BeBeBus successfully navigate the two major “challenges”

The maker of premium nursery products under the BeBeBus brand has filed to list in Hong Kong just six years after its own birth

Key Takeaways:

  • Butong has filed to list in Hong Kong, reporting nearly 900 million yuan in revenue in the first three quarters of last year
  • The maker of BeBeBus-brand premium nursery products has quickly built a following among millennial consumers by leveraging social media platforms

  

By Tsui Wai Kwan

When it comes to raising children, China’s new middle class is famous for its attitude of sparing no expense. That’s created big demand from millennial mothers for high-end nursery products, which Butong Group, owner of the BeBeBus brand, is trying to milk as it eyes a Hong Kong IPO.

Butong’s listing document describes the company as a high-end nursery product brand whose scale has been toddling steadily upward. Its revenue rose from 507 million yuan ($69.2 million) in 2022 to 852 million yuan in 2023, and was set to growth strongly again last year after reaching 884 million yuan in the first nine months of 2024. It’s also toddled into the black, earning a profit of 27.2 million yuan in 2023 after reporting a 21.22 million yuan loss the previous year. Its profits continued to grow last year, more than doubling year-on-year to 46.4 million yuan in the first three quarters of 2024.

Butong’s business consists of four main parts: travel gear, which includes strollers, car seats and baby carriers; sleep gear, including cribs, pajamas and pillows; feeding gear, consisting of highchairs, baby bottles and sippy cups; and baby care products like diapers, wet wipes and dry wipes. Travel gear is its most important baby, accounting for 47% of total revenue in the first three quarters of 2024, followed by baby care products at 30.6%, sleep gear at 16.6% and feeding gear at 5.8%.

Butong founder Wang Wei is himself a millennial, turning 39 this year. In 2018, he was astute enough to notice that increasing wealth among Chinese families was causing demand for high-end products to grow more quickly than their mass market counterparts. The number of well-off families in China targeted by Wang is expected to grow from 4.9 million in 2019 to 5.4 million in 2028, according to third-party market data in Butong’s listing document. Wang was confident that such changing wealth patterns would create huge demand for high-end nursery products, leading him to start his journey into the market.

Playing to social media

In addition to catering to young moms who want nothing but the best for their babies, the BeBeBus brand’s success owes in no small part to Wang’s deep understanding of how to leverage social media to quickly popularize his brand in its desired niche.

BeBeBus is extremely active on platforms like Xiaohongshu and Douyin, two of China’s most popular social media outlets where users often share their experiences. By the end of last September, the company had partnered on those and other platforms with over 16,000 key opinion leaders (KOLs), including more than 20 with over a million followers. In the 19 months between March 2023 and September 2024, those KOLs flooded the internet with more than 830,000 posts and videos featuring BeBeBus-related content, averaging 1,500 per day.

Such tactics came at a large cost, as the company incurred more than 500 million yuan combined in promotion and marketing expenses over the last three years, accounting for around a quarter of its revenue during the period. The company clearly believes that it takes money to make money, and Wang himself is sparing no expense to nurture his corporate prodigy.

Weak consumption, declining birth rate

BeBeBus has made a positive first impression with young parents using its aggressive marketing. But whether its high-end nursery brand will appeal to investors could depend on whether it can maintain its position in a market where the birth rate is plunging and willingness to pay big money for premium products is weakening with China’s slowing economy.

China’s premium nursery product market grew from 25.4 billion yuan in 2019 to 31 billion yuan in 2023, representing average annual growth of 5.1%, according to third-party data in Butong’s listing document. The market is expected to reach 45.8 billion yuan by 2028, growing by an average 8.1% annually between 2023 and 2028. Such single-digit growth seems to lack the pizzaz needed to get investors excited.

To try and soften the birth rate decline and create a more balanced demographic mix, China has relaxed its birth policies several times in the last decade. It replaced its one-child policy introduced in late 1970s with a two-child policy in 2017, and later expanded that to three children in 2021.

But such efforts haven’t had much effect. According Bloomberg Economics projections, the number of Chinese will decline by 51 million in the next decade, as the nation struggles to reverse the falling birth rate.

Weak consumption is also posing a major challenge for retailers across the spectrum, especially at the higher end where such products are considered highly discretionary. BeBeBus products offer glitzy and tasteful designs – but at a price. Average products cost over 2,000 yuan, or nearly $300. Some cribs cost more than 4,180 yuan and strollers 4,980 yuan, double or even triple the prices of similar offerings from other domestic brands.

But with China’s economy slowing these last two years, after an anticipated post-pandemic rebound proved short-lived, people are no longer willing to shell out cash as freely as they once did. Especially when it comes to things like pricey nursery products, parents may not find it worthwhile to spend big sums on items their children will quickly outgrow.

Hong Kong-listed peer Goodbaby International (1086.HK) could be a good comparison for Butong, reporting revenue of 4.2 billion yuan and a profit of 185 million yuan in the first half of last year. But despite significantly outperforming Butong, both in terms of scale and profitability, Goodbaby trades at a trailing price-to-earnings (P/E) ratio of just 4 times. That shows investors may not be rushing to embrace this kind of nursery care stock, which could make it difficult for the Butong to secure a high valuation in its listing.

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