A TD Cowen survey released Thursday shows that US brands are rapidly losing their appeal in China, especially as economic growth slows, as locals prefer increasingly competitive players in their countries. Overall preferences for Western brands fell to 9% from 14% last year, but certain American companies face higher risks than others, the report says. TD Cowen partnered with an unnamed Beijing-based advisory company to conduct the survey in February 2025, following a similar survey in May 2024. However, they warned that several other American companies are at high risk in the region despite management optimism. China’s top leaders on Friday acknowledged the growing impact of trade tensions and pledged to target struggling businesses. Official reads stopped stopping that did not lead to a complete stimulus announcement. “This year’s survey was conducted before the US-China trade war intensified, but the threat was on the horizon,” said an analyst at TD Cowen. “Adding this factor to the equation makes it easy to see why uncertainty continues to rise and households are likely to be more cautious in the future.” The survey shows that income expectations will decline, with respondents’ share expected to increase from 6% to 10% over the next 12 months. In particular, Chinese consumers are planning to reduce costs for beauty items over the next six months, research shows that they are increasing their preferences for Chinese brands. US cosmetics giant Estee Lauder held first place in terms of highest recognition among Western beauty brands in China, but consumer preferences fell to 19.6% of respondents, down from 24.3% last year. That contrasted with an increase in respondents expressing preferences for second and third market players Lancome and Chanel, respectively. In the quarter ended December 31, Estee Lauder said net sales in Asia-Pacific fell by 11%, with some dropping due to “consumer sentiment in mainland China, South Korea and Hong Kong.” The Asia-Pacific accounted for 32% of total quarterly revenue. In the profitable sportswear category, Nike “losed meaningful preferences in every category,” and last year local competitors Li-inning and Anta found profits. TD Cowen’s analysis showed that of the US sportswear brands facing the most revenue risk compared to consensus expectations, Nike has the highest China sales exposure at 15%. “The Chinese market is the most recent third quarter revenue call in March 2025, marking its growth opportunity for sports, according to Nike Management,” the analyst said. That’s not necessarily slow growth or nationalism. The survey found a 4% decline in preferences for foreign apparel and footwear brands, but also showed a 3% increase in the trend of purchasing the “best” products regardless of their origin. “The implicit perception here is that Western brands don’t offer much in the best products and value ways,” said an analyst at TD Cowen. Similarly, Starbucks has encountered fierce local competition and is trying to maintain prices of more than a third of their competitors’ coffee, the report says. The survey found that the American coffee giant “slows its peers in terms of improving perceptions of value and quality.” Other coffee brands such as Mather, Tim’s, Cotti, %Arabica and M Stand have also recently expanded in China. Starbucks’ attendance sales in China fell 6% per year for the quarter ended December 29, bringing the regional share of total revenue to below 8%. What’s even more worrying is that the highly anticipated coffee boom in China may not be realized. “We have seen a decrease in daily and weekly purchases among coffee drinkers, suggesting that the coffee habits seen in the US are not entrenched in China,” the analyst said. They pointed out that Starbucks’ new ownership structure for China’s business is positive for stocks given its lack of short-term catalysts. TD Cowen buys Starbucks, but retains ratings for Nike and Estée Lauder.
