China: Domestic and foreign brewers boost competition

The latest statistics from Beer Sector Commission of China National Food Industry Association (CNFIA) showed that large beer enterprises have consistently increased their market shares, and brand fight has been carried out in a full scale on the strategic level, a release evoked on May 09.

The beer sales volume of China Resources Snow Breweries Company tops the whole industry; InBev has rushed into the fourth place of the industry and the total sales volume of its holding beer companies has achieved 2.3 million tons; the annual sales volume of the top three beer enterprises, namely Tsingtao Brewery Co., Ltd., China Resources Snow Breweries Company and Beijing Yanjing Brewery Company, have all broken through 3 million tons. The intensification level of the beer industry keeps rising, and the top ten domestic beer production manufacturers have already occupied 61 percent of the total market shares, increasing by 6 percentage points compared with 2004.

From July 2004 when American Anheuser-Busch Limited purchased Harbin Brewery Company Ltd. at the price of RMB5.7 billion Yuan, with a premium of approximately 500%, to January this year when Belgian InBev purchased Fujian Sedrin Brewery at the price of RMB5.886 billion Yuan, nearly 1000% of the premium, the purchasing price in the beer industry keeps climbing, thus making a great deal of small and middle sized beer companies watch the market to wait for the most favorable price. Compared with them, large beer enterprises are apt to build more factories and enlarge output to expand their businesses besides merger.

On April 11th, Beijing Yanjing Brewery Company announced its two investment projects: building new brewery plants with an annual output of 100,000 tons in Shenyang city, Liaoning province, and in Shihezi city, Xinjiang autonomous region.

On April 8th, the foundation of the new brewery plant in Harbin invested by China Resources Snow Breweries Company with RMB283 million Yuan was laid; meanwhile the company also announced that the output capacities of its Beijing Pinggu Plant and Tianjing Plant would be increased from original 350,000 tons to 450,000 tons.

On March 19, the 200,000-ton beer engineering project of Kingway Brewery Holding Ltd. was started up in Xi Żan. After building brewery plant in Tianjing, Kingway Brewery dominating Guangdong has speeded up its steps toward national expansion.

Different strategic arrangements have supported the expansion of different beer enterprises. The second beer camp consisting of Guangzhou Zhujiang Brewery Group Co., Ltd., Harbin Brewery Company, Jinxing Beer Group Co., Ltd., Chongqing Brewery Co., Ltd., and so on with their production scales mostly between one million tons to two million tons have began their national expansion, making preparations to become nationally famous brands. The first beer camp, based on Tsingtao Brewery Company, Beijing Yanjing Brewery Company and China Resources Breweries Company, boasts national brands; these enterprises have basically finished their production distribution across China, and have accelerated penetration into their respectively dominating regional markets.

As the competition between large foreign and domestic beer enterprises is more likely carried out in regional markets, brand fight is being launched on the level of strategic thought and strategic integration.

Beijing Yanjing Brewery Company and Tsingtao Brewery Company, the two successive domestic beer sponsors of 2008 Beijing Olympic Games, have reinforced their brand marketing and overall brand promotion. As the five production bases were completed successively in Baotou of Inner Mongolia autonomous region, Xiantao of Hubei province, and so on, Yanjing Brewery Company has basically finished its national production distribution. Its brand expansion strategy that gives priority to "Yanjing" brand in high-end market supplemented by fine subsidiary brands in the mass market has contributed a lot to the company's achievements.

In the same way, Tsingtao Brewery Company has changed its focus from product operation to brand operation. The sales volume of its major brand "Tsingtao" and the six subsidiary brands "Hansi", "Laoshan", and "Shanshui", etc. represented 66 percent of its total sales volume in 2005, increasing by 7 percentage points year-on-year. Jin Zhiguo, president of Tsingtao Brewery Company put forward that the priority in the future was still given to deep integration including brand integration.

China Resources Breweries Company, professing to be "the last one engaged in brand operation", has broken through the old strategy that focused its distribution on cities along Yangtze River, coastal cities and central cities, and has changed to the full-direction expansion strategy that vigorously promotes the major brand "Snow" all around China. Hou Xiaohai, general marketing director of China Resources Breweries Company said, "The promotion of the brand 'Snow' is by no means to change all regional brands simply into a single brand. The reason is simple that consumers won't accept it. 'Snow Beer' is promoted as "a new brand and a new product" in any markets, and the rapid expansion of the brand benefits from the powerful integrating and distributing capability."

While large domestic beer enterprises like Tsingtao Brewery Company, Beijing Yanjing Brewery Company and China Resources Breweries Company have been consistently consummating their national strategic distribution through building new plants and merger, foreign famous beer manufacturers like Budweiser, InBev and Carlsberg have also strengthened their penetration into China's beer industry. The brand offensive launched by Anheuser-Busch (AB) that "Budweiser sticks to the high-end market, Tsingtao Beer storms the mainstream market, and Harbin Beer captures the mass market" has been formed; Japanese Santori Brewery Co., Ltd., specializing in the high-end market, focuses its market on the Yangtze Delta Region with Shanghai at the core.

In the beer industry with intensive homogeneous competition, it's necessary for every participating enterprise to fully consider how to specify its brand orientation and promote its brand value. Du Futai, the secretary general of Beer Sector Commission of CNFIA, was deeply touched by this. He said, "The beer industry calls for rational competition, which needs to ensure the quality and brand promotion of enterprises when winning scale success."

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .