Analysis

Focus - China's Beer Market

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China may have the world's highest overall consumption, but leading brewers face an uphill struggle to find strong profits, an analyst has claimed today (6 February). Here, with the help of Bernstein's figures and analysis, just-drinks looks at the fragmented Chinese beer market.

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Size

China is the largest beer market in the world, worth 450m hectolitres per year - about 25% of global beer consumption. It is twice the size of the second largest market, the US. However, it only accounts for an estimated 3% of the global beer profit pool and ranks eighth in profit terms, ahead of Colombia but behind Russia. Per capita annual consumption is 33 litres and, although that may rise to 50 litres by 2020, it still lags Western Europe and North America's 70 litres. Within Asia-Pacific, China accounts for 70% of beer volumes and 18% of EBIT.

Leading players

  1. China Resources Snow (49% owned by SABMiller)
  2. Tsingtao (20% owned by Asahi)
  3. Anheuser-Busch InBev
  4. Beijing Yanjing (state-owned)

The top four account for 60% of China's beer volumes and have increased their market share by 2% in the past five years. CR Snow has increased its market share from 5% in 2000 to about 20% today.

Tsingtao accounts for about 30% of China's profit pool because of its higher price.

CR Snow has added numerous new breweries in the past year, including one in Guizhou, two in Liaoning, one in Jiangsu, one in Shanghai, one in Anhui and two in Henan. A-B InBev has built a new brewery in Sichuan and is also expanding in the north-east and Fujian.

Carslberg is mainly focused in the west through direct subsidies and minority partnerships with local companies. Heineken's interests are managed by the Hong Kong office of its Asia Pacific Breweries unit, and has two breweries, one in Hainan, the other in Guangzhou.

Regional volumes

  • Greater Beijing, 23% of China beer volumes
  • Central Provinces, 18% of China beer volumes
  • North East China, 14% of China beer volumes
  • Greater Guangdong, 13% of China beer volumes
  • Greater Shanghai, 12% of China beer volumes
  • South West China, 12% of China beer volumes
  • North West China, 8% of China beer volumes

There is a strong correlation between GDP and consumption, although Shanghai underperforms, perhaps because of higher consumption of international spirits such as Cognac.

Premiumisation

According to A-B InBev, the premium segment is growing twice as fast as the overall market. Brand Budweiser has operating margins of about 25%, compared to 6% for the overall market.


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