Fresh Opportunities Brewing in China's Beer Market
Post-COVID China is new, exciting, and thirsty for unique, quality beer.
APAC is in the midst of a scorching summer. Consumers are looking for ways to cool off. For beer enthusiasts, the allure of a frosty cold one has never been more appealing.
This is especially so in China, which is the world’s largest beer market. After years of lockdown measures, China is once again open and the beer taps are fully flowing. At the same time, a lot has changed in the Chinese market, including consumer trends and preferences.
In today’s newsletter, we answer the question: what fresh opportunities are brewing for beverage makers in China post-COVID?
Today:
📰 In The News: Functional cereals and plant-based eels in Japan, Coke’s USD 137.7 million sustainability fund, and much more.
📆 Unmissable Event: SKS Japan 2023 | July 27th - 29th
🚀 Innovation Deep Dive: Opportunities Brewing in China’s Beer Market
Tapping Beer Opportunities in a New China
Beer in China is Going Premium
China Craves Craft Brews
Ready to Dive In and Explore Opportunities in China?
📰 In The News
A curation of our favorite F&B innovation stories from the week. Can be read in less than a 🧻 break.
Nissin Foods Holdings will release a limited edition plant-based kabayaki (grilled eel) on July 18th in Japan.
Nestle will implement regenerative agricultural practices across wheat farms within its DiGiorno pizza brand supply chain. Two-thirds of Nestle’s emissions currently come from sourcing ingredients.
The world’s biggest F&B companies explain how the role of Chief Sustainability Officer is evolving.
One of GourmetPro’s experts in China, Felipe Cabrera, details the epic battle for consumers’ coffee cups in China being fought between Starbucks and Luckin Coffee in this 3-part series.
📆 Unmissable Event: SKS Japan 2023 | July 27 ~ 29
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🚀 Innovation Deep Dive: Opportunities Brewing in China’s Beer Market
Weekly deep dive into an F&B trend. Can be read in less than a 🚋 ride.
China’s beer market is the biggest on the planet, valued at USD 121 billion in 2022. Local enthusiasts put away a staggering amount of amber nectar each year, fuelling the market’s growth. In 2021 people in China chugged back over 47.5 billion liters of beer, almost twice as much as the USA.
But surging ingredient prices and years of draconian lockdowns have had pundits wondering whether China’s reign as the world’s #1 beer market would soon be coming to an end. All signs point to the answer being no.
While COVID-19 tanked production in 2020, which fell by almost 2 billion liters, China’s beer industry has remained resilient. China’s National Bureau of Statistics reported that the beer industry rebounded in 2021, growing by 38% YoY. This is significant as surging raw material prices for key things like barley and aluminum have raised beer prices in China, yet the data suggests consumer demand is healthy.
And though sales in 2022 didn’t entirely return to pre-pandemic levels, the end to lockdown restrictions in 2023 has generated waves of excitement within the industry for a boom in the new post-COVID China beer industry. In fact, the market is moving in a way that opens up exciting opportunities for overseas brands and local innovators.
Tapping Beer Opportunities in a “New” China
China’s beer market is relatively consolidated. 70% of the market is dominated by five main companies:
China Resources (hereafter CR): 23.2%
Tsingtao Brewery (青岛啤酒): 16.4%
Anheuser-Busch InBev: 16.2%
Yanjing (燕京): 8.5%
Carlsberg: 6.1%
Other brands: 29%
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Local brands are the most profitable but Budweiser, Carlsberg, and Heineken are foreign brands that have earned loyal followings in the Chinese market. Experts agree that there’s more room for foreign brands to play, however.
There are two main reasons for this.
Beer in China is Going Premium
The first is a broad trend toward premiumization. Despite the increasing price of beer, consumers have shown a willingness to fork out. Most companies that launch new beers are pricing them above 8 yuan ($1.15), which is widely regarded by local producers as the average for a macro-brewed beer. According to experts, this hasn’t resulted in a decline in demand.
In fact, regardless of commodities-related price increases, Chinese consumers are beginning to prioritize quality over quantity as the beer market matures. The largest demographic of beer consumers in China is aged 22 - 44, i.e. millennials and Gen-Z. This group is increasingly affluent (growing in number in second and third-tier cities especially) and looking for quality beers made with superior ingredients.
The industry is shifting strategies to meet this growing demand. China Resources, which acquired China’s Heineken brand in 2019 as part of a premiumization push continues to list this as a core growth strategy in its latest investor report. Budweiser, APAC’s largest beer company by sales, plans to increase the number of Chinese cities where it sells at least one million liters of its premium Budweiser brand to 220 this year, up from 201 last year. Tsingdao, who secured record profits through sales of premium beer in 2021, has gone as far as to launch a premium beer, “One World Legend”, that costs the equivalent of USD 165, plus.
Thirst for higher quality products and willingness to pay more for beer opens doors for brands that may have so far ignored the Chinese market for price reasons. Equally, for brands in the market that have traditionally targeted high-end channels, there is now the possibility to expand distribution as more stores and pubs seek premium offerings to meet consumer demand.
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Thirst for high-quality beers also brings us to the second reason why international brands should be paying attention to China: the nation’s growing craft beer segment.
China Craves Craft Brews
Craft beer in China is starting to boom. The market grew from CNY 20 billion in 2018 to CNY 33 billion in 2020. Zhongtai Securities forecasts annual growth from 2021 to 2023 of 30%.
As the craft beer craze takes off, the Chinese beer landscape is getting shaken up. The number of craft beer-related businesses has increased by 8400 in the last three years alone. This figure includes local microbreweries, some of which are starting to earn a strong reputation globally, with the likes of Truman Brewing (楚门精酿) and Mahanine Brewing (Chinese: 大九酿造) receiving medals at the World Beer Cup in 2022.
As fans of craft beer grow, the category’s inherent variety is expanding the beer market as a whole. Sweeter beers like fruit beers are attracting a growing number of millennial and middle/ upper-class women to craft beer in China. For example, Xing Lei, founder of Truman Brewing, told Equal Ocean that 70% of his company’s customers are women. With this, the image of beer as a “man’s drink” is fading in China and there are fresh opportunities for beverage companies to market to women.
The growth of China’s craft beer industry is already attracting interest from overseas brands. Earlier this year BrewDog announced a partnership with Budweiser to increase its presence in China. The deal will see Budweiser China brew some of BrewDog’s core products like Punk IPA in their local factory to distribute and sell on the Chinese market.
As part of the brand’s expansion plan, they will also open up nine bars in China. This move fits in with the post-pandemic shift towards alcohol consumption outside of home. By 2025, it is estimated that over 50% of all beer drunk in China and 72% of all beer spending will occur outside the house, such as at bars and restaurants.
Demand for premium and craft beer and sales boosts from the return of on-premise consumption should have beverage industry players thinking seriously about their China strategies. The country may have held the title of the biggest beer market in the world since 2002, but a lot has changed since COVID-19. The “New” China that is just opening itself up to the world is fresh and thirsty for opportunities, and so too is its beer market.
Ready to Dive In and Explore Opportunities in China?
If you can already taste the opportunity that the Chinese market offers for your beverage product, then now is the time to act.
That can be easier said than done though. The Chinese market is challenging. From the local language to the sheer size and complexity of the market, there’s a lot to wrap your head around. Going in alone can take months if not years of expensive preparation, including getting to know the market, finding local partners, and more before finally making your move.
But China doesn’t have to be head-scratching, expensive, or frustrating. With the support of a local expert to help you navigate the market - its language, regulations, key players, and distribution - you can start progressing toward sustainable growth for your brand.
GourmetPro’s team of skilled experts in China have decades of experience each supporting brands to succeed in the market. Whether you’re weighing up the opportunity or already established there, we can support you to seize your next opportunity in a “New” China.
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See you next week as we explore more exciting opportunities in the Chinese market.
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