whether this indicates a repetition of the consumer cycle or a deeper paradigm shift.

Analysis shows that although Labubu and a well-known liquor brand both possess the characteristics of social currency, their social attributes exhibit significant differences. Labubu is more grounded in the shared interests and values of the younger demographic, while the liquor brand relies more on power and hierarchical relationships. This difference reflects the essential distinction between "new consumption" and "traditional consumption."

However, a certain toy company is also facing the dual challenges brought by the IP cycle and investment attributes. If there is a long gap between Labubu and the next popular IP, the company's global growth may slow down.

In addition, regulatory risks and market congestion are also factors that cannot be ignored. The current phenomenon of capital concentrating on the "new consumption" sector is quite similar to the previous trend of funds clustering around blue-chip stocks, and the fragility of this crowded trading may have a significant impact on valuations.

Intergenerational Differences in Social Currency

The research team believes that while Labubu and a certain liquor brand both possess social currency attributes, there are significant generational differences. The social function of the certain liquor is more reflected as a "lubricant" in business situations, whereas Labubu represents the younger generation's pursuit of emotional value, providing consumers with an immediate, nuanced, and affordable pleasurable experience in the era of digital social media.

In a digital world where consumers face "meaninglessness" and increasing pressure, Labubu suggests that China is gradually shifting from an investment-driven model to a consumption-driven model. A certain liquor brand is deeply rooted in traditional Chinese culture, and its globalization process is still in the early stages, while Labubu, which is highly aligned with the global zeitgeist, has already achieved significant global success.

Differences in social attributes:

• The social attributes of a certain liquor brand rely more on power and hierarchy, primarily serving business occasions.
• Labubu represents the younger generation's social interactions based on interests and values, emphasizing emotional value and instant gratification.

Consumption Motivation:

• Some baijiu can be used as a "productivity tool" (business lubricant)
• Labubu meets the pursuit of emotional value and rapid gratification by young people in a digital social environment, reflecting China's trend of transitioning from investment-driven to consumption-driven.

Globalization process:

• A certain baijiu is deeply rooted in Chinese traditional culture and is still in the early stages of globalization.
• Labubu has achieved significant success globally, in line with global trends.

The Double-Edged Sword of IP Cycle Risks and Investment Attributes

While experiencing rapid growth, analysis also points out the dual challenges faced by a certain toy company and a certain liquor brand, namely the dual test brought about by the IP lifecycle and product investment attributes.

IP lifecycle risk: A certain liquor brand with a century of history and official endorsement has proven its ability to withstand cycles. In contrast, a certain toy company and Labubu have histories of only 15 years and 10 years, respectively, making the IP lifecycle a core risk.

The report suggests that as an IP platform, the diversified IP portfolio of a certain toy company can mitigate risks, but Labubu is crucial for its global success. If there is a prolonged gap between Labubu and the next hit IP, its global growth may slow down. Furthermore, the "mainstreaming" of subcultures may drive growth, but it could also dilute Labubu's unique social identity, thereby alienating its core consumer group.

The pros and cons of investment attributes: The history of a certain liquor brand indicates that "investability" is a double-edged sword, serving as a booster in uptrends and becoming an amplifier in downturns.

The report notes that a certain toy company is actively managing the prices in the second-hand market to ensure its appeal to young consumers and to create a favorable environment for the release of new IP and products. The recent drop in the second-hand prices of the Labubu plush toy series is seen as a result of the toy company's proactive management of supply and demand dynamics.

Unignorable Regulation and Market Congestion

The report emphasizes that regulation and market sentiment are the other two risk factors that investors must confront.

Regulatory risks: A certain liquor brand is always affected by policies such as price controls and anti-corruption campaigns. Similarly, a certain toy company is not in a regulatory vacuum. Recently, media articles have reminded us of the market-related risks. However, analysts believe that as the consumer base of the toy company becomes increasingly diversified, "mainstreaming" reduces its exposure to minors in the Chinese market. At the same time, the growing overseas business (expected to contribute more than half of sales by 2025) also helps hedge against regulatory risks in a single market. However, this risk may still negatively impact the company's fundamentals or trigger "headline noise" that leads to stock price volatility.

The Vulnerability of "Crowded" Trading: Every cycle in the capital market may experience dominant "crowded trades." The influx of funds from 2016 to 2021 into consumer blue-chip stocks represented by a certain liquor brand is quite similar to the current concentration of funds in the "new consumption" sector focused on a certain toy company. Changes in fund flow and positions can have a significant impact on valuations — the forward P/E ratio of the certain liquor brand was nearly 60 times at the beginning of 2021, while it is currently only 18-19 times. Although recent changes in fund flows have put some pressure on "new consumption" stocks like the certain toy company, the report suggests that this "crowded" situation may persist for some time given the scarcity of quality investment targets. The real turning point may only come when meaningful turning points appear in high-frequency data from overseas markets or when a strong recovery in the Chinese economy offers investors more choices.

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