FutureStarr

Budweiser Bets on Post-COVID China Thirst For Premium Beer

Budweiser Bets on Post-COVID China Thirst For Premium Beer

blog_img

China's beer industry is on track to experience rapid expansion. That's great news for global brewers.

Chinese consumers' tastes are evolving and diversifying, driven by a growing middle class that is driving demand for higher-end beers. The two leading international breweries, SABMiller and Anheuser-Busch InBev, are investing heavily in premium beer production.

Growth Opportunities

Budweiser APAC has placed their bet on China reversing COVID restrictions that had hit its bars and restaurants, anticipating a post-COVID thirst for premium beer in China. In fact, they predict the market for high-end beers will double over the next ten years.

Western brewers have tried to take advantage of the Chinese market by entering the more exclusive segment with their own brands, but have encountered difficulty competing against local rivals such as Tsingtao Brewery and China Resources Beer (CR Beer), who offer beers two or three times cheaper than their foreign counterparts. Furthermore, consumers have moved away from higher-end lagers towards more budget friendly versions of traditional styles with lower alcohol content.

International brewers have an opportunity to cultivate brand loyalty among Chinese consumers, which is essential for long-term success in China. But, just like wine, attaining that level of brand recognition that makes these brands desirable enough to compete globally can take years of expensive investment and marketing efforts.

According to Euan McLeish, managing director at Sanford C. Bernstein in Shanghai, the beer industry in China has been focused on moving upmarket for several years.

China's high-end beer market has become increasingly lucrative, yet the size of this segment remains small compared to other beer markets. Economy lagers account for 30% of total sales while mid-priced tier share accounts for 50%; yet sales of premium beers only made up 8% of total volume sold in 2019. Despite being China's most important beer category, premium beer sales only made up 8.0% of total volume sold in 2019.

Recently, some of China's largest brewers such as Tsingtao have introduced products with higher prices to appeal to younger consumers. Unfortunately, they lack brand loyalty to compete against Budweiser and other foreign rivals like CR Beer, according to Bloomberg.

Chinese consumers remain eager to try the more flavorful varieties. In fact, they have been drinking more low-alcohol by volume beer recently than ever before.

Market Trends

China has long been known for its love of beer, but it wasn't until recent years that the industry really took off. As living standards have improved and economic growth continued to accelerate, so too has demand for premium beer - estimated by Asia Pacific Breweries to grow at an annual rate of 12 percent through 2020 to 2.1 billion liters.

The major beer companies, including Anheuser-Busch InBev and Chinese titans like Tsingtao and Snow, are eager to tap into the growing demand for higher echelon beers. But it's a crowded market with lots of competition for consumers' attention - both young and old alike.

Budweiser APAC is no exception, offering bold beers like Hoegaarden and Blue Girl alongside more conservative lagers and an impressive portfolio of international brands. The company has set its sights on China's rapidly developing high-end market - the so-called premium segment - and plans to sell its premium brands in over 60 cities by 2023.

To stay ahead of the competition in this industry, major brewers need to create an appealing product lineup that appeals to customer tastes and budgets. To do this, breweries should employ cutting-edge production technologies while still guaranteeing customers a superior end product with consistent high quality.

Market Size

Due to the COVID-19 pandemic in China, Anheuser Busch InBev's Budweiser APAC unit experienced a decline in sales and revenue. However, they were able to make up for lost sales by raising prices on their products; Budweiser APAC saw its revenue per hectoliter rise by 4.7% during the first half of 2022.

The beer market in Asia is still relatively small, but its potential for exponential growth. Therefore, AB InBev has made a strategic investment to increase their market share.

In China, AB InBev's key strategy has been to sell more premium and super-premium beer. This strategy enabled the company to recover from two consecutive quarters of revenue and profit declines in the first half of 2020.

China's overall beer demand had been declining even before COVID-19 broke out, due to a shrinking working-age population that made up the bulk of drinkers. As such, beer companies were finding it increasingly difficult to meet rising demands for low-ABV cocktails, which have become more popular in recent years.

Budweiser APAC has since shifted their attention to the super-premium beer segment, which only accounts for 16% of China's total beer market but offers significant growth potential. They plan to invest in western-style bars and expand their wholesaler network in tier 1 and 2 cities, according to Jan Craps, Budweiser APAC CEO.

Mirae Asset Securities projects that China's super-premium beer market will expand by 42% to $34 billion by 2020, accounting for nearly one-fourth of all beer sales in China.

China's market for super-premium beer offers a lower premiumization rate than markets such as South Korea or the West, giving room for further expansion within this segment. This will result in strong profits for the industry as a whole.

Furthermore, China's expanding middle class will drive large demand for premium and super-premium beer in the future. These categories boast the highest margins and highest profitability within the industry; according to analysts, these categories could account for over 80% of profits within five years.

Market Share

Recently, China's thirst for beer has reached new heights. With rising per capita income and shifting tastes toward higher-end brands rather than the light lagers of yesteryear, Chinese drinkers are opting for more premium options like craft brews.

The Chinese brewing industry is the biggest in the world, producing an incredible 1.3 billion liters annually - or 25% of global output. Therefore, this lucrative market offers plenty of opportunity for entrepreneurs.

However, local breweries remain dominant in China's beer industry. Due to slow margins and price wars, international breweries must offer cheaper alternatives in order to compete with domestic competitors. However, some foreign breweries are becoming creative in order to capture a majority of China's growth opportunities.

One of the best examples is Budweiser APAC, Anheuser-Busch InBev's Asia-Pacific unit. This year they aim to increase the number of cities where they sell at least one million litres of their premium Budweiser brand beer to 220 from 201 last year.

The company plans to double down on premium beers, which will be the driving force behind its growth over the next decade. To reach this ambitious target, they'll focus on developing promising new products and leverage their extensive distribution network for introduction to customers.

Related Articles

  • Related Blog Image

    #The Rise of #Fapello: Unveiling the Secrets Behind its Massive Leaked Content

    Explore
    Author Profile Image
    August 29, 2023     |     Future Starr
  • Related Blog Image

    Dallas Mavericks Lose to Indiana Pacers 124-122

    Explore
    Author Profile Image
    March 02, 2023     |     Future Starr
  • Related Blog Image

    The Legal Beat: Journey Won't Stop Litigating - Plus YNW Melly Benny Blanc

    Explore
    Author Profile Image
    March 07, 2023     |     Future Starr
  • Related Blog Image

    Lovebites Drops New Official Video For Stand And Deliver

    Explore
    Author Profile Image
    January 26, 2022     |     Future Starr
  • Related Blog Image

    Apple Holds -WWDC for AI? Employee Event

    Explore
    Author Profile Image
    February 20, 2023     |     Future Starr
  • Related Blog Image

    #Oracle Layoffs Today: A Comprehensive Analysis of the Impact on Oracle's Financial Performance

    Explore
    Author Profile Image
    October 04, 2023     |     Future Starr
  • Related Blog Image

    Liverpool Vs Manchester United 7-0 Highlights & Goals

    Explore
    Author Profile Image
    March 06, 2023     |     Future Starr
  • Related Blog Image

    #Georgia Bulldogs to Face Alabama Crimson Tide at Mercedes Benz Stadium on Dec 2, 2023

    Explore
    Author Profile Image
    November 26, 2023     |     Future Starr
  • Related Blog Image

    #Google Doodle Honors James Baldwin on First Day of Black History Month " Go Tell It on the Mountain"

    Explore
    Author Profile Image
    February 02, 2024     |     Future Starr
  • Related Blog Image

    American Express Black Card Price

    Explore
    Author Profile Image
    January 04, 2022     |     Future Starr
  • Related Blog Image

    #MariaMoobs – Playful OnlyFans Model: Empowering Body Positivity and Building a Safe Online Community

    Explore
    Author Profile Image
    August 21, 2023     |     Future Starr
  • Related Blog Image

    The Impact of Warner Bros. Discovery's Layoffs on the TV Industry

    Explore
    Author Profile Image
    May 22, 2023     |     Future Starr
  • Related Blog Image

    #Everything You Need to Know About the BET Hip Hop Awards Performers, Streaming Time, and More

    Explore
    Author Profile Image
    October 10, 2023     |     Future Starr
  • Related Blog Image

    What You Need to Know About Paris Saint-Germain

    Explore
    Author Profile Image
    February 19, 2023     |     Future Starr
  • Related Blog Image

    #Toby Keith's Charitable Foundation: Making a Lasting Impact in Local Communities

    Explore
    Author Profile Image
    October 11, 2023     |     Future Starr