beer market in China

From pints to palates: the beer market in China is shifting to premium beers

China’s beer market is the most profitable in the world. The most popular beers in the market are produced by local companies, leaving foreign ones struggling to win over a spot for themselves. However, the beer market in China is recently going through a change in consumer habits which might open up new opportunities for international players. Let us delve into the key features defining this dynamic market.

A global leader in the beer market

The beer market in China has become the first ranking in the world in terms of both production and consumption. According to Statista, the market revenue is expected to generate USD 125.6 billion by the end of 2023.

Due to the COVID-19 pandemic and large-scale lockdowns in 2020, the beer market in China suffered from a loss and has yet to recover completely. The production fell by almost 2 billion liters, but luckily enough, growth in e-commerce platforms and live-streamings mitigated the damage.

The e-commerce beer market is expected to generate USD 6 million in 2023, with a CAGR of 9.6% in the period 2022-2027, making it a strategic channel for sales and product promotion.

beer market in China
beer production
Source: Shengang security, designed by daxue consulting, 2019-2022 beer production variation in billion liters

Beer market players: key companies and consumers landscape in China

China’s beer market has been consistently growing ever since 2002, with a few slowdowns after 2019 attributable to the COVID-19 pandemic. This growth can be attributed to the increasing number of foreign investments and the population’s growing interest in this alcoholic beverage. While the market is mostly dominated by local players such as Tsingtao Brewery (青岛啤酒), Yanjing (燕京), Chongqing Beer (重庆啤酒), Zhujiang beer (珠江啤酒) and China Resources (华润啤酒, hereinafter referred to as CR), foreign options such as the Dutch Heineken and the US Budweiser have proven to be noteworthy.

Local producers dominate the Chinese beer market

In 2022, the most profitable company in the beer market was CR, the producer of the popular Snow beer (雪花啤酒), with RMB 35 billion (USD 4.9 billion) generated revenue, followed by Tsingtao Brewery and Chongqing Beer.

According to a report from the financial institution Shengang Security, Tsingtao Brewery, Yanjing, Chongqing Beer and Zhujiang Beer are projected to grow at a CAGR of 3.3%, 3.7%, 5.7% and 4.7% respectively in the years 2022-2026.

top 5 domestic companies in china's beer market in billion RMB
Source: Minsheng Securities, designed by daxue consulting, 2022 revenue of the top 5 domestic companies in China’s beer market in billion RMB

Unveiling two popular foreign brands: Heineken and Budweiser

Heineken entered the Chinese beer market back in 1983, but faced troubles establishing a strong foothold. In 2018, the company took a significant step by buying 40% of CR’s stakes as part of a partnership which also included the entry of the two brands into a Trademark License Agreement. CR then acquired the rights to brew Heineken’s premium beer and use its logo. Due to its nature of premium beer, Heineken gained popularity mainly in pubs and bars. However, the implementation of the zero-COVID policy caused its profitability from cash to plummet by 64%. Prior to this, the brand had been experiencing consistent growth at an average rate of 6.5% since 2014. However, CR’s use of the brand’s license is proving to be quite effective. In the first half of 2022, Heineken registered double-digit growth, thanks in part to CR Beer’s youth-oriented marketing strategies and the new interest in premium beer.

beer market in China: CR’s signature beer “Snow”
Source: Heineken official website, Heineken’ and CR’s joint venture. On the right, CR’s signature beer “Snow”

In China’s beer market, Budweiser (百威亚太) has emerged as another popular beer option. The brand is owned by the US company Anheuser-Busch InBev and distributed in China by Budweiser APAC. In 2022, the revenue of the brand Budweiser beer alone generated nearly RMB 7 billion (USD 974 million), establishing itself as one of the leading brands in the market.

The Budweiser APAC umbrella stretches out to more than 50 brands, including Corona and Stella Artois, and it is still expanding its portfolio. The most recent partnership was signed with the British craft beer company BrewDog, which had previously attempted to enter the Chinese market in 2015.

Budweiser APAC’s sales were also negatively affected by the zero-COVID policy, as one of their main channels of distribution was the out-of-home consumption in bars and restaurants. However, with the recent lifting of restrictions, they are planning to expand even more in the market.

The Chinese beer consumer’s identity

As of 2021, most of beer consumers in China belonged to the age group 24-44, making up for around 65% of the market. In terms of gender distribution, 61% of consumers are male, indicating notable differences in consumption patterns between genders.

Beer is mostly consumed out of home, with the high-peak season occurring during the second and third quarters of the year (from April to September). Indeed, according to a survey conducted in China by Statista involving 1,000 respondents, the main reasons for drinking beer are to enjoy the fresh taste, liven up the atmosphere and relieve anxiety and stress, all reasons that resonate well with the summer-vibe.

Emerging trends

Chinese consumers are moving away from traditional ready-to-drink beers and showing growing curiosity toward new trends. Over the next few years, it can be expected a rise in popularity of alternative options such as premium and craft beers.

Premium beer is becoming questionably expensive

It is generally considered “premium” a beer whose price is higher than RMB 8 (USD 1.1). Chinese consumers’ taste is moving toward this segment of the market, prioritizing quality over quantity. This shift can be attributed to factors such as the rise in disposable income among families and a growing interest in health and well-being. Local companies have responded by introducing their own premium beer brands to tackle this growing sector of the market. CR Beers’ acquisition of Heineken’s trademark also aligns to this trend towards the high-end segment, even though, as of now, its primary revenue still comes from traditional industrial beer.

Zhujiang Beer recently released a new product called “Nanyue Huzun” (南越虎尊), a premium beer priced RMB 398 a bottle, corresponding to around USD 55. The cost of the bottle raised many eyebrows over the reasons why a beer would cost this much. However, Zhujiang’s Beer is not the only company offering expensive beer products. Certain beers reach even higher peaks, like Tsingtao Brewery’s “Legend of the First World” (一世传奇), which has a price of over RMB 1,200 (USD 168) per one bottle of 1.5L.

Beer market in China: Nanyue Huzun
Source: Weibo, Zhujiang Beer’s new product, Nanyue Huzun

The craft beer market is booming, opening up to new opportunities

In the early 2010s, craft beer amounted to less than 1% of China’s beer market, but today, people are in search of new tastes and quality products. There are now more than 13,000 enterprises producing craft beer in China, and even market giants like CR and Tsingtao Brewery are tilting their heads toward this new lucrative options and have started launching their own products.

As the COVID-19 emergency fades away, it is expected that beer consumption in bars and pubs will grow significantly, providing a favorable environment for the further expansion of craft beers.

Among the companies in this niche sector are Trueman Brewing (楚门精酿) and Mahanine Brewing beers (大九酿造), both Chinese enterprises which wrote a name for themselves at the World Beer Cup in 2022. Trueman Brewing won a second place in the sweet stout category with their Flipped Chocolate Milk Stout beer, while Mahanine Brewing’s Grape Fruit Session IPA secured the third place in the fruit beer section.

However, the craft beer market is currently open to new opportunities.

Mahanine’s grape fruit beer
Source: Untappt, Mahanine’s grape fruit beer

Direct investments or licensing? Tips on how to enter the Chinese beer market

There are many viable options that a company has to consider when deciding to start doing business in China. Licensing and direct investments are both undoubtedly rewarding methods, but also have pros and cons. The following section will briefly address each of these options.

Balancing pros and cons of IPR licensing

Licensing out one’s intellectual property rights (IPR) is a valid option to navigate the highly competitive Chinese beer market. As mentioned above, major international companies such as Heineken and BrewDog have already opted for this approach, as it offers a partner with well-established connections in the market and effective distribution channels.

Nevertheless, caution is needed when selecting a partner. In the past there have been many cases of IPR thefts at the expense of foreign partners. Although the government has strengthened the law regulations in this sector in the last couple of years, being careful is always a wise choice to make when navigating the Chinese market.

Direct investing for better brand control

Opting for a Foreign Direct Investment (FDI) allows to gain better brand and product control, compared to licensing. However, it also requires careful considerations over factors such as whether to produce locally or export, what distribution channels to use, identifying suitable retail partners. Direct entry to the Chinese market necessitates great funding and knowledge on the government’s evolving regulations regarding both food & beverages safety laws and market entry requirements.

In terms of market sectors, mid-to-high-end beers are most likely to generate the most profitable results for an FDI. Recent trends show a greater interest in quality beer, particularly among the younger generations.

The Chinese beer market in short

  • The beer market in China is the most profitable in the world and it is expected to generate USD 125.6 billion in 2023.
  • The COVID-19 pandemic caused a temporary setback in the beer market, but e-commerce platforms helped mitigate the damage.
  • The market is mainly dominated by local players such as Tsingtao Brewery, Yanjing, Chongqing Beer, Zhujiang Beer, and China Resources (CR). However, foreign companies like Heineken and Budweiser also have a strong foothold in the industry.
  • Heineken licensed out its IPR to CR in 2018, benefiting from the Chinese company’s distribution channels. Budweiser, instead, has kept its rights in Asia and is produced by the umbrella company Budweiser APAC, which counts more than other 50 brands.
  • Most beer consumers in China are aged 24-44, with a majority of them being male.
  • Premium and craft beers are gaining popularity as consumers seek new tastes and higher quality products.
  • Licensing and direct investments are two viable options for entering the Chinese beer market, each with its own pros and cons.
  • Foreign direct investment in mid-to-high-end beers is likely to yield profitable results, especially with the growing interest in quality beer among younger generations.

Author: Chiara M. Barbera

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