Pop Mart's Surge: A Generational Shift in China's Consumer Landscape

The rise of Pop Mart (09992.HK), a once-obscure toy retailer now valued at $43.6 billion, marks a seismic shift in China's consumer market. While traditional staples like Kweichow Moutai (600519.SS), the iconic liquor brand, have long dominated investor portfolios, Pop Mart's explosive growth signals a new era of “emotional consumption” driven by Gen Z and young millennials. This pivot toward experiential, identity-driven spending—and the regulatory environment nurturing it—suggests investors should reallocate capital toward companies catering to this “new consumer.”

The Gen Z Consumption Revolution

Gen Z's spending habits are a stark departure from older generations. Unlike their parents, who prioritized practicality and status symbols like Moutai's premium liquor, today's youth seek products that fulfill emotional needs—whether for self-expression, social validation, or stress relief. Pop Mart has mastered this shift, transforming itself from a brick-and-mortar toy store into a global IP powerhouse. Its blind box model, with its ritualistic unboxing and hidden-edition surprises, taps into Gen Z's craving for instant gratification and collectible value.

The numbers speak volumes:
- Pop Mart's revenue surged to RMB 13 billion in 2024, a fivefold increase since its 2020 IPO.
- Its LABUBU IP generated RMB 3.04 billion in 2024—a 727% jump—while HIRONO grew 107%.
- Overseas sales now account for 71% of revenue, with North America and Southeast Asia surging 557% and 619%, respectively.

Compare this to Moutai, whose P/E ratio has fallen to 22.58 in April 2025, nearly halving from its 2021 peak of 60.35. While Moutai's decline reflects broader macroeconomic pressures, it also underscores a generational shift: younger consumers are less drawn to traditional luxury and more to pop culture and social media-driven brands.

The Regulatory Tightrope—and Why It's Manageable

Pop Mart's growth isn't without risks. Regulatory scrutiny over its blind-box model—which critics liken to gambling—has caused stock dips, such as a 6.2% drop in June 2025 after state media warnings. Yet these risks are mitigated by two factors:
1. Compliance with evolving guidelines: Pop Mart has already adjusted to age restrictions (e.g., no sales to children under eight) and proposed price caps (under ¥200 for blind boxes). Its robust IP licensing and cultural collaborations—like with the Van Gogh Museum—also align with China's push to become a “global creative center.”
2. State support for innovation: China's National Action Plan prioritizes creative industries, enabling Pop Mart to expand its U.S. footprint (targeting 50 stores by 2025) and collaborate with global IPs like Powerpuff Girls.

Valuation: A Premium for the Future

Pop Mart's valuation multiples—P/S of 6x versus Mattel's (NASDAQ:MAT) 1.5x—reflect investor faith in its transition from a fad to a cultural institution. Its MEGA series, priced up to ¥10,000 and marketed as “investment-grade collectibles,” and its 46 million members (with a 49% repurchase rate) further justify the premium.

Yet risks linger. A pullback to pre-regulatory levels (10–15% below current prices) could make it more attractive, while over-reliance on a few IPs could stall growth. Competitors like TOPTOY, backed by MINISO, are encroaching in lower-tier cities. Still, Pop Mart's global IP portfolio and DTC strategy give it an edge.

Investment Case: Pivot to “New Consumer” Equities

Investors should heed this shift. Gen Z's spending power—already influencing 30% of China's consumption—will only grow. Pop Mart's 66.8% gross margin and operating profit surge (238% in 2024) suggest strong profitability, while its 71% overseas revenue buffers against domestic slowdowns.

For now, the tailwinds outweigh the headwinds. China's regulatory support for creative industries, coupled with Gen Z's demand for emotional goods, positions Pop Mart as a leader in the “new consumer” economy. Traditional staples like Moutai may still have their place, but the future belongs to companies that turn toys into cultural symbols.

Investment advice: Consider overweighting Pop Mart and similar firms (e.g., Bilibili, SHEIN) while underweighting legacy luxury brands. The emotional economy is here to stay—and so is Pop Mart's rise.

Data as of June 2025.