Blog: SABMiller - Snowing all across China
Olly Wehring | 15 December 2006
Today (15 December), we’ve again seen the importance that the world’s brewing giants are placing on China as they seek out growth markets in the East to alleviate the problems caused by stagnant demand in the West.
SABMiller’s Chinese associate, China Resources Snow Breweries, announced earlier that it has bought two more breweries in the world’s largest beer market.
The acquisitions take the number of breweries it owns in China to 47 and, with two more greenfield breweries in the offing, CR Snow is developing a truly national footprint in China.
And these acquisitions can only help CR Snow in its quest to build flagship brand Snow into China’s first truly national beer. A couple of months ago, the brewer trumpeted the fact that its flagship brand Snow had become the biggest in China this year, out-selling rival Tsingtao.
While there remains some debate among the Chinese brewing fraternity over whether there is a truly national beer in China (Snow, for instance, has a meagre presence in Beijing and none at all in Shanghai), by snapping up breweries across the country, SABMiller’s associate is doing it all can to expand the reach of its hallmark brew throughout China.
The retail price of beer remains pitifully low in China. A 640ml bottle of beer in China can cost as little as US$0.12. Therefore, it is vital that, in order to generate returns from their businesses, multinational brewers keep costs down - and by owning breweries close to their respective markets, brewers can reduce the cost of distributing its products.
Some multinationals have chosen to concentrate on specific regions in China. Carlsberg, for instance, has focused on China’s south-west, while InBev is strong in the south and east of the country.
However, as China’s economy grows, more of its citizens turn into consumers with greater disposable incomes and desire for brands - be it in beverage alcohol, fashion or electronics. As such, there is a prize to be won in building China’s first national beer brand.
And, while CR Snow faces tough competition from the likes of Tsingtao, Yanjing and Anheuser-Busch-owned Harbin, its strategy of buying up breweries throughout China will give it an advantage pushing Snow nationally – and make it easier to generate returns doing it.
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