Latest government crackdown on so-called ‘vice’ industries in China, which includes alcohol consumption could aid international brewers (exporters) by disrupting the premiumisation efforts by domestic rivals.
Earlier in August, the country’s Central Discipline Inspection Committee flagged the culture of consuming alcohol at business events as an issue to be addressed as part of a wider investigation into sexual abuse allegations within China’s technology sector. The reference to alcohol by the committee and its subsequent amplification by state media has been interpreted by investors as evidence of the heightened risk of a crackdown, said a Bernstein analyst. State media has been reporting on the ill-effects of consuming liquor and its link to cancer, suggesting that the government might step in to limit alcohol consumption.
However the analyst believed that an alcohol consultation is already underway in China and could eventually lead to an overhaul of the excise tax on beer, which currently favours premium brewers such as Carlsberg and Anheuser-Busch InBev. For example, tax accounts for 3.1% of mainstream beers compared to 1.8% of a premium brand. A move to level the playing field would initially hit premium brewers harder but, in the long run, would compromise efforts by domestic brewers China Resources Beer and Tsingtao to premiumise. He added, “Given their lack of scale and equity in premium, [it would] limit the scope for their brands to pass the tax on to consumers.”
It is highly likely that regulations such as the enforcement of a minimum drinking age and restrictions on where to buy alcohol to appear in China in the near future.
Previous clampdowns on alcohol in China mainly tackled other issues relating to corruption of local officials, and not relating to ‘health’ issues.