The Future for Foreign Beers in China

According to latest research from the AMI Group, a shake-out of the Chinese domestic beer market is under way and at this point it is unclear who will come out the strongest. One thing that is for sure is that many foreign players have been having a hard time of it.

In 1998 there were over 600 beer manufacturers in China, by the end of 2001 this had fallen to only around 400. Among others CSI and ASIMCO have departed, Bass Brewery withdrew from Jinlin Ginsber and Carlsberg offloaded a majority share of its operation to Tsingtao.

Tsingtao and Yanjing, the two largest domestic brewers have been expanding aggressively buying both domestic producers and failed foreign operators. These two are joined by CERB, a joint venture between China Resources Corporation and South African Breweries.

On the other hand, many foreign players remain highly active and sales of imported beer averaged over 40% growth a year over the past two years. Heineken and Corona are being imported whilst brands such as Budweiser, Asahi and Suntory are being brewed and marketed locally. Other foreign firms are actively on the acquisition trail.

A parallel can be drawn with the failure of foreign cigarettes in the mid 1990s and some see foreign beer brands going the same way. However, there is a key difference - the tobacco industry is tightly regulated whilst the beer industry is wide open for investment.

Furthermore, the market is still young. Per capita beer consumption is way below the levels of mature overseas markets and the industry is not concentrated. The top three players (Tsingtao, Yanjing and CERB) account for about 30% of sales whereas in the US the top 5 brewers take over 90% share. Japan is even more concentrated with 90% of the market in the hands of 4 brewers. As yet, AMI believes that a true national brand has yet to emerge in China.

What is certain to happen is further consolidation. The big three are likely to snap up more smaller regional operators, but it is possible that a foreign brewer with the correct strategy could become one of the major players.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.