Consumer giants from Starbucks to General Mills have one big sales problem: China

The Chinese market has been a significant factor in the earnings reports of many US companies, with slower growth and intense local competition weighing on corporate earnings. Consumer sentiment in China is weak, with consumers being more deals-seeking than they are spending. McDonald’s reported a 1.3% decline in sales for its international developmental licensed markets segment, including China. Nationwide retail sales grew by just 2% in June from a year ago.

Several US consumer giants have also echoed this downward trend in their latest earnings reports. Apple reported a 6.5% year-on-year decrease in Greater China sales in the quarter ended June 29. Johnson and Johnson referred to China as a “very volatile market” and a major business segment that performed below expectations. General Mills’ CFO Kofi Bruce said the quarter ending May 26 saw a souring or downturn in consumer sentiment, hitting Haagen-Dazs store traffic and the company’s “premium dumpling business.”

The regional results are also affecting longer-term corporate outlooks. Procter and Gamble CFO Andre Schulten said that China would improve to mid-single-digit growth over time, similar to that in developed markets. Procter and Gamble said China sales for the quarter ending late June fell by 9%, but it was able to grow baby care product sales by 6% and increase market share thanks to a localization strategy.

Hotel operator Marriott International cut its revenue per available room (RevPAR) outlook for the year to 3% to 4% growth, partly due to expectations that Greater China will remain weak and softer performance in the U.S. and Canada. Marriott’s RevPAR Greater China fell by about 4% in the quarter ended June 30, partly affected by Chinese people choosing to travel abroad on top of a weaker-than-expected domestic recovery.

McDonald’s affirmed its goal to open 1,000 new stores in China a year, while Domino’s said its China operator, DPC Dash, aims to have 1,000 stores in the country by the end of the year.

Coca-Cola reported a decline in consumer confidence in China, with volumes falling in contrast to growth in Southeast Asia, Japan, and South Korea. Asia Pacific net operating revenue fell by 4% year-on-year to $1.51 billion in the quarter ended June 28. The company’s shift from unprofitable water products to sparkling water, juice, and teas was attributed to the drop in China volumes. Starbucks CEO Laxman Narasimhan said that they had to adapt to a new mix of products and promotions, which caused significant disruption to the operating environment.

Starbucks reported China same-store sales dropped by 14% in the quarter ended June 30, far steeper than the 2% decline in the U.S. Starbucks also reported a 20.9% drop in same-store sales for the quarter ended June 30. However, the company claimed sales for those stores surged by nearly 40% to the equivalent of $863.7 million. Starbucks said its 7,306 stores in China saw revenue drop by 11% to $733.8 million during the same quarter. Both companies face many competitors in China, from Cotti Coffee on the lower end to Peet’s on the higher end.