Premiumization has become a common and synchronized move in the beer industry. Major companies have incorporated premiumization into their long-term strategies; those who lag behind will be hit or even eliminated! How far can beer premiumization go? This is a topic of common concern among many friends.
-01- Reviewing 40 Years of the Beer Industry. Phase One: Beer as Cheap as Water From around 1990 to 2010, the characteristic of this period was land grabbing and volume supremacy! One-yuan beers were everywhere, industry net profit was less than 3%, and less than 50% of companies were profitable.
Phase Two: Beer as Expensive as Oil From around 2010 to 2020, the acquisition window basically closed. After total consumption reached its historical peak, it began a continuous decline for five years starting in 2014! Companies began to abandon market share battles and shift to profit pursuit. During this time, imported beers surged. Budweiser strategically abandoned the low-end market, while Snow Beer set the goal of the "last battle" to become a world-class beer company and capture the top share of China's high-end market.
2020 marked another turning point for Chinese beer! The crisis of that year turned out to be a blessing in disguise: it unified understanding and thinking in the crisis: Low prices have no future; high-end has a future!
Phase Three: Beer as Expensive as Liquor? This phase roughly starts from 2020, and it needs a question mark "?" because the future hasn't arrived yet!
Based on current data, the total revenue of the beer industry is 150 billion yuan, total industry profit is 13.3 billion yuan, and the industry net profit margin is about 9%.
Budweiser China's net profit once peaked at over 20%. Although it has declined in the past two years, it still exceeds 10% overall. Chongqing Brewery's profit has remained stable at 15%, and Zhujiang Beer once reached as high as 19%!
In the next five-year plan of the China Alcoholic Drinks Association: It is expected that during the 14th Five-Year Plan period, beer production will reach 38 million kiloliters, an increase of 11.4% over the end of the 13th Five-Year Plan, with an average annual growth of 2.2%; sales revenue will reach 240 billion yuan, a year-on-year increase of 63.4%, with an average annual growth of 10.3%; and profits will reach 30 billion yuan, a year-on-year increase of 124%, with an average annual growth of 17.5%.
The keyword for this phase: Doubling! The industry's average net profit will reach 12.5%! During this period, it is foreseeable that some companies' net profit will approach or even exceed 20%. In contrast, the next five-year net profit target for the baijiu industry is 35%!
In short, the floor for the beer industry is the beverage industry, and the ceiling is the baijiu industry!
More expensive than water, cheaper than liquor—this is likely the inherent attribute and gene of the beer industry.
-02- Four Actions in Beer Industry Premiumization
1. Optimize Production Capacity That is, closing and building factories simultaneously. In the future, half of the production capacity will be optimized, characterized by closing old factories and building new ones.
2. Raise Prices The window for collective industry-wide price increases will not open frequently, but price increases in local markets for individual brands will be normalized.
3. Adjust Product Structure Leading companies will continue to launch new products, and the upward shift of the tiered price band will be continuously followed up.
4. Build Brands Brands will start signing endorsers in large numbers and increase communication expenses.
-03- Two Schools of Thought in Beer Industry Premiumization
1. Multi-Brand Path This is reflected in Budweiser China, which brings together nearly 30 high-end brands from around the world to China for intensive layout in the head market. Carlsberg is similar, with head brands including 1664, Grimbergen, Wusu, and others. Snow Beer has acquired several high-end brands under Heineken. Yanjing Beer has started multi-brand strategies such as U8 and Xuelu.
2. Multi-Category Path Taking Tsingtao Beer as an example, the head gathers multiple categories such as white beer, dark beer, Pilsner, IPA, etc., forming a rich category product line.
Premiumization Suspense: 1. Can China Resources Snow achieve the first goal of premiumization within three years? 2. Who will be the most profitable brand in the Chinese beer market? 3. In the high-end decisive battle, who will be thrown off the chariot?
It is estimated that by 2025, China's alcoholic beverage industry will achieve total production of 66.9 million kiloliters, an increase of 23.9% over the end of the 13th Five-Year Plan, with an average annual growth of 4.4%; sales revenue will reach 1.418 trillion yuan, an increase of 69.8%, with an average annual growth of 11.2%; and profits will reach 334 billion yuan, an increase of 86.4%, with an average annual growth of 13.3%.
1. Baijiu sales will reach 950 billion yuan, with profits of 270 billion yuan. Baijiu production is predicted to reach over 8 million kiloliters by 2025, an increase of 8.0% over the end of the 13th Five-Year Plan, with an average annual growth of 1.6%. Sales revenue will reach 950 billion yuan, an increase of 62.8%, with an average annual growth of 10.2%; profits will reach 270 billion yuan, an increase of 70.3%, with an average annual growth of 11.2%.
2. Beer sales will reach 240 billion yuan, with profits of 30 billion yuan. It is expected that beer production will reach 38 million kiloliters, an increase of 11.4% over the end of the 13th Five-Year Plan, with an average annual growth of 2.2%; sales revenue will reach 240 billion yuan, a year-on-year increase of 63.4%, with an average annual growth of 10.3%; profits will reach 30 billion yuan, a year-on-year increase of 124%, with an average annual growth of 17.5%.
3. Wine sales will reach 20 billion yuan, with profits of 3 billion yuan. It is expected that wine production will reach 700,000 kiloliters, an increase of 69.4% over the end of the 13th Five-Year Plan, with an average annual growth of 11.1%; sales revenue will reach 20 billion yuan, a year-on-year increase of 99.6%, with an average annual growth of 14.8%; profits will reach 3 billion yuan, a year-on-year increase of 1058.3%, with an average annual growth of 63.2%.
-04- Reading the 2020 Alcohol Industry by the Numbers
1. In 2020, there were 1,887 enterprises above designated size in the national brewing industry, a decrease of 802 compared to the end of the 12th Five-Year Plan. Among them, there were 1,040 baijiu enterprises above designated size, 346 beer enterprises, and 130 wine production enterprises.
Characteristics: During the 13th Five-Year Plan period, the number of alcohol enterprises above designated size decreased year by year, and the trend of industry concentration became increasingly evident.
2. Total alcohol production completed was 54.007 million kiloliters, a year-on-year decrease of 24.7%. Among them, beverage alcohol production was 44.765 million kiloliters, a year-on-year decrease of 28.1%; fermented alcohol production was 9.243 million kiloliters, a year-on-year decrease of 2.5%.
Characteristics: Production and sales basically showed a downward trend year by year, reflecting changes in market supply-demand relationships and consumer demand.
3. Cumulative product sales revenue was 835.33 billion yuan, a year-on-year decrease of 9.2%.
Characteristics: Product sales revenue achieved a V-shaped reversal in the mid-13th Five-Year Plan period, and unit product sales revenue basically showed a year-by-year growth trend, indicating that the market pricing power of alcoholic products has gradually improved.
4. Profits reached 179.2 billion yuan, a year-on-year increase of 75.6%.
In recent years, major companies have launched representative high-end brands: Budweiser Corona, Snow SuperX, Tsingtao 1903, Carlsberg Wusu, Yanjing U8.
According to statistics, SuperX and 1903 seem to score low, and domestic brands' high-end definitions are generally 1-2 tiers lower than Budweiser.
In terms of volume, the ranking from high to low is roughly: Wusu, U8, Corona, SuperX, 1903.
Low-end is materialistic, high-end is idealistic! Maybe we should reflect: have we got it reversed?
When doing high-end, emphasizing the basic attributes of the product, physical and material attributes, is no longer meaningful.
Weak air force may be the fatal weakness of domestic brands' premiumization.
High-end piled up by channels is not a brand.
Without channels, you can't grow big; with only channels, you can't become strong!
Without infantry, you can't grow big; with only infantry, you also can't become strong!
Source: New Beer Author: Fang Gang
Tips will be paid 400-2000 yuan once the tip is adopted.