A Craft Beer Revolution is Taking Place in China
China’s beer market, estimated to be worth 683 billion CNY (108.6 billion USD) by 2019, is the world’s largest beer market by volume, with at least 450 million hectoliters sold per year. For decades, low-end mass-market brews have dominated China’s beer industry.
No longer. A craft beer revolution is taking place in the Chinese beer market. Chinese consumers – as a result of increased disposable income and higher purchasing power – have newly found cravings for premium beer varieties. “There’s a shift from industrial beers to refined craft beers, as consumers begin to realize that there is more to beer than their plain lagers,” said Cong Yin, a World of Beer’s Shanghai franchisee.
Foreign expats are not the only craft beer patrons. China’s nouveau riche and middle-class beer drinkers are abandoning long-standing local beers—such as Snow–demanding high-quality craft brews of specialty flavors, a symbol of prestige and sophisticated taste.
Huge Potential in Lower-tier Cities
While non-lager, craft brews, have remained niche and typically limited to large first-tier cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, enthusiasm for craft beer is beginning to spread to lower-tier cities. Even beyond these megapolises, sales revenues of specialty craft beers are rising, despite being priced much higher than low-end mass market beers. Foreign and domestic microbreweries have likewise increased threefold (to 150 in total by 2016), setting up shops across coastal cities and provinces in China.
Although beer consumption is declining in China overall, craft beer consumption surged by two-thirds over the past five years, according to research firm Global Data. Imported craft beer brands in particular enjoy the advantage of being perceived as premium products and a symbol of an international, modern lifestyle by the brand-conscious Chinese consumers. With mass-market beer experiencing diminished returns and premium beer variants winning over more Chinese consumers, foreign companies should take advantage of China’s promising, yet underdeveloped, craft beer market, before the market becomes saturated with major domestic brands.
Create Your Market Entry Plan Strategically
How foreign companies enter the market may vary – either acquiring and creating joint ventures with local breweries (as is the case for AB InBev’s recent purchase of Shanghai brewer Boxing Cat) or setting up their own breweries in China – but their success in navigating common challenges in the market is clear. It is defined by their ability to cooperate with local partners knowledgeable of the Chinese language, consumers, markets, and regulatory framework; sell to China through pre-vetted distributors; and deploy an effective branding and marketing strategy that is well-adjusted to the local tastes.