China Consumer

Flat beer

Breweries bemoan falling consumption


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In China, going out boozing with clients and colleagues is often seen as an essential skill for career advancement. Some bosses even call openly for “good drinking capacity” when hiring.

It seems especially important in the public sector – if you believe the findings of a study from 2011 which found that civil servants are more likely to suffer from liver disease than the rest of the population.

But as China becomes wealthier, its consumers are getting more health-conscious. That’s bad news for the beer producers. China has been the world’s biggest beer market since 2003. But the country’s beer volume fell 1% in 2014, the first decline in 24 years.

“China’s beer production and sales have reached the upper limit of the short- and medium-term consumption capacity,” was the sobering verdict that He Yong, deputy secretary general of China Alcoholic Drinks Association gave to the Southern Metropolis Daily.

Beer sales have been heady, increasing at an average annualised rate of 7.5% from 2009-14, and hitting $32.4 billion last year. At the same time, a fragmented market has become more consolidated, with the top five breweries – China Resources Enterprise (which makes Snow Beer in a joint venture with SAB Miller), Tsingtao, InBev’s Budweiser, Yanjing and Carlsberg – accounting for 70% of volumes sold.

Now some blame the anti-corruption crackdown for the slowdown in production last year. “Beer sales at restaurants and entertainment venues are gloomy, since a lot of officials don’t dare to eat out or even go to karaoke parlours. Many companies suspended their gift-giving activity in the wake of the austerity drive, which led to declines of beer sales at supermarkets too,” one industry observer told the China Daily. Another factor at work: more middle class consumers are opting for wine (China is already the biggest consumer of red wine), which is viewed not just as a healthier form of alcohol consumption but also a classier one.

Domestic brewers face another threat: the popularity of imported premium beers has continued to rise, says China Business Journal. The cumulative growth of imported beer has grown 427% over the past three years even though they are more pricey compared with local beers, which sometimes cost as little as Rmb2 a bottle (or 32 American cents). Imported beers are now more popular than ever before because younger consumers seek fun and novelty products that are different from their parents’ generation, says Southern Metropolis Daily.

Some foreign producers also are savvier when it comes to presentation and packaging. Budweiser, for instance, is sold in cans topped with gold-coloured aluminum foil to give it an upscale image. “Domestic brands, however, lack these elements to attract consumers. And imported beer also is far superior in developing new flavours,” says China Business Journal.

To that end, domestic beer producers are now finding ways to jumpstart sales. Southern Metropolis Daily says many are developing new flavours to court younger drinkers. Tsingtao, for instance, last year launched a peach-flavoured fruit beer that comes in a pink can. “Young people now seek modern trendy products so Tsingtao is also trying to release some new products based on that,” says Fan Wei, vice president of Tsingtao. “Our Peach Beer is very appealing to young women.”

Others are also hoping that expanding into e-commerce can help reverse their fortune. Tsingtao, for instance, launched Peach Beer on Alibaba’s Tmall with surprise discounts, gifts and cash rewards.

Many beer producers reckon that the countryside also has huge potential. However, extending distribution to rural areas is also a logistical nightmare. Zeng Shenping of Snow Beer says one of its dealers tried to transport beer to villages in Guizhou province. The delivery process involved horse-drawn carriages and needed workers to carry the beers the last-mile up mountainous roads.

Still, China looks far from having reached its longer-term saturation point. Japan boasts a per capita consumption of nearly 50 litres of beer annually. On the same metric China consumes only 35.9 litres…

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