The Biggest “Gold Mine” of New Consumption Is Starting to Emerge

Since the beginning of 2024, there has been an ongoing surge in the stock prices of companies like Pop Mart, Old Poo Gold, and Mixue Ice City following their listings on the Hong Kong Stock Exchange, as well as the continuous hype around A-shares in the pet sector. Capital’s enthusiasm for the “new consumption narrative” is showing no signs of slowing down. Behind this surge is a shift in consumer behavior, where more consumers are moving from “functional needs” to “emotional value.” This shift has spurred explosive growth in new consumption sectors like the millet economy, traditional gold jewelry, and the pet economy.There is currently no unified definition of “new consumption” within the industry. According to Zhang Yidong, the Global Chief Strategy Analyst at Industrial Securities, new consumption includes service consumption, spiritual consumption, and the new forms of consumption related to AI technology. In a mid-term strategy meeting held by Industrial Securities on May 20, Zhang highlighted that this year, he was particularly focused on consumption in the spiritual domain. This is because, in a world where material goods are abundant, the functionality of products has weakened. Consumers no longer find themselves overly dependent on daily essentials like oil, salt, vinegar, or their basic living needs. Instead, the highlights of consumption now stem from emotional resonance and identity building. According to Zhang, this marks the beginning of the era of spiritual consumption in China.“We see many new consumption businesses adopting innovative business models.

For example, companies like Pop Mart, which have captured the new trend of consumption transformation, have achieved explosive growth despite the relatively slow recovery in overall consumption,” he said. He believes that the next wave of consumption, driven by innovations like artificial intelligence, will lead to the emergence of new consumption scenarios. At the micro level, new consumption companies are generally more growth-oriented and self-sustaining compared to traditional consumption businesses. They exhibit strong free cash flow and returns, outperforming many in the market.According to research from Dongwu Securities, new consumption is a phenomenon where a brand’s power increases during the “formation of new consumption habits” or “the breaking of brand influence beyond its original market.” Consumers’ willingness to pay a premium for products comes from their recognition of the brand, not from any drastic changes in the channel or supply chain. For example, the consumption scene of Mixue Ice City isn’t “I used to drink 30 RMB milk tea, but now I can only afford 6 RMB milk tea,” but rather, “I never drank milk tea, but now Mixue has opened a store near my house. I tried it, liked it, and now I’m drinking milk tea.” This essentially represents the formation of new consumption habits, or the brand’s breakthrough in creating these habits, with the core value lying in the “strong brand,” not just “low prices.”Mixue Ice City’s integration of spiritual consumption is also reflected in its IP “Snow King,” which has gone viral, enhancing brand recognition. The brand has built an emotional connection with young consumers through its 2D characters, differentiating itself from other new tea drink brands.

However, the non-standardized nature of spiritual consumption can lead to significant fluctuations in product lifecycles, and valuations of relevant companies may also experience volatility, especially when capital inflows drive up their stock prices. For instance, Pop Mart, as a representative of the millet economy, now has a price-to-earnings (P/E) ratio of over 85 times, far exceeding that of traditional consumer goods leaders.Recently, Tu Zheng, an early investor in Pop Mart from Fengqiao Capital, announced that due to the upcoming expiration of the first phase of the fund, Fengqiao Capital sold off all its Pop Mart shares through block trading, cashing out about HKD 2.264 billion (around RMB 2.11 billion). In comparison, the pet economy, one of the hottest sectors in the A-shares market, seems to offer greater certainty and potential. According to Wind data, the pet economy index has risen by more than 30% this year, with a 10% increase since May.One of the leading companies in the pet economy, Zhongchong Co., Ltd., has hit a series of historical highs in the last six trading days, demonstrating the stability of pet food as a high-demand new consumption product. The scale of China’s pet economy reached 592.8 billion RMB in 2023, and it is expected to exceed 1.15 trillion RMB by 2028, with pet food accounting for over 50% of the market share.From the millet economy to the pet economy, market speculation appears to be driven by short-term capital chasing hot trends, but underneath, there is a clear industrial logic.

With the acceleration of China’s aging population and declining birth rate, capital is replicating Japan’s industrial transformation from manufacturing to new consumption. This logic not only determines the capital allocation across industries but also reflects the deep impact of population structure changes on economic patterns.The pet economy particularly embodies this logic, as pets serve as stronger “emotional substitutes,” with much higher consumer loyalty than ordinary goods. According to the “2025 China Pet Industry White Paper (Consumer Report),” the domestic urban (dog and cat) consumption market is expected to reach 300.2 billion RMB in 2024. Among the primary consumer groups, “Post-90s” represent 41.2%, and “Post-00s” account for 25.6%, making young people the main force in pet ownership. These young consumers are more inclined to spend on diverse, personalized, and high-quality pet products. For example, when choosing pet food, many consumers are increasingly focused on ingredients, with grain-free, high-meat-content products becoming more popular, leading to increased capital inflow toward these companies.The application of technology in the pet economy is also expanding, with the market for smart pet products like intelligent litter boxes and automatic feeders growing rapidly. Furthermore, as pet owners become younger, they are more likely to embrace technology, creating significant market potential for smart pet products. Although pet consumption is currently concentrated in first- and second-tier cities and is still in its early stages, it is expected to expand into more cities, with substantial market potential.

CITIC Securities believes that the pet economy is a rare track with strong demand resilience. The domestic market is still in the “large industry, small leading companies” stage (unlike in the U.S., where the top three pet food companies account for about 55% of the market, China’s top three account for less than 20%). With further industry concentration, they are optimistic about leading companies enhancing market share through product innovation, brand development, and channel expansion.However, pet stocks currently have a P/E ratio exceeding 50 times, far higher than traditional consumer goods (which typically range from 10 to 25 times). If industry concentration does not improve as expected, some companies may face valuation corrections. Additionally, while leading pet companies like Guibao Pet and Zhongchong Co. are accelerating overseas expansion, with significant increases in foreign revenue, challenges remain. Unlike Japan’s early pet industry globalization experience, the ongoing tariff wars between the U.S. and China may squeeze the market share of Chinese pet products in overseas markets, and the brand premium of Chinese pet companies in international markets is still to be tested.Capital’s pursuit of new consumption, inspired by Japan’s path, is essentially about finding “certainty” in an increasingly uncertain world. However, its sustainability still needs to return to the core of business fundamentals—short-term capital rotations will eventually give way to the real value that can weather economic cycles. Whether the rapidly growing pet economy will become the biggest “gold mine” of new consumption still needs time to verify.