Global beer production stood at 181 billion liters with a year-on-year growth of 0.4% in 2009 with the five largest beer manufacturing nations constituting 52% ofthe total market. China is the largest producer accounting for 23.7% of total market followed by the United States with annual production volume of 23 billion.
China is the world's largest beer producer with manufacturing volume of 43 billion liters annually, and CAGR of 8.1% (2004-2009). The growth of domestic beer production in China is attributed to improving per capita consumption to 32.1 liters and exponential population growth to 1.35 billion over the past 2-3 years. Domestic beer production witnessed lower than expected growth in 2008 and 2009 predominantly due to the Sichuan earthquake and severe winter conditions.
Hop is the core raw material used for brewing beer worldwide. Among the 60 hop farms across China, Xinjiang is the largest hop farming area constituting 60% of total farms in China. Gansu is the second largest region accounting for 40% of hops farming. In China, hop plantation surface has increased to 6,023 hectares, with year-on-year growth of 6%.
China beer manufacturing segment is moderately consolidated with the ten largest brands controlling 48.9% of market share. China Resources Enterprises Co Ltd's core brand "Snow" is the leading brand with a volume share of 17% followed by Tsingtao Brewery Co Ltd's flagship brand "Tsingtao". Harbin beer brand is the fastest growing in domestic marketspace with a volume share of 4.7%.
Majority of international and domestic beer manufacturers in China are growing fast via acquisitions, regional advertising campaigns, improving production capabilities and new distribution channels.
China beer manufacturing is regionally fragmented with local producers controlling niche markets. National beer manufacturers (Tsingtao Brewery and AB Inbev) have enhanced regional promotional and advertising expenditure to compete with small regional and local brands. In 2010, a few dominant beer manufacturers (Carlsberg, Molson, Tsingtao Brewery, etc) acquired local and regional small brewers to improve brand equity. Finally, fierce competition reduces profitability on a short term basis for beer manufacturers in China.
Majority of international and domestic beer manufacturers in China are growing fast via acquisitions, regional advertising campaigns, improving production capabilities and new distribution channels.
China beer manufacturing is regionally fragmented with local producers controlling niche markets. National beer manufacturers (Tsingtao Brewery and AB Inbev) have enhanced regional promotional and advertising expenditure to compete with small regional and local brands. In 2010, a few dominant beer manufacturers (Carlsberg, Molson, Tsingtao Brewery, etc) acquired local and regional small brewers to improve brand equity. Finally, fierce competition reduces profitability on a short term basis for beer manufacturers in China.
China is the largest beer producing nation attracting considerable foreign direct investment in the form of international brands acquisition and creation of joint venture agreements with local and regional brewers. Strong labou unions, local & regional government support to Chinese-born enterprises, need for costly equipment and beer excise taxation increased to US$31.2 per ton from US$24.9 over the past 3-5 years might hamper foreign direct investment in beer manufacturing segment.
Further, new entrants can improve their market positions via aggressive outdoor and point of sale display advertising campaigns in expat localities (Beijing, Shanghai, etc), entering into partnership with regional bartenders, enhancing on trade volume sales and developing the taste for beer products in urban and rural markets.
Sources: The Barth Report (2009/2010), Business Monitor International (2010), Brewing & Beverage Industry International, Anheuser-Busch InBev China Co., Ltd, China Resources Enterprise Investor Presentation (July 2010), www.haicent.com and www.fas.usda.gov.
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