And Finally

The morning after

Brewers are disappointed that people didn’t drink more during Olympics

Twenty years ago the Chinese were light beer drinkers, quaffing an average of just 12 pints a year. By 2001 consumption was up to 32 pints and last year it was 63, according to brewer SAB Miller. That’s still some way short of the world’s best boozers – stumble forward the Czechs, who each downed 306 pints last year, says Euromonitor – but at least it is heading in the right direction as far as the brewers are concerned.

So why have Chinese beer firms lately been reporting an unexpected hangover from unsold inventory?

First half results from the domestic breweries reveal that sales and profits were disappointing. Take Tsingtao, China’s second largest brewer. It missed analyst forecasts for the first half, recording Rmb13.4 billion in sales, or year-on-year growth of 11.2%. Not bad, but less impressive than 2011, when sales grew by more than 20%.

Most analysts attribute the slowdown to the economic downturn, as well as a relatively cool spring this year. But beermakers were confident of making up lost ground over the summer, thanks to the Olympics Games. Accordingly, they all increased production.

“The January-March quarter is the weakest season for beer in general. But this year the April-June quarter also saw sales badly hurt by adverse weather. So the beer producers decided to bet big and pushed their distributors to beef up their inventory during the summer’s Olympics,” Zhu Danpeng, a researcher at the Institute of Chinese Food Business, told Southern Metropolis Daily.

But brewery bosses won’t have won any gold medals for forecasting demand. The largest producers reported only small increases in sales during the Olympiad: a 5% uplift for bottled beer and about 10% for cans. Nothing like the larger spike that they were anticipating.

Blame London rather than us, industry executives have been insisting. They say the Olympics didn’t deliver the sales that they expected because of the time difference with the UK. Many of the most popular events didn’t start until late into the night, after peak beer-drinking hours.

Quite why the planners weren’t able to predict the timing disconnect is left unsaid. But for Tsingtao, which pumped sponsorship funds into China’s “diving princess” He Zi, as well as former hurdling glory boy Liu Xiang, that must have been especially frustrating.

Now the result is very much a ‘morning after’ feel for parts of the industry, with distributors complaining that they have months of excess inventory sitting in their warehouses. That also suggests they’ll be ordering less beer over the weeks ahead, denting prospects for the brewers in the remaining months of the year.

Nonetheless, hopes are still high about future demand in the Chinese beer market, which analysts expect to contribute about 40% of the world’s volume growth over the next four years.


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