The Chinese beer market has grown at an astounding pace in recent years. Indeed since 1997 total consumption of beer grew by 16.79 per cent up to 2003 to reach 24.87 billion litres. These figures have been spurred on by the massive levels of foreign investment in the market, along with the rise in the average levels of consumer spending in China, thanks to the economic reform policies of the government. Indeed total expenditure on beer has risen by 85.99 per cent in current value terms since 1996, the report highlights.
Poised to become super beer nation
China stands poised to overtake the US to become the largest national beer market in the world, and this is likely to happen before the next century begins, the Access Asia research team say. Thus China is an increasingly important market, with a lot more potential for investment. The report bases this assumption on the fact that retail volumes for beer rose by 23.29 per cent between 1997 and 2003 and that in 2002 the market reached an estimated value of RMB 163.98 billion (€16.1bn).
The further potential of the Chinese beer market is highlighted by the fact that, despite volumes being significant, per capita consumption is still relatively low. In 2003 an average of 18.76 litres of beer was consumed by each person on a yearly basis. This compares to 44.5 litres per capita in South Korea, 41.9 in Japan and 29 litres in Hong Kong. Undoubtedly such figures indicate that as the economy continues to develop, so too will the potential for greater levels of beer consumption.
Standard lager still dominates
Also reflecting the relative lack of development in the market is the fact that standard lagers are still by far the most significant type of beer. In 2003, 19.8 million hecolitres of standard lager was sold in China, compared to 728,000 hecolitres of speciality beer. The growth of the speciality beers sector, up from 2.5 per cent of the market in 1997 to 3.43 per cent in 2003 - came at the expense of standard lagers with fell from 92.91 per cent of the market in 1997 to 91.45 in 2003. Although the growth of the speciality beer market has been significantly higher than that of standard lagers in recent years, the slice of the market that premium beers command indicates that there is still more room for development and that signs of real market maturation are still some way off.
Not only have there been changes in the types of beer consumed, there has also been a distinct shift in the way it is consumed. One of the driving forces behind the increase in sales has been the growth of the home drinking market, as opposed to the catering market. According to the report retail sales grew from 81 per cent of the market in 1997 to 85.5 per cent of the market in 2003. However the report also highlights the fact that the market for home drinking is even bigger, as many of the sales made by restaurants and other catering establishments are for home consumption.
Competition growth
Currently competition in the China beer market is growing at phenomenal rate, with all the major players clamouring to increase their share of the market. Of the international players, the leader is US-based Budweiser. However, in the last year or so competition has increased substantially with more than 50 foreign ventures now up and running in the country, many of which have been announced in the last couple of months.
The latest in a string of recent acquisitions by international breweries has been Carlsberg's move to buy up 50 per cent of Lanzhou Huanghe Brewery's operations in the Gansu and Qinghai provinces, which was signed last month. Other acquisitions in the course of the last three months have included Anheuser-Busch's successful attempt to out-bid SABMiller in the battle to win a controlling stake in Harbin brewery and Scottish & Newcastle purchasing a 19.5 per cent share in China's Chongqing Breweries.
Still fragmented
However, despite all the activity, Access Asia points out that the China beer market still remains dominated by a large number of domestic players, which makes for a localised and fragmented market. This suggests that there is still further room for international investment, but this is most likely to take the form of joint venture arrangements, as leading players such as Tsingtao, Yanjing and Zhujiang become increasingly dominant.
China is a complex market, varying widely from region to region. Indeed, China can be described as a collection of regional markets, with very few companies able to operate on a truly national level. The brewing industry has been one of those quickest to modernise in China, and can be seen as a yardstick upon which other industries in China will model themselves.
Despite its huge market size, the report says that there remains great scope for development, and many new opportunities are still available in China. As per capita beer consumption continues to be relatively low, and this can only mean that the market still has much room for development.