Analysis of beer market in China (on Russian)
Beer market of Ukraine: big three losing weightIn 2016, fast increase of excises and resulting price spike stood in the way of the beer market stabilization. Most of competition (as well as mass sorts) moved to the economy segment of the market. The biggest losses were incurred by the leading three, especially Obolon, which again experienced pressure after reallocation of Efes market share. However, one should already speak of TOP-4. Group Oasis CIS (PPB) became a strong player and competitor to transnational companies. Besides the net sales of many regional medium breweries look rather good and 16-fold cost reduction wholesale trade license for craft brewers opens up a possibility of rapid growth in 2017.
Analysis of beer market in China
China’s transition to a “new normal” reality backfired on the brewing industry unexpectedly. Stagnation and subsequent market decline resulted from dynamic social and economic changes. There has emerged a “two speed” market where the medium class significance is growing, yet the share of main beer consumers, “blue collar” is decreasing. Also the inflow of consumers is shrinking, as demographics stopped being a growth driver. Finally, beer is giving way to other alcohol drinks....
Foreign beers gain in China
The country's drinks market is shifting away from beer and towards wines and spirits as incomes grow and tastes change; per capita consumption has dropped from 37.4 litres to 34.7 litres in two years.
According to a survey by FT Confidential Research, asking which two brands of beer were bought most regularly during the second quarter of 2016, 59.2% selected two domestic beers, with 17.3% choosing two foreign brands.
But a very different picture emerged when looking at higher-income respondents (those with a household income of Rmb300,000 ($41,000) or more).
Among this group, just 33% chose only domestic brands, lower than the 35.1% opting for two foreign brands; the latter figure represented an increase of 16.9 percentage points on a similar survey in the third quarter of 2015.
Local brand Tsingtao remains the most popular brand overall, being chosen by 38% of respondents, but that was 19 percentage points down on Q3 2015, when 57% chose it as one of their regular beer buys.
This shift was especially noticeable among higher-income respondents: just 27.2% of this group opted for Tsingtao in Q2 2016, down a massive 31.2 percentage points in a year.
These consumers are now more likely to pick Budweiser (33.5%), the AB InBev beer. Carlsberg saw the biggest gains, up 10.8 percentage points from a low base, while Heineken and Suntory also increased in preference among higher earners.
A similar if less dramatic picture was evident among lower income groups. Tsingtao saw a 17.3 percentage point drop in preference among those with a household income of Rmb100,000-299,000, while third-placed Budweiser gained 5.2 percentage points; Carlsberg and Heineken also made modest gains.
And for those earning Rmb99,000 or less Tsingtao registered a 19.0 percentage point decline; more were opting for Harbin (up 5.6 percentage points), the AB InBev-owned local brand. And, again, more were choosing Budweiser, Carlsberg and Heineken among their regular beer purchases.
FT Confidential Research noted that foreign-branded beer brewed in China sells for an average $0.67 a litre more than domestic brands, but that consumers appear willing to pay the premium.
It suggested that Chinese brewers needed to build brand identities that are attractive to the country's growing consumer class, something Tsingtao is attempting around its premium ‘1903' product.
Edward Bell of FCB Greater China recently held up the brand as an example of inconsistency in marketing, blaming frequent changes in management.
"Tsingtao is not much more than a bland, but familiar, face in China," he said, "and outside of China, is little more than a cliché for sale in Chinese restaurants."
8 Aug. 2016