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

Recently, an analysis report compared the popular IP Labubu with the traditional liquor giant Moutai, attempting to explore whether this is a historical repetition of the consumption cycle or a profound paradigm shift.

The report points out that although Labubu and Moutai both possess the attributes of social currency, there are significant differences in their social characteristics. Labubu's social attributes are more based on the shared interests and values of the younger population, while Moutai's social functions rely more on power and hierarchical relationships. This difference reflects the essential distinction between "new consumption" and "traditional consumption."

Similar to Moutai, Labubu's parent company is also facing the dual challenges brought by the IP cycle and investment attributes. If there is a long gap between Labubu and the next blockbuster IP, the company's global growth may slow down.

In addition, regulation and market congestion are two major risks that investors cannot ignore. The current phenomenon of capital concentrating in the "new consumption" sector is quite similar to the previous trend of funds clustering around consumer blue-chip stocks represented by Maotai. The fragility of this crowded trade could have a significant impact on valuations.

Intergenerational Differences in Social Currency

The analysis team believes that Labubu and Moutai, while both possessing attributes of social currency, exhibit significant generational differences:

1. Differences in social attributes: Moutai's social attributes rely more on power and hierarchy, primarily serving business occasions; Labubu, on the other hand, represents the younger generation's social interactions based on interests and values, emphasizing emotional value and instant gratification.

2. Consumption motivation: Moutai can serve as a "productivity tool" (business lubricant), while Labubu meets the pursuit of emotional value and "dopamine" consumption among young people in a digital social environment, reflecting China's transformation trend from investment-driven to consumption-driven.

3. Globalization Process: Moutai is deeply rooted in Chinese traditional culture and is still in the early stages of globalization; Labubu has already achieved significant success worldwide, aligning with global trends.

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

While experiencing rapid growth, analysts have also pointed out the similar challenges faced by Labubu's parent company and Moutai, namely the dual test brought by the IP lifecycle and product investment attributes.

1. IP lifecycle risk: Moutai, with a history of a hundred years of accumulation and official endorsement, has proven its ability to withstand cycles. In contrast, Labubu has only a 10-year history, and the IP lifecycle remains a core risk.

2. Pros and cons of investment attributes: The history of Moutai shows that "investability" is a double-edged sword, serving as a booster during upward cycles and acting as an amplifier during downward cycles.

The report noted that Labubu's parent company is actively managing the second-hand market prices to ensure its appeal to young consumers and to create a favorable environment for the release of new IP and products. The recent decline in the second-hand prices of Labubu plush toy series has been viewed as a result of actively managing the supply and demand dynamics.

Unignorable Regulation and Market Congestion

The report concludes by emphasizing that regulation and market sentiment are two other risk factors that investors must face.

1. Regulatory risk: Moutai has always been influenced by price controls and anti-corruption campaigns. Similarly, Labubu is not in a regulatory vacuum. As Labubu's consumer base becomes increasingly diversified, "mainstreaming" reduces its exposure to minors in the Chinese market. At the same time, the growing overseas business helps to hedge against the regulatory risks of a single market. However, this risk may still negatively impact the company's fundamentals or trigger "headline noise" that leads to stock price fluctuations.

2. The vulnerability of "herding" trading: In every cycle of the capital market, there may be dominant "crowded trades." The influx of funds into consumer blue-chip stocks represented by Moutai from 2016 to 2021 is quite similar to the current concentration of funds on the "new consumption" track focused on Labubu. Changes in fund flows and positions can have a significant impact on valuations. Although recent changes in fund flows have put some pressure on "new consumption" stocks, the report suggests that, against the backdrop of a scarcity of high-quality investment targets, this "crowded" situation may persist for some time.