China’s beer market — the world’s largest by sales — is going upscale.
Beer sales in China rose by 8 percent last year to reach more than $26 billion, according to consulting firm Guanyan World Data Center — a rise partly driven by increased consumption of more expensively priced, premium beers that particularly appeal to younger Chinese drinkers.
The market shift in China is somewhat akin to the rise of craft beers in the United States in the 1990s, which now account for over a tenth of the American market. And while premium beers are still a relatively small part of overall beer sales in China, they are helping put the froth back into industry earnings.
“Even if beer companies are selling less volume, because they’re selling more of this premium product, they can still keep their profits up,” says Neil Playfoot, a China-based beer consultant.
“In China, people want to go out and they may have several bottles on a table. Rather than those being the basic Tsingtao [one of China’s most well-known beer brands], if it’s seen as a more premium product, they’re able to say — ‘hey, look at me,’” says Playfoot. “It’s appealing to the younger generation and young professionals in bigger cities.”
Beer in China tends to be a lot cheaper than in other major markets: a typical 500-milliliter bottle from a mass-produced brand costs about RMB 8 ($1.15), compared to between $5 – $7 in the United States. Locally made premium beer can cost more than twice as much, however: Last year state-owned beer company China Resources Beer (CR Beer) released a Chinese pale ale named after the country’s first emperor, Qin Shi Huang, that costs RMB 15 for a 315-ml bottle.
Even if beer companies are selling less volume, because they’re selling more of this premium product, they can still keep their profits up… It’s appealing to the younger generation and young professionals in bigger cities.
Neil Playfoot, a China-based beer consultant
Despite the expense, premium beer’s share of the Chinese market is set to rise to 6.3 percent by 2025, up from 0.8 percent in 2016, according to forecasts from Guanyan World Data Center.
Craft beers are usually produced on a smaller scale than mass-produced brands, with dedicated breweries that produce beers with richer flavors. While premium products are not always craft beers, Belgian brewer Anheuser-Busch InBev (AB InBev) offers at least one product in China that blurs the line — its Goose Island brand.
“Goose Island — they are pushing that as a craft product, even though obviously they’re making it in the same facilities in Wuhan and elsewhere,” says Playfoot. “They started with brew pubs; then they did high-end tap rooms, and in that way they tried to push it as a premium product.”
Other top beer companies, both domestic and foreign, are taking notice of this trend. Check out some of China’s most well-known craft beers:
Despite the incipient rise in popularity of premium beers, China’s overall market remains highly concentrated in the hands of a few major brewers.
Major foreign companies have recently pointed to weakness in the Chinese market affecting their earnings. Budweiser saw its revenue in China fall by 15 percent in the first half of this year, which it said was due to heavy rainfall in its key Guangdong and Fujian province markets. Meanwhile, Dutch brewer Heineken took a near $1 billion impairment on its 20.7 percent stake in CR Beer earlier this year, due to “concerns on the macroeconomic environment in China and its impact on consumer demand.”
Check out the graphic below for more milestones in the development of China’s beer market:
Aaron Mc Nicholas is a staff writer at The Wire based in Washington DC. He was previously based in Hong Kong, where he worked at Bloomberg and at Storyful, a news agency dedicated to verifying newsworthy social media content. He earned a Master of Arts in Asian Studies at Georgetown University and a Bachelor of Arts in Journalism from Dublin City University in Ireland.
