China’s beer market is estimated to be worth $70bn-a-year and, despite its total volume falling 5% over the past three years (with the appearance of alternatives like wine), it is expected to soon overtake the US as the largest beer market in the world.
Disposable incomes have grown significantly leading to more people being able to afford beer – and even more so – premium beer. In 2013, the local economy lager brand Snow accounted for 82 percent of the overall volume of beer sales. However, as Chinese consumers have started to develop a liking for premium varieties, a gap opened up in the beverage market that welcomed newcomers from outside of the mainland.
The country’s beer industry has found itself needing to deal with a new set of cravings – that of the millennials. Making up almost a third of the country, the new generation boasts bigger purchasing power and a worldly outlook leading their tastes into foreign territory of imported and craft beers. Plain pale lagers like Snow are no longer in demand.
In their pursuit of richer flavors, China’s beer drinkers have propelled the influx of imported beer brands pumping the consumption of foreign beers up 40% and granting them 3.6 % of the market share. Leading beer exporters to China are Germany, Belgium, the Netherlands, France, and Spain.
According to Rabobank Food & Agribusiness Analyst Katherine Song, Chinese consumers see imported premium beers as part of a modern lifestyle and an adventurous experience. “The continuous growth of imported beer is reflective of the rising demand by consumers for trading up,” – she adds.
The way foreign companies enter the market varies. Carlsberg appeared in China back in 1876 and promoted its products through acquiring and creating joint ventures with local breweries, while Canadian brand Russell Breweries opted for sticking to its original beer recipe and waiting for local tastes to catch up – successfully.
There is a notable boost of interest in small European breweries. Antoine Bolly, China marketing manager for Antoine Bolly (distributor for Chimay beer and Huyghe Brewery’s Delirium Tremens beer) notes that consumers are increasingly focusing on brand names rather than value for money. Brand recognition is also rising for foreign beers – however, for some, a change in marketing strategy is unavoidable. Chimay is originally brewed by Trappist monks in Belgium, but the company has chosen not to share the back story to avoid controversy in an officially atheist state.
It’s not all smooth brewing, though. Transportation is a big challenge for foreign beer makers – that’s why many of them opt for locating their breweries in China or forming joint ventures with local companies. The lack of proper refrigeration in bars and distribution vehicles is another issue that affects taste – and sales – of imported beers.
Craft beers remain relatively unknown and the craft beer scene is tiny – but growing quickly. Microbreweries and home breweries are popping up all over the country, with some quickly winning over both local and expat beer drinkers. Slow Boat is one of the country’s biggest craft breweries with distribution in restaurants in several Chinese cities, while South China’s newcomer – Taps (the biggest craft brewery in Shenzhen) already boasts 44 beer lines. Just like wine, travel and expensive handbags, craft beer is becoming a way to show off one’s sophisticated taste.
Local beer companies seem to be struggling with the shift. Tsingtao reported an 8% fall in revenue while Snow’s sales contracted by 3%. According to analysts, foreign companies can take advantage of the growing taste for imported products – but it may not be long till China’s local beer giants start competing for a slice of the small, but growing, premium market.