Market Analysis: Foreign beer Bubbles in China

cctv.com 08-18-2003 14:22

Today, more beer is brewed in China than anywhere else in the world. But annual beer consumption of every Chinese is merely 12 liters, far lower than that of western countries. That spells market potential aplenty for local and foreign breweries. Foreign brands have been in China鈥檚 beer market for more than 10 years but those years have been far from smooth sailing. In Today鈥檚 Market Analysis segment, we will examine how the foreign breweries are performing and fighting the squeeze in China鈥檚 beer market.

In one of Beijing鈥檚 famous bar streets located downtown, as night falls, hundreds of bar goers flood into the watering holes and that鈥檚 when the fun begins. Each bar is lit up with neon signs to draw drinkers as if moths to the light. Among which beer brand neon signs is the most in number. For the bar goers, it seems difficult to make a choice among the myriad of names. But, beer is the most often ordered tipple of choice and is an inseparable part of a great night out.

Beer has not only become the favorite beverage for bar goers but is also available to ordinary Chinese through supermarkets. Beer sales are now growing three times faster than that of hard liquor. Take one branch of Carrefour (Beijing) as an example, starting from the late 90鈥檚, beer sales volume has increased 10 percent annually. While growth for liquor has been steady at 3 percent. Sales of beer for last year was USD 600,000.

Like many other Chinese markets, the market for beer has also attracted overseas investment. In the early 90鈥檚, foreign beer brands started entering the Chinese market. They were an instant hit and business peaked in the mid 90鈥檚. Average annual increase in sales at that time was about 50%.

鈥淲hen the international brands came into China. They brought in a lot of new ideas to the local breweries and consumers. So at that time, in terms of quality, technologies and way of promotion was very different from local breweries. So I would say the international brands enjoyed a really good time because the market received some new things,鈥said Lisa Loo, regional sales manager of Carlsberg Brewery (Guangdong) Limited.

Obviously, the foreign brands basked in the quick success. However, as local breweries got smarter and the foreign breweries found they did not really know the Chinese market, they started to meet hard times.

The competition between foreign breweries and Chinese counterparts is mainly on pricing. Normally, the price of foreign beer is two or three time higher than that of Chinese beer in China鈥檚 supermarkets. The higher price presents a dilemma for foreign breweries.

Beside price, taste is another important element for foreign breweries to consider.

The foreign breweries have learnt a lot from the Chinese market, at present, increasing numbers of foreign breweries are seeks faster expansion by M&As.

Latest M&As by Foreign Breweries

1, Anheuser-Busch will lift their stake in Tsingtao Brewery to 27 percent in 7 years.

2, In 2001, SAB Miller took over Sichuan Lijia Group for US$ 200m

3, In 2003, Carlsberg bought Yunan鈥檚 largest brewery group for US$ 27.5m

4, In 2003, Gardwell paid US$90m for a 29.64 percent stake in Harbin Brewery Group.

鈥淔oreign breweries seek to come in and partner with Chinese companies who know the all the obstacles and know the market better. It is great for them. If they come on their own. It will very difficult for them,鈥said Flemming Christensen, market development manager of Novozymes.

It is easy to see the willingness of foreign breweries to brew up a storm in China鈥檚 beer market. But the performance of market share seems to show a different result. While the Chinese breweries are still dominating the market, foreign players only take 7 percent of market share. On the one hand, this 7 percent means there is a room for foreign breweries to grow. On the other hand, to penetrate and dominate the increasingly crowded Chinese beer market, foreign beermakers have their work cut out for them.

Editor:Liu  Source: