Beer consumption in China has experienced striking growth as retail value of beer soared 6.5 percent to 188.65 billion yuan in 2006 and growth is forecast to continue in the next few years.

 

According to transnational market research firm Euromonitor International, beer is mainly sold through off-trade channels, which accounted for 68 percent of the total volume in 2006. Consumers prefer to buy beer from off-trade outlets and consume it at home.

 

Market performance

 

Modern distribution channels such as supermarkets or hypermarkets and convenience stores boosted growth in off-trade sales last year, increasing the number of outlets on the mainland and offering lower unit prices than independent food stores.

 

Meanwhile, continuous economic development and disposable income surge resulted in consumers eating out and socializing with friends in nightclubs and bars with greater frequency, leading to strong increase in on-trade sales.

 

Premium and standard lager enjoyed fast growth in on-trade channels while economy lager lost share due to higher income levels and consumers trading up.

 

Within lager, light-tasting and premium-positioned draft lager saw the strongest growth in 2006 and benefited from a number of launches such as Shenzhen Kingway Brewery's Kingway New Life Beer and Kingstar Xin Yi Dai (new generation, in Chinese).

 

Imported premium lager achieved a striking 14 percent volume growth in 2006 over the previous year, as brands such as Modelo's Corona Extra were regarded as prestigious and particularly popular in on-trade outlets due to their premium image.

 

Competitive landscape

 

The market is led by strong beer companies, with China Resources Enterprise, Tsingtao and Beijing Yanjing in the lead in 2005. These players focused on expansion in the past years and the late 1990s, acquiring numerous regional players.

 

Domestic players dominate the sales networks, with most foreign players lacking the access to distribution and production that is required to build a national network.

 

Most multinationals are keen to establish a presence in China via acquisition or investment, however.

 

Heineken switched to Chinese production in 2005 for its Heineken Premium, with this now being produced by Shanghai Asia Pacific. Meanwhile, Anheuser-Busch and SABMiller fought over domestic players such as Harbin Brewery and are continuing to examine potential acquisition targets.

 

Acquisitions enable foreign players to gain established distribution networks and breweries, making the introduction of their own brands considerably easier.

 

Prospects

 

Beer is expected to see strong growth during the forecast period of 2007 to 2011, expanding by 29 percent in terms of total volume. However, the surge will soften slightly in comparison to the dynamism seen in 2006, when sales grew by 37 percent, with dominant economy lager moving closer to saturation.

 

Economy lager is expected to continue the good progress of 26 percent during the forecast period as disposable income levels improve and consumers purchase more lager overall. However, growth will slow in comparison to last year, with consumers and manufacturers increasingly focusing on higher-quality and higher-priced products.

 

Imported lager is expected to outstrip domestic products in total volume increase, expanding by 62 percent from 2007 to 2011. The surge will be partly driven by the growing range of these products on offer at supermarkets and hypermarkets, with brands such as Corona and Guinness hoping to gain mainstream acceptance.

 

Growth will be chiefly due to growing on-trade sales in major cities, however, with disposable income growth encouraging consumers to socialize at bars and restaurants and a fashion for imported lager amongst young adults.

 

Most consumers prefer to drink cheaper domestic lager at home, and in 2011 domestic lager will continue to account for close to 100 percent of overall beer retail volume sales.

 

(China Daily November 2, 2007)