Labubu and Moutai: A Comparison and Challenges of New and Old Social Currencies

A financial institution in the United States recently released a report comparing emerging trendy toy IPs with traditional liquor giants, exploring whether this reflects a repetition of the consumption cycle or a profound paradigm shift.

The report points out that although both have the attributes of social currency, the social characteristics of emerging IP are more based on the common interests and values of the younger generation, while the social functions of traditional liquor rely more on power and hierarchical relationships. This difference reflects the essential distinction between "new consumption" and "traditional consumption."

Analysts believe that emerging IP companies are also facing a dual challenge posed by the IP cycle and investment attributes. If there is a long gap between the current popular IP and the next blockbuster, the company's global growth may slow down.

In addition, regulatory risks and market congestion are two major factors that investors cannot ignore. The report warns that the current phenomenon of capital concentration flowing into the "new consumption" sector is similar to the previous trend of funds clustering around traditional consumer blue-chip stocks, and the fragility of this crowded trading may have a significant impact on valuations.

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Intergenerational Differences in Social Currency

The research team believes that although both new and old social coins possess social attributes, there are significant generational differences.

1. Social Functions: Traditional liquor is more of a productivity tool that serves as a "social/business lubricant," while emerging IP represents the younger generation's pursuit of emotional value, providing instant, nuanced, and affordable experiences in the digital social media era.

2. Consumption Motivation: Traditional Baijiu can be seen as a "productivity tool", while emerging IP meets the emotional value and instant gratification needs of young people in a digital social environment, reflecting China's transition trend from investment-driven to consumption-driven.

3. Globalization Process: Traditional baijiu is deeply rooted in Chinese traditional culture and is still in the early stages of globalization; emerging IPs have already achieved significant success on a global scale, aligning more closely with global trends.

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

While experiencing rapid growth, analysts also pointed out the challenges faced by emerging IP companies, namely the dual test brought by the IP lifecycle and product investment attributes.

1. IP Lifecycle Risk: Traditional liquor has a history of hundreds of years and official endorsement, proving its ability to withstand cycles. In contrast, emerging IP companies have a shorter history, and the IP lifecycle remains a core risk.

2. Pros and Cons of Investment Attributes: The history of traditional liquor indicates that "investability" is a double-edged sword; it acts as a booster during an upward cycle and becomes an amplifier during a downward cycle.

The report notes that emerging IP companies are actively managing the prices in the secondary market to ensure their appeal to young consumers and to create a favorable environment for the release of new IPs and products.

Risks of Regulation and Market Congestion

1. Regulatory risk: Traditional liquor has always been affected by policies such as price controls and anti-corruption campaigns. Similarly, emerging IP companies are not in a regulatory vacuum. Recent media reports have highlighted market-related risks. However, analysts believe that as the consumer base becomes increasingly diversified, "mainstreaming" reduces its exposure to underage individuals in the domestic market. At the same time, the continuously growing overseas business also helps to hedge against regulatory risks in a single market.

2. The vulnerability of "crowded" trading: Every cycle in the capital market may witness dominant "crowded trades." The influx of funds into consumer blue-chip stocks represented by traditional liquor from 2016 to 2021 is quite similar to the current concentration of funds focused on emerging IP in the "new consumption" sector. Changes in fund flow and positions can have a significant impact on valuations.

The report believes that in the context of a scarcity of high-quality investment targets, this "crowded" situation may continue for some time. The real turning point may only come when significant turning points appear in overseas market high-frequency data, or when a strong recovery in the Chinese economy provides investors with more options.