China and Beer: A Quick Look at a Complex Topic

Posted on October 3, 2012

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It is both surprising and obvious that China is the biggest beer market in the world. Surprising because beer is heavily associated with European culture (at least from an American and Western-centric perspective), obvious because China is the most populous country in the world.

In 2011 50 billion liters of beer were consumed in China. For context the next largest consumptions rates were: US at 24 billion litres, Brazil at 14 billion litres, Russia and Germany both at 9 billion litres.1 It is important to keep in mind that this does not mean that the average Chinese individual is drinking massive amounts. These statistics reflect the size of the country’s population as well as increases in consumption. While Chinese consumption per capita was 32 liters a year in 2010, it was 132 liters per person in the Czech Republic, the country that tops the list.2 The average US citizen consumed 78 liters per capita in 2010.3  Not only is China the largest beer market in the world, by some predictions it could grow 30-50% in the next few years.4 If the growth is anywhere near this number there is huge market opportunity, and the large international brewers are paying attention.

There is enough interest in the Chinese beer market that Mintel (a research company) can charge $3,990 for their findings.5  A few details of the report, that were openly accessible, show that the growth in the last five years, from 2007 to 2011, is impressive: 6

The market grew 29% in volume.
There was 63% growth in value.
Average value per litre of beer sold rose by 27%.

The current Chinese beer market has less concentration than the US market, but with the top four companies owning 55% of the market there is significant concentration. Of these four, AB InBev is the only foreign player, for which China represents 6% of its global beer volume but only 1% of profits, pointing to the complexities that foreign players face.7 China is a difficult market for western companies to crack, the successful entries to date have been joint ventures, generally with the foreign company buying into a Chinese company. The world’s best selling beer is Snow, is a joint venture between China Resources Enterprise and SABMiller.

There are two specific areas of growth which are particularly interesting right now: premium and craft. The growth in both of these categories reflects changes in the economy and society. Traditionally, beer in China is consumed in social settings, from large banquets to dinner parties – in contrast to drinking at home or in a bar. In these settings beer is not the highlight, it is part of the social exchange.

With the rise of expendable incomes, people are looking for new ways to distinguish themselves. Much like in the US, premium and craft beer represents an affordable luxury. Consuming this luxury is also a strong signaling device to the outside world, especially since premium beer can be priced up to 15 times that of mainstream beers in China. With this premium pricing this segment is of great interest to producers, even though it only presents 5%-10% of the overall market.8

Much of the craft beer scene is strongly influenced by foreign residents, primarily westerners. And, this influence is very recent. Expats were behind a number of inaugural craft beer events this year, Beijing hosted a craft beer festival and Shanghai had a beer week. Highlighting the strategic paradoxes in approach to manufacturing and production in China, two micro brewers in Beijing take contrasting approaches to sourcing: one sources locally as “it proves you can do well-done, craft, artisan brewing in China without having to make it look American or European” while the other brewery uses imports as it is “comforting for local Chinese to know the ingredients aren’t Chinese, because of all the food scandals.”9

From economic growth and social dynamics to market concentration and sourcing, the dynamic issues of the Chinese beer market are many of the same problems companies and countries are struggling to understand. Though it is impossible to give justice to this topic in under 700 words, hopefully this quick info sheds a little light on a fascinating topic.

1 https://en.wikipedia.org/wiki/List_of_countries_by_beer_consumption_per_capita
2 ditto
3 ditto
4 http://europe.chinadaily.com.cn/epaper/2012-04/06/content_14991403.htm
5 http://store.mintel.com/beer-china-may-2012.html
6 http://www.mintel.com/press-centre/press-releases/882/china-beer-consumption-hits-the-50-billion-litre-mark-for-first-time-in-2011
7 http://www.chinaeconomicreview.com/content/better-beer
8 http://www.foxbusiness.com/markets/2011/11/03/analysis-premium-chinese-beer-bitter-brew-for-foreign-brands/
http://europe.chinadaily.com.cn/epaper/2012-04/06/content_14991403.htm
http://www.chinaeconomicreview.com/content/better-beer
9 http://blogs.wsj.com/scene/2012/02/21/beijing-brews-up-craft-beers/

Other
In China, low end beer can cost as little as $0.30 on average.
http://www.bloomberg.com/news/2012-04-10/budweiser-is-luxury-in-china-where-beer-costs-30-cents.html
http://www.jingdaily.com/tag/beer/
http://beerpulse.com/2012/06/chinas-beer-market-crosses-50-billion-liters-for-first-time-ever/

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