Difficulties in the Beer Industry
In fact, China's beer industry is still undergoing profound changes. According to data from the National Bureau of Statistics, from January to October this year, the cumulative beer production of Chinese enterprises above designated size was 31.631 million kiloliters, unchanged from the same period last year. In October, the beer production of Chinese enterprises above designated size was 1.794 million kiloliters, a year-on-year decrease of 1.0%.
In terms of production volume, the beer industry in China is severely shrinking. From 2000 to 2013, domestic beer production increased from 22.31 million kiloliters to the industry's peak of 50.62 million kiloliters. Afterwards, it continued to decline to 35.213 million kiloliters by 2024.
During this process, the CR5 (market share of the top five companies in the industry) of the domestic beer industry rose to 92.9% at one point, but then slightly declined under the impact of new categories such as craft beer.
It is widely believed in the industry that China's beer continues to be high-end, and the entire industry maintains a trend of "quantity decline and price increase". The revenue of the beer industry still maintains a growth trend.
However, a noticeable change is that the process of high-end beer in China has slowed down significantly in the past two years.
According to statistics from Dongwu Securities Research Institute, the ton price of Qingdao beer in the first half of this year was 4330 yuan/ton, a year-on-year decrease of 0.09%; The ton price of beer in Chongqing was 4908 yuan/ton, a year-on-year decrease of 1.18%; The ton price of China Resources Beer is 3570 yuan/ton, with a slight increase of 0.44% at the same time; The ton price of Yanjing beer was 3639 yuan/ton, a year-on-year increase of 4.25%. In the first half of this year, the performance of leading enterprises in ton prices has shown some differentiation, and there is still pressure, "Dongwu Securities mentioned in a research report.
Fang Gang, an expert in the eoe beer industry, has repeatedly stated that the high-end 1.0 stage of beer in China is nearing its end. In the 1.0 era, beer companies achieved high-end production by optimizing production capacity, adjusting product structure, and raising prices. When these dividends are released, the industry enters a new stage. In the 2.0 stage, the beer industry will enter a moderate growth phase.
As for beer companies, when production fails to experience explosive growth and prices fail to increase as scheduled, many beer companies face significant pressure in their operations.
Financial report data shows that in the first half of this year, the revenue growth of China Resources Beer and Qingdao Beer did not exceed 3%, while Chongqing Beer's revenue decreased by 0.24% year-on-year. In addition, data from the China Food and Beverage Industry Association shows that the beer industry's revenue decreased significantly by 5.7% in 2024, making it the only category in the food and beverage industry with declining revenue.
Where can we find increment?
Hou Xiaohai, former chairman of the board of directors of China Resources Beer, publicly stated at a book club organized by the Henan Private Enterprise Association that future beer companies can seek greater growth by expanding internationally and diversifying their layout.
Among them, in terms of internationalization, China Resources Beer can leverage the power of Heineken to expand overseas. In terms of diversification, Hou Xiaohai believes that we can learn from Japanese company Suntory.
Public information shows that Suntory first laid out its liquor business and later began to develop towards beverages. According to Euromonitor data, in 2024, Suntory will occupy the second, first, first, second, and fourth positions in the overall soft drink, tea beverage, bottled water, coffee beverage, and juice industries in the Japanese market.
In recent years, the frequency of cross-border layout by Chinese beer companies has become increasingly dense, and the cross-border fields have gradually diversified. Recently, China Resources Beer and leading yellow wine company Gu Yue Longshan jointly launched "Yue Xiao Beer". Prior to that, China Resources had arranged Baijiu business for many times.
In fact, beverages are the important cross-border field. Qingdao Beer Group and Qingdao Beverage Group are implementing strategic restructuring and integration to build a full industry chain ecosystem covering alcoholic beverages, etc; Yanjing Beer has clearly implemented a dual track strategic layout of "beer+beverage" and launched Best Soda; Chongqing Beer has launched Dali Cang'er Soda, attempting to strengthen channel driving force through a product combination of "beer+soda".
However, the staff of the Lanzhou Yellow River Secretary's Office believe that the company's layout of beverage business is not considered cross-border. On the one hand, the company has been involved in this business for a long time. On the other hand, the beer and beverage businesses have a high degree of synergy in terms of channels and other aspects.
Food and beverage industry expert Yu Runjie said that from multiple aspects such as product form, sales channels, and consumption scenarios, alcoholic beverages and beverages have high similarities. So much so that many beer companies mistakenly believe that the operation of alcoholic beverages can be highly coordinated, and thus choose beverage categories to carry out cross-border layout. But the fact is, these are two industries with huge differences. In terms of competition, beer and beverages are both in a highly concentrated competitive landscape. At multiple levels such as consumer ecology, commercial ecology, socio-cultural ecology, and the operational logic of the two major businesses, the differences far outweigh the similarities.
Strategic positioning expert Xu Xiongjun believes that enterprise resources should be focused as much as possible. After achieving the top position in the main business, it is necessary to find precise definitions in the category. In addition, if the original brand is not suitable for extension in other categories, a new brand may need to be adopted.
When domestic beer companies expand into other businesses across borders, the first thing they need to abandon is the mentality of collaboration and complementarity between the two major businesses. They need to truly separate their cross-border businesses such as beverages, make them first become 'lone wolves', independently develop markets, and ultimately grow into' wolf packs', "said Yu Runjie.
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