SABMiller’s Asia chief Ari Mervis raises a glass to Snow Beer

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Here’s a game you can play the next time you go for a pint: offer the price of a pint of English ale to any fellow drinker who can name the world’s best-selling beer brand. Heineken, perhaps? Or Carlsberg? Maybe Budweiser…?

All wrong. For the past three years, the world’s top-selling beer is a pale, Budweiser-like brew that barely anyone in the West has ever heard of, let alone tasted. It is Snow Beer.

The Chinese drank 16.5bn pints of Snow last year, making it easily China’s favourite and roughly twice as popular as Bud Light, the global beer from which it snatched the number one spot back in 2008.

Snow may not yet generate as much profit for SABMiller, the brewer that part owns it, as Bud Light does for its rival, Anheuser-Busch InBev, but the Chinese beer market is booming, with around 10pc growth each year.

By contrast, US and European beer drinkers, sobering up fast thanks to the economy’s poor state in the developed world, are steadily reducing their own consumption.

“A lot of foreigners who have been to the mainland are surprised when they stop by my office,” said Ari Mervis, the head of SABMiller in Asia, from his base in Hong Kong. “They ask me: ‘What is this brand Snow? We did not see it anywhere.'”

“And of course I tell them it is the biggest beer in China, ahead of rivals who have been around for 110 years when we have only been going for 15. But it is in a very Chinese part of the market, not in places where foreigners go to.”

In fact, Snow is such a domestic Chinese product that it is not even available in Hong Kong, just across the border. The beer that most foreigners see, both inside and outside China, is Tsingtao, first brewed by Germans in the north-east of the country, and now owned partly by Asahi, the Japanese conglomerate, a Chinese entrepreneur and the Chinese government. More than 11bn pints of Tsingtao were sold last year. And Tsingtao is said to be up against SABMiller in the race to take over Foster’s, after the South African brewers put up a ?6bn hostile offer last week.

Snow is not marketed as aggressively as Tsingtao. Indeed, it barely advertises at all. But its parent company, which is 49pc-owned by SABMiller and 51pc-owned by China Resources, has steadily gone about buying up China’s network of local breweries, traditionally the main providers of beer in each region, moving from the north-east down the coast and then to the south and inland. The spate of acquisitions has given Snow control of large areas of the country where it dominates the local market.

“When we entered the market in 1993, we did so very humbly with only three breweries,” said Mr Mervis. “Now we have 80 and there are 500 across the country,” he added.

In the beginning, as Tim Clissold, a former banker who invested heavily in China in the 1990s, relates in his book Mr China, the Chinese beer market produced “a great deal of froth”. International investors piled into the market, but there was little quality control at breweries that had been state-run for decades.

“Late that summer, I was given several samples of our beer that had been recovered from a Beijing market,” wrote Mr Clissold of the Five Star brand he had invested in.

“One bottle had leaves in the bottom, several contained only an inch of beer and another was full but contained a large ball of adhesive tape. We could never figure out how it ever got in there.”

Mr Mervis admits that when he started in China, some of the breweries reminded him of his days in Russia, when he would see “places with just a kettle and a tank that had been set up for distilling vodka”.

Nevertheless, in the early days of Snow, he said the team looked at under-performing breweries as “an opportunity”. These days, of course, the breweries have all been upgraded with the latest equipment.

“The technological and technical advances have been remarkable,” he said. “When we look at our breweries globally there are some in China that are right up there, in terms of low water usage, energy per hectolitre (100 litres), and output per person.”

He added: “In terms of quality we have focused on consistency of quality, and we have rationalised the brands – so there used to be over 60 brands of Snow and now there are just five key varieties. We focused on the glass, the labelling, the crowns.”

Earlier this summer, Snow’s expansion continued down in Jiangsu province, Shanghai, and then in Zhejiang, with the ?111m purchase of four major breweries, one of which produces one of Shanghai’s favourite beer brands, REEB. The sellers were Asahi and Heineken.

“For us it was important to have control of those areas,” said Mr Mervis. “Hangzhou in particular is a large and affluent city, very prosperous and attracts a lot of visitors.” He declined to comment on why Asahi and Heineken had sold, beyond saying that the Japanese brewer was focusing its efforts on Tsingtao and that Heineken is after China’s premium market. Last week, Snow struck a ?25m deal to take a 70pc stake in Kweichow Moutai beer, a spin-off brand of China’s most famous “baijiu”, or white spirit, distillery.

With the purchase of each new brewery, Snow targets a 50pc share of the local market, slowly replacing the local brewery’s brand with its own and courting distributors. The focus on logistics, rather than image, has so far been the key to its success.

The product itself is difficult to distinguish from the rest of China’s beers, all of which tend to taste the same to a European palate, much in the way that American beers do, but it is a good example of where localisation is essential to success in China.

According to SABMiller, the beer is “bright, almost transparent in nature, with a tight pure white foam”. According to beer enthusiasts outside of China, posting on the BeerAdvocate magazine’s website, it is “bland and watery”.

“The Chinese do not look at beer the way that you do in the UK, where people go to a pub to drink. Chinese still see beer mostly as an accompaniment to a meal,” said Mr Mervis. “Half of all beer is drunk in restaurants, and with spicy food, they want a less filling and less heavy beer. The prefer low alcohol (typically between 3pc and 4pc) and a more American taste profile,” he added.

Looking forward, Mr Mervis predicted that Snow’s march of acquisitions would start to slow. The jumps that saw Snow double in size between 2005 and 2006 are unlikely to be repeated.

“I cannot see much on the horizon,” he said. “It is a big challenge to make sure acquisitions can see a clear path to profitability,” he added. “It is hard in China, because to do well in fast-moving consumer goods, you need to be big. But you have to balance that investment. We want to build an unassailable lead but we want to be profitable, too.”

Instead, he hinted that the company’s experiments with moving the brand towards the premium sector had been successful, and that with the national coverage that Snow has, it could be time to start a national advertising campaign.

“Beer is not really seen as a real premium product in China so far,” he said. “But in the future it may move that way.”