---
title: "2015 Beer Industry Decline Is a Foregone Conclusion: Mid-Year Performance Review of the Top Five Giants"
description: "With the release of Tsingtao Brewery's financial report, the mid-year results of all major beer industry giants have been published. According to data from the National Bureau of Statistics, domestic beer production in the first half of this year reached 24.57 million kiloliters, a year-on-year decrease of 6.2%. This article compiles the financial reports of the major giants and relevant NBS data for comparison."
author: "New Distribution"
publisher: "New Distribution"
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published: "2015-09-05"
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# 2015 Beer Industry Decline Is a Foregone Conclusion: Mid-Year Performance Review of the Top Five Giants

> With the release of Tsingtao Brewery's financial report, the mid-year results of all major beer industry giants have been published. According to data from the National Bureau of Statistics, domestic beer production in the first half of this year reached 24.57 million kiloliters, a year-on-year decrease of 6.2%. This article compiles the financial reports of the major giants and relevant NBS data for comparison.

With the release of Tsingtao Brewery's financial report, the mid-year results of all major beer industry giants have been published. According to data from the National Bureau of Statistics, **domestic beer production in the first half of this year reached 24.57 million kiloliters, a year-on-year decrease of 6.2%**. We have compiled the financial reports of the major giants and relevant NBS data for comparison on a single platform for industry peers.

**I. Sales Volume Comparison of Beer Industry Giants**

| No. | Company | Sales Volume (10,000 kiloliters) | Year-on-Year Growth |
|-----|---------|----------------------------------|---------------------|
| 1 | China Resources Snow Breweries | 624.9 | (-0.8%) | Market share 25.%
| 2 | Tsingtao Brewery | 491.8 | (-7.38%) | Market share 20%
| 3 | Anheuser-Busch InBev | 387.5 | (+1.7%) | Market share 18%
| 4 | Yanjing Beer | 296.1 | (-3.58%) | Market share 12%
| 5 | Carlsberg | China market organic growth 1%, plus Chongqing Brewery 12% |
| 6 | Heineken | China sales increased 5% |

Note: The above data are from respective financial reports; this platform only compiles relevant data.

**Editor's Comment:**

The ranking of beer giants remains unchanged, with decline being the main theme. The sales increase for AB InBev is related to last year's acquisition of Dafuhao. The top five giants already hold over 75% of the market. In the short term, market rankings are unlikely to change significantly.

From the development trend of China's beer industry, it is likely to follow the US and Japan models, which is a consensus in the industry. Some regional small enterprises will be integrated by larger ones. In this sense, industry concentration will further increase.

However, China's beer market is vast, unlike the US and Japan. Therefore, it is unlikely that one or two companies will dominate; instead, more players may share the market. Currently, several major beer companies have formed—China Resources, Tsingtao, AB InBev, Yanjing, and Carlsberg—and the possibility of mutual integration among these five is low.

The past decade has been a period of rapid development for China's beer industry and a crucial decade for the growth of the top five giants. From 2005, when the top five brewers held half of the industry, to 2014, these five brewers accounted for 71% of the market share. Unfortunately, Yanjing Beer has missed opportunities over the past decade, with no significant change in market share.

**II. Revenue and Profit Comparison of Beer Industry Giants**

| No. | Company | Revenue (100 million RMB) | Year-on-Year Growth | Net Profit (100 million RMB) | Year-on-Year Growth |
|-----|---------|---------------------------|---------------------|------------------------------|---------------------|
| 1 | China Resources Snow Breweries | 160.77 (196.09 billion HKD) | 6% | 4.46 (5.44 billion HKD) | 30.50% |
| 2 | Tsingtao Brewery | 160.67 | (-5.26%) | 11.99 | (-14.66%) |
| 3 | Anheuser-Busch InBev | 137.52 (2164 million USD) | 10.20% | EBITDA grew 28% in H1 |
| 4 | Yanjing Beer | 70.38 | (-9.28%) | 5.98 | 2.83% |
| 5 | Carlsberg | Global revenue growth 1% | Global operating profit declined 12% |
| 6 | Heineken | | 9.15 billion EUR | 14% |

**Editor's Comment:**

Unlike the widespread decline in sales, industry profits are increasing. The reason is that major giants are focusing on mid-to-high-end beers, raising unit prices, thus increasing revenue and profits.

Unlike other giants' profit growth, Tsingtao Brewery's financial report shows declines in sales, revenue, and profit in H1. The company provided corresponding explanations.

Tsingtao's operating costs decreased mainly due to lower beer sales during the reporting period. Profit decline was mainly due to a 6.06% year-on-year increase in administrative expenses, primarily due to increased employee compensation; financial expenses increased 15.13% year-on-year, mainly due to reduced interest income.

**III. Strategies of the Giants**

**Snow Breweries**

Regarding future development strategy, Snow stated it will first make premium brands more penetrating in high-end dining and modern retail channels, driving sales and profit growth through premiumization.

Second, the company will strengthen regional layout through organic growth and acquisitions.

Third, it will use Kingway breweries to brew Snow products. Over the next 3-4 years, it will continue integrating Kingway Beer, improving its operations and distribution network.

Finally, Snow will strengthen cooperation with SAB Miller to continue improving operational efficiency and management.

**Tsingtao Brewery**

The company rapidly deployed market networks for new and specialty products and developed professional distributors, achieving significant results. It actively explores new marketing models in the mobile internet era, leading the beer industry's e-commerce development. After establishing official flagship stores on major e-commerce platforms, it pioneered a three-dimensional e-commerce channel system (official flagship store + official mall + online retailers + distribution exclusive stores), accelerating the transformation of its e-commerce O2O model and B2C business.

The company is transforming its R&D model for new technologies and products, leading product consumption upgrades. Using the "State Key Laboratory of Beer Biological Fermentation Engineering" R&D platform, it focuses on international new product development trends. In H1, it developed new varieties targeting youth, fashion, health, and functionality, successfully launching products like whole wheat white beer, Xuanqi fruit beer, jujube-flavored dark beer, and 5L draft beer.

The company continues to increase investment in safety, environmental protection, and quality improvement, implementing projects including ammonia system renovation, desulfurization and dust removal, wastewater treatment, and packaging equipment updates to ensure safe production and stable operation of environmental facilities, and improve product quality. Currently, the company has reached advanced domestic levels in safety production, clean production, energy conservation, emission reduction, and resource consumption reduction.

In H1, the company actively adjusted investment methods from "capacity expansion" to "quality and efficiency improvement," reasonably controlling expansion project progress, prioritizing strategic new and specialty products and canned products that meet market consumption upgrades, and fully supporting base market development to maximize investment returns.

**Anheuser-Busch InBev**

The company stated it will continue investing in the Budweiser brand to make it a leading brand in the international high-end market.

AB InBev's global CEO Carlos Brito, in a quarterly earnings call, mentioned the Chinese market, saying two reasons give him confidence in H2 business: "First, summer in China has just begun; we believe Q3 sales will improve. Second, negative growth in China's beer market is mainly in low-to-mid-end categories, while we hold a leading position in high-end categories." He said: "Budweiser conducted over 12,000 quality-themed marketing activities in China in Q2, and we will boost the Chinese market with more marketing activities."

**Yanjing Beer**

Enhancing product quality, highlighting product advantages

The company continues to prioritize product quality improvement, strengthening R&D and quality control, and striving to brew the best beer. It continuously optimizes product flavor and taste, striving to give consumers a better experience. On the basis of further optimizing refreshing beer, fresh beer, and pure draft flavor, it continues developing new products to meet personalized and differentiated consumer needs. Its original pulp white beer has been favored by consumers.

Accelerating product upgrades, optimizing structure

The company's product structure is continuously enriched, with increasingly clear product lines. The proportion of mid-to-high-end products like fresh beer and pure draft continues to rise. With continuous improvement of product architecture, the company's mid-to-high-end beer grew 18.27%.

Strengthening market development, consolidating market position

The company's advantageous market position is steadily consolidating, and growth markets are developing stably. In H1 2015, base markets like Beijing and Guangxi maintained absolute advantages, further consolidating its advantageous position. Emerging markets like Yunnan, Sichuan, and Xinjiang are transforming into growth markets, expanding the scope of advantageous markets.

Deepening brand promotion, effectively enhancing brand image

The company's "1+3" brand strategy is advancing, and the Yanjing brand value is increasing.

Improving internal management, promoting healthy and orderly operation; advancing human resources development, improving management levels; using informatization to promote scientific development, accelerating informatization construction; relying on technology to deepen energy conservation and emission reduction, achieving new breakthroughs in environmental protection.

**Carlsberg**

Cees 't Hart, who took office as CEO of Carlsberg Group on June 15, said the company is revising its strategy to help financial development become more robust. By mid-2016, the company will announce the results of this measure.

Carlsberg also lowered its full-year outlook, expecting a slight decline in organic operating profit. Previously, the company expected mid-single-digit to high-single-digit organic growth. The company said sales in Xinjiang and Chongqing grew well, but declined slightly in East China. The integration with Chongqing Brewery has been completed.

**Heineken**

Heineken's CEO said the industry is highly competitive, and the way to maintain competitiveness is **investing in innovation and launching new products**.

The half-year report shows new products brought Heineken 854 million euros in revenue, accounting for 8.6% of sales.

Second, Heineken will launch a new product called The Sub in China this month; this platform has already reported on it.

**Afterword:**

Half a year later, China's beer industry output continued to decline in July. According to NBS data:

In July 2015, China's beer industry output was 5.2403 million kiloliters, a year-on-year decrease of 8%;

From January to July 2015, cumulative output was 29.7479 million kiloliters, a year-on-year decrease of 6.5%.

Major beer brands saw sales decline in H1, and H2 performance may not be good either, as this year also experienced a cool summer. June to September is the main beer consumption period, accounting for 2/3 of annual sales. Major beer-consuming cities experienced low temperatures, heavy rain, or other conditions, so the summer heat was absent, significantly impacting beer consumption venues like outdoor food stalls and street snacks.

Poor economic conditions and reduced consumer spending are also major reasons affecting beer consumption. In H1, domestic macroeconomic downward pressure remained significant, economic growth continued to slow, negatively impacting the beer industry, with overall industry sales declining noticeably.

Another impact on beer is the rise of cocktails. Currently, cocktails are favored by industry, capital, and all sectors, creating a significant substitution effect on high-end beer. For example, premixed drinks like RIO have high similarity in channel overlap, alcohol content, consumer groups, and price ranges, substituting mid-to-high-end beer. Moreover, cocktails and other premixed drinks have relatively better taste and are popular among young women. How to win over this consumer segment requires effort.

The top five beer companies—China Resources Snow, Tsingtao, AB InBev, Yanjing, and Carlsberg—hold about 80% of the market. In an era of stagnant or declining overall industry sales, with thin industry profits and a downward cycle, small and medium beer enterprises will accelerate their exit from the market. To ensure stable performance growth, mergers and acquisitions will be a very important choice for the giants. Whether mergers and reorganizations among giants will occur in the future remains to be seen.

Editor: Lianke Jun

**-END-**

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