The lack of obvious 'replacement' in beer is a reflection of its own industry operating rules and characteristics. In the long run, the trend of premiumization in the beer industry remains unchanged. As the Spring Festival approaches, consumer Zhang Bin is paying close attention to beer prices for gift-giving during the holiday season. In January, he found that during the 'New Year Shopping Festival' on platforms like JD.com, he could still buy brand beers at discounted prices below 3 yuan per can. 'During the festival, a 12-can pack of 330ML Snow beer was 29.3 yuan; a 6-can pack of 330ML Qiandao Lake beer was 16.9 yuan, both under 3 yuan per can, offering great value for money,' Zhang Bin said. At Chengdu Hongqi Chain Supermarket, 330ML Harbin Beer retails at 2.5-3 yuan per can, occupying good shelf positions year-round with decent sales. Market research found that low-priced beers around 3 yuan are still visible and selling well in many regions. China's beer production peaked in 2013, followed by seven years of decline. Starting in 2018, the beer industry reversed its revenue and profit decline by cutting capacity, adjusting product structure towards premiumization, and increasing per-ton prices. Alongside premiumization, low-priced beers around 3 yuan gradually faded from view, a phenomenon once interpreted as the 'disappearance of watery beer.' In recent years, a trend of 'replacement' has emerged in multiple industries. Has the beer category also seen low-priced products replacing mid-to-high-priced ones? The author conducted extensive market research. Beer Has Few 'Replacements'? In 2023, with changing market conditions, the concept of 'spending the least money to buy high-cost-performance products' became widespread, with examples like military coats replacing down jackets and Luckin Coffee replacing Starbucks frequently trending. In the beer industry, has a similar 'replacement' phenomenon occurred? In January, Ye Haixia, general manager of Wenzhou Qiming Trading Co., Ltd., which has operated imported beer for many years, found in his year-end review that the company's beer sales declined in 2023. By product structure, products originally wholesaled at 5-6 yuan per bottle saw average price drops of 10%-15%, making 4-5 yuan per bottle the mainstream wholesale price for imported beer. 'Beer consumption levels have slightly declined, but there hasn't been a phenomenon like liquor consumers dropping from 300-500 yuan products to 100-200 yuan products.' Wang Quan, a liquor merchant in Nanning, Guangxi, introduced that in Nanning's dining channels, mainstream brands like Yanjing, Snow's 'Brave the World,' and Lijiang maintain terminal prices around 8-12 yuan. In supermarkets and convenience stores, there are still brand beers at 5 yuan per bottle, and some individual 330ML canned beers retail at 3 yuan, but by sales volume, products above 8 yuan account for the largest share, while low-priced beers at 3-5 yuan sell less. This indirectly shows that compared to the 'replacement' trend in the liquor industry, exemplified by the rise of bottled liquor, the 'replacement' phenomenon in beer is not prominent. Yuan Yue, secretary-general of the Beer Branch of the China Alcoholic Drinks Association, stated that with the industry's upgrade, the market share of major brands has increased, and quality across all price points has improved. Low-priced brand beers are gradually replacing unknown products from small factories, which is the market basis for 3-yuan beers. During the e-commerce New Year Shopping Festival, low-priced beers sold on e-commerce platforms are mostly well-known brands, having little direct relation to 'replacement.' Thus, the lack of obvious 'replacement' in beer reflects its own industry operating rules and characteristics. Four Reasons Why Beer Is Hard to 'Replace' Compared to liquor and other FMCG products, why hasn't beer seen an obvious market 'replacement'? Because the beer industry has high brand concentration, moderate cost increases, over half of sales in on-premise channels, and frequent promotional sales due to short shelf life. Relevant data shows that in 2022, the combined market share of China Resources Snow, Tsingtao Beer, Yanjing Beer, Budweiser APAC, and Carlsberg Beer reached 92.1%, the highest among all alcoholic beverages. Fang Gang, senior researcher at Yunjiu·China Alcoholic Drinks Brand Research Institute and beer marketing expert, believes that beer brand concentration far exceeds that of liquor and other alcoholic beverages, meaning consumers have limited choices of well-known beer brands. Additionally, beer's price range is far less diverse than liquor's. Consumers are more willing to choose familiar or previously tried brands, and unknown low-priced beers may not sell well, which is why well-known beer brands at 8-12 yuan are popular in many dining channels. Beer raw material price changes (Source: Changjiang Securities) From a cost perspective, the main factors affecting beer production costs are barley, packaging, logistics, and labor. In 2022, due to environmental changes, the average import price of barley rose from around $220/ton in the second half of 2020 to $410/ton by the end of 2022. Packaging material prices adjusted, but logistics and labor costs trended upward, pushing beer prices up slowly due to cost pressures, making it difficult to produce low-priced, high-quality beer. This increases the difficulty of beer 'replacement.' From a channel perspective, unlike liquor, which can be sold through group buying, premium liquor stores, supermarkets, dining, and wholesale, over 50% of beer is consumed in on-premise channels like restaurants, bars, and nightclubs, where terminals have 'store lock-in' phenomena, limiting consumer choices, which also restricts the consumption scenarios for beer 'replacement.' Due to short shelf life, beer has high promotion frequency and intensity. Ye Haixia stated that as long as imported beer has less than six months of shelf life, the company considers selling at low prices. This also explains why low-priced premium beers are often available in e-commerce live streams. Since consumers can drink good beer for less money, how many would still choose 'replacement'? Premiumization Unchanged, Pursuing Cost-Performance In Fang Gang's view, 'replacement' appeared in various industries in 2023, with consumers seeking to 'stretch every penny,' but overall, the premiumization trend in the beer industry remains unchanged, and this is a relatively long-term process. Changes in per-ton price are the most obvious indicator of premiumization. Data shows that in 2017, only Budweiser APAC and Chongqing Beer had per-ton prices above 3,500 yuan per kiloliter, with China Resources Beer at 2,516 yuan per kiloliter and Yanjing Beer at 2,689 yuan per kiloliter. By the first half of 2023, China Resources Beer's per-ton price reached 3,633 yuan per kiloliter, Tsingtao Beer at 4,298 yuan, Yanjing Beer at 3,329 yuan, and Chongqing Beer at 4,925 yuan, approaching the 5,000 yuan mark. Beer (by scenario) average retail price (yuan/500ml, Source: Changjiang Securities) In September 2023, at the '2023 China Beer T5 Summit' hosted by the China Alcoholic Drinks Association and co-organized by Yanjing Beer, He Yong, secretary-general of the association, mentioned, 'As Chinese market consumption concepts continue to upgrade, we are entering an era of quality and diversity. Despite a huge market and large consumer base, the future direction is high quality, and we should maintain firm confidence in the premiumization trend.' Premiumization is the main theme in the beer industry, but premiumization does not mean high prices; high-cost-performance beers will gain more consumer favor. Data shows that China's per capita disposable income increased from 25,974 yuan in 2017 to 39,218 yuan in 2023, a 50% growth over six years. Theoretically, this also determines the upper limit for beer companies' price increases during the same period. Seeing this trend, the five major beer brands, led by China Resources Snow and Tsingtao Beer, have been focusing on premiumization in recent years, launching a series of high-cost-performance products. Beer listed company financial reports show that in the first half of 2023, China Resources Beer's premium and above beer sales reached approximately 1.444 million kiloliters, a 26.4% increase year-on-year; Heineken® brand sales grew nearly 60%, with continuous improvement in product structure. From January to September 2023, Tsingtao Beer's mid-to-high-end and above product sales reached 2.902 million kiloliters, a year-on-year increase of 11%; Chongqing Beer's 6-10 yuan mainstream products generated revenue exceeding 6.785 billion yuan, up 12.37% year-on-year; Zhujiang Pure Draft beer sales increased 15.01% year-on-year, with '97 Pure Draft' product sales up 33.28%. Thus, while 'replacement' frequently appears in various industries, beer rarely sees 'replacement,' which is not only a reflection of the industry's own operating rules and characteristics but also the result of long-term premiumization. The emergence of more high-cost-performance beers will better benefit society and meet consumer needs. What do you think of the beer 'replacement' trend? PS: From March 14-16, 2024, the 9th China FMCG Innovation Conference & the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference, hosted by New Distribution and co-hosted by Anneng Zhilian, will be grandly held in Chengdu! The 2nd China FMCG Distributor Conference will be hosted by New Distribution and co-hosted by Zhoupu Data. **This conference will revolve around the theme of 'Supply Chain Revolution.' 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