• We’d hoped Chinese sugar consumption would recover alongside its vaccine rollout.
• However, the emergence of the Delta strain means restrictions are tightening again.
• Sugar consumption may struggle to strongly rebound until the outbreak is contained.

The Delta Variant is Spreading Fast in China

• We previously thought Chinese sugar consumption would recover due to the pace of vaccination.
• However, the highly contagious Delta variant was recently identified in Nanjing (Jiangsu Province).

• In just 10 days, it had been identified in a further 22 cities, splayed across 10 provinces.
• This has resulted in more lockdowns and we’ve seen hospitality venues close in these areas, in an effort to reduce the spread.
• Movement in and out of Nanjing City has also been minimised through renewed travel restrictions.

• We therefore no longer think Chinese sugar consumption will rebound strongly until the outbreak is under control again.

Chinese Sugar Consumption Going Forward

• Fortunately, a large-scale outbreak is unlikely, as China’s vaccination programme is being carried out at a world-leading rate.

• However, sugar consumption may dip in the remaining summer months and forthcoming public holidays as social gatherings reduce.

• In the short term, all eyes are on China’s mooncake producers, which usually require 100k tonnes of sugar a year.

• Some of these have already cut their production targets as they anticipate weaker demand on the back of fresh restrictions.

• Mooncake sales were impressive in 2020, totalling RMB 20.52 billion (up 4.3% year-on-year), with most restrictions eased.
• We don’t think demand will be as strong this year, given the current situation.
• China’s catering revenue, which had recovered to pre-COVID levels prior to the surge in cases, may in fact slow as other settings that provoke sugar consumption also quieten down.

• Of course, it all depends on how long it takes the Government to get this latest outbreak under control.

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