China: Beer stocks fall on poor year-end sales

Chinese and Hong Kong beer companies were among the worst performers on Hong Kong and Chinese stock markets which saw substantial falls on the first trading day of 2024. On the Hong Kong market, China Resources Beer led the decline, and saw its share price fall by 4.5%; followed by Budweiser Asia Pacific, with a 4.24% drop; Tsingtao Beer with 4.2%, and Chongqing Beer with 3.69%, asiabrewersnetwork.com reported on January 8.

Although, the fall across the markets was broad-based and reflected a general pessimism about economic conditions for the greater China region, Chinese brewers were also punished for lukewarm sales over the festive season, and a gloomy long term outlook for mass market beer sales.

According to a News Directory3 report on the Chinese and US beer markets, during the recent Christmas and New Year period, some mainland Chinese cities had succumbed to pressure to ban or play down celebration of foreign holidays, and events such as New Year’s day countdowns had been cancelled at the last minute.

Postings on Xiaohongshu (Little Red Book), a Chinese social media and e-commerce platform which tracks catering consumption, claimed that in the last quarter of 2023, beer sales in restaurants and bars in first and second tier cities such as Beijing, Shanghai, Chongqing, and Xi’an badly missed forecasts. A recent Essence Securities report said that mainland beer production fell by 5.5% year-on-year in the third quarter of 2023.

The drop in production may not bad news for the craft beer segment, however. The News Directory3 report argues that younger people are increasingly less likely to drink beer in the same quantities as the previous generation, and prefer beers such as craft brews that are more suitable for slower, less substantial drinking and more interesting to taste, despite their higher prices.

Consequently, the Chinese beer giants will need to diversify their brands to include more premium segment brews, and to make greater inroads into international markets, if they wish to restore investor’s confidence in their long term growth prospects.

The problem is that although the big brewers have committed to exploring foreign markets and launching fine beers in recent years, they still lack internationally recognised brands and progress is not as good as expected.

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