Why Asia is the latest front in the craft beer battle - Comment

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We're off to Asia with beer commentator Stephen Beaumont this month. Vietnam, to be specific, with the country serving as an example of how the continent is becoming the next battleground for beer's higher-end players.

Asia has opened up as the latest battleground for craft beer

Asia has opened up as the latest battleground for craft beer

Taken on its own, the news didn't seem exactly earth-shaking. Earlier this week, GlobalData reported that the premium beer segment in Vietnam has been on a five-year roll, with volumes rising from around 4m hectolitres in 2011 to 10m hl in 2016. Meanwhile, in a trend echoing what is occurring elsewhere, sales of discount beers – including the nation's indigenous bia hoì – have fallen by 500,000 hectolitres over the same period, from 3.5m to 3m.

Although Vietnam might not strike casual observers as necessarily a major beer drinking country, it is calculated by some sources to be the ninth-largest brewing nation in the world with overall beer production estimated at slightly over 40m hl in 2016 - not far behind the UK and inches ahead of Poland. Further, like most beer markets in Asia, it is in growth mode, adding about 4m hl between 2015 and 2016.

And, if 150% growth over a five-year period isn't impressive enough, turn your attention to the tiny craft beer portion of the Vietnamese market, currently estimated at a mere 0.2% of the total market but growing at a rate of 40% per annum with no downturn in sight.

This last part is of particular importance, since Asia may well be on its way to becoming the next major front in the 'craft beer versus multinational' brewing wars.

It is a battle that has all but ended in much of the western world, with craft the victor. For, while small-scale brewing has slowed its growth in most countries where it has a well-established presence, such as Canada, the US and the UK, it has done so in markets that are overall either stagnant or in continuing decline. So, while the big name brands continue to shrink - as admittedly do some of the big name craft brands - overall craft continues to gain at the expense of its larger rivals, with smaller percentage growth but still impressive volume growth.

The pace at which multi-nationals such as Anheuser-Busch InBev, Molson Coors and Heineken are buying existing craft brewers suggests that, if they might not have exactly accepted defeat, they are at least acknowledging a shift in consumer preferences.

Which brings us back to Vietnam, in particular, and Asia, in general.

While the downbeat situation in China may be dominating the Asian beer headlines these days, with three consecutive years of production declines following decades of growth, the overall picture in Asia is actually looking pretty rosy: Last year, beer production in Japan bounced back to growth after years in the doldrums; Thailand has posted consecutive years of growth and, despite all the uncertainty surrounding the country, South Korea seems to be more-or-less holding its own. Add in the seductive possibilities of sizable growth in India, and the continent seems to hold much promise for the future.

Even more so when the market segments being addressed are premium and craft beer.

As noted in Vietnam, the premium and craft beer segments are booming all across Asia. Even in China, where regular beer sales are flagging, a re-empowered middle class is causing premium beer sales to grow substantially, which is music to the ears of companies like Carlsberg and A-B InBev, who are making great inroads into the country's premium market.

Also as in Vietnam, however, small but steadily-growing craft beer movements are gaining traction throughout Asia, from the big cities of China, particularly Shanghai, Beijing and Hong Kong, to middle-class enclaves in India and the burgeoning craft beer market of South Korea. Uniformly, they are small pieces of their respective markets, seldom if ever topping 1% market share anywhere outside of Japan, but they are also typically growing at paces comparable to that seen in Vietnam.

What's more, in common with Latin American nations like Brazil and Mexico, the speed at which Asian craft breweries are not only growing, but also improving is impressive. Chinese craft breweries scored an impressive eight medals in the recent Brussels Beer Challenge, for only 69 beers entered, while, in September, CNN reported that after only two years of existence, pioneering Vietnamese craft brewery Pasteur Street has begun exporting to Malaysia, Hong Kong, and the US, with Japan and Europe on the brewery's horizon. Other smaller domestic brewers are following suit.

Bearing in mind that markets like the US, where craft beer now claims a volume share of 12.6% and a sales share of over 20%, began from similarly modest beginnings, and adding in the fact that the pace of growth for craft beer worldwide is much faster today than it was in the 1980s, it becomes easy to imagine that the next battleground for consumers' throats may well be Asia.

Sectors: Beer & cider

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