China is the world’s largest beer market in terms of sales with an annual consumption of 45.7 billion litres, according to latest report released by Smart Research Insights.
Despite the huge market, demand for mass-market beer is on the decline, and according to the report, the growing demand for this industry is catalysed by the surge in consumption for premium beer.
The report also highlighted that although the alcoholic beverage of choice for the Chinese is baijiu, however premium beer is fast catching up to the demand. Major players like China Resources and Tsingtao are focusing on the mid-market and premium segments, while demand for low-end beer is fast declining.
For the first time, China saw a 1 percent decline in beer production in 2014 (see Chart 1.0). Despite the decline, China remained as the world’s largest beer producer in 2019 with output of 39 billion litres.
In terms of beer consumption, China also saw a 10 percent decline in volume to 45 billion litres in 2018 from from 2013. However, in terms of value, there was a 40% growth to reach US$93 billion in the same period studied. And this was attributed to consumers’ rising affinity for premium beers.
The report highlighted that there are 5 major players in the beer market with 75% share of the market. They include Carlsberg China, China Resources Snow Breweries, Anheuser-Bush InBev, Tsingtao Brewery, and Beijing Yangqin Beer. China Resources Snow Breweries is the largest beer producer in China and is owned by a joint venture between SABMiller and China Resources. The following Chart 2.0 showed the latest available market shares of various players in China.
Many global players are betting big on the Chinese beer market where, although consumers have high affinity for local beers such as Snow, sufficient demand exists for foreign beers too. According to the report, there is a rising affinity for imported beers which is driven by increase in overseas travel; a large number of Chinese students studying abroad; and a growing desire for foreign goods often perceived as superior in quality. Mexico was the largest beer exporter to China as it exported more than US$251 million of beer to the country in 2018. (See Chart 3.0) The Chinese like Mexican beers due to their moderate alcohol content and the most popular brand at the time of study is Corona. Recent outbreak of COVID-19 pandemic, however, might have hampered consumption of Corona beer due to its ‘negative’ brand association. German Beers are also popular due to their smooth and creamy textures. Meanwhile, craft beer is a nascent yet fast growing segment in China. All key international players have entered the craft beer market, driven by the changing consumer preferences in the country. In the period 2015-2017, Budweiser acquired 18 craft beer brands in China. Craft beer breweries have strong presence in Beijing and Shanghai where close to 10 homegrown craft breweries exist. This segment however is threatened by many newcomers trying to saturate the market with low quality products.
The report has forecast China beer market to be moderate in terms of growth as it faces falling sales and intense competition between many players. The market is expected to focus on increasing margins and premiumisation. With growing competition, market players are adopting smaller pack sizes, and making changes in packaging like replacing glass bottles with cans and kegs.
Urban areas in China with rising incomes have the purchasing power to consume high-end premium beers. Growing pub culture and dining-out trends, prior to COVID-19, support introduction of premium beers into the market. Whereas in the rural area, low-cost beer is still in demand however rural dwellers’ exposure to urban life (i.e. when they work in major cities in China) have also elevated their preferences for better quality beers.
China beer players need to also localise tastes of their products as well as devise marketing and advertising strategies to suit regional markets in China.
Current market challenges faced by beer industry include growing number of counterfeit brands; Chinese growing affinity for wines which indirectly impact demand for beer; and the overall economic slowdown due to COVID-19 pandemic which will ultimately affect demand for beer, which is considered as ‘non-essential’ product.
