The summer solstice has arrived, and heat waves are rolling in. It's the time of year when beer consumption is at its highest. What beer sells best in your area? Little do you know, every choice you make—whether proactive or passive—at BBQ restaurants, supermarkets, or nightclubs is the result of fierce competition among beer manufacturers. How is the sphere of influence divided across the country? China Resources Snow Beer (CR Snow) has "blossomed everywhere" nationwide, engaging in three major battles with Budweiser in the northeast, east, and south. Tsingtao Beer firmly holds the Shandong market and clashes with Yanjing Beer in the north and central regions. Carlsberg, almost unnoticed, has absorbed the entire western beer forces and is preparing to march eastward. In short, the living space for local small breweries is shrinking. Snow's "Total War" With the world's top-selling Snow Beer, China Resources Beer (00291.HK) naturally sits firmly at the top of China's beer market. In 2016, China Resources Beer sold 11.7 million tons, with revenue of 28.696 billion yuan. As of 2016, China Resources Beer operated 136 breweries in China. The regional distribution of these breweries basically represents CR Snow's sphere of influence nationwide. After all, beer is the most typical market-oriented industry, with a high degree of overlap between production and consumption areas. On the Chinese mainland, except for Chongqing, Jiangxi, Yunnan, Qinghai, and Xinjiang, CR Snow has breweries in all other regions. Even in provinces without breweries, coverage is achieved through neighboring provinces. For example, CR Snow set up a brewery in Changdu, on the border of Tibet and Qinghai, to cover both provinces simultaneously. Of course, while expanding nationwide, CR Snow also has its strongholds, such as Sichuan, Anhui, and Liaoning. Among these, Sichuan, with 13 breweries, is CR Snow's top priority. According to the author's statistics, the total beer production capacity in Sichuan is about 4.5 million tons, of which Chongqing Beer (600132.SH) has 750,000 tons, Tsingtao Beer 500,000 tons, Yanjing Beer 300,000 tons, Budweiser 250,000 tons, Henan-based金星 Beer 300,000 tons, and CR Snow accounts for about 2.4 million tons, more than half. In CR Snow's aggressive push into the Sichuan market, the iron law for local brands—"either be acquired or be killed"—was forcefully replicated. Blue Sword and Jinwei were absorbed, while Aowei Beer and Nengli Beer disappeared. Yesterday, I specifically asked several friends from Sichuan, and they all said that now basically everyone in Sichuan drinks Snow Beer. This matches what Brother Wei saw when he visited Sichuan. For CR Snow, some more important markets cannot be led as in Sichuan, so it has to ignite fires everywhere, triggering a "total war." In the northeast, it competes with Harbin Beer; in the Yangtze River Delta, it faces Harbin Beer and Dafufu; in the south, its biggest competitor is Zhujiang. Behind these three are actually Budweiser. Indeed, in the current Chinese market, only Budweiser has the capability to compete with CR Snow. In addition to the above two situations, Snow's third-tier layout is more about "presence." For example, it has three breweries in Shandong, where Tsingtao holds an absolute market share. These layouts are probably not for profit but to prove CR Snow's status as the leader of China's beer market. Beer Market in Flames Perhaps because all its energy is spent competing for market share with national rivals, CR Snow has little energy to optimize its product structure and improve profitability. Among China's major beer giants, Snow has the lowest gross margin. In 2016, the gross margins of Tsingtao Beer, Yanjing Beer, Chongqing Beer, and Zhujiang Beer (002461.SZ) were 37.8%, 40.9%, 39.4%, and 39.9%, respectively, while China Resources Beer's gross margin was 33.7%. Regional giants that have深耕 a single market for years often optimize resource allocation to the fullest. Although their national brand influence and market share may not match national giants, they are in the best state within their single region. In 2016, Tsingtao Beer (600600.SH) generated 13.6 billion yuan in revenue within Shandong Province—something no other giant or region could achieve. With Shandong as its base, Tsingtao Beer also jointly radiates to several provinces in North and Central China with Yanjing Beer (000729.SZ). For example, Tsingtao dominates in Shaanxi, while Hunan is Yanjing's territory. Budweiser, through acquisitions of Harbin Beer, Xuejin Beer, and Dafufu Beer, and a stake in Zhujiang Beer, has aggressively positioned itself in the northeast, east, and south. However, CR Snow has eyed these lucrative markets for years. If the merger war between Snow and Budweiser is "open strife," then Carlsberg's rise in China's western market is "hidden warfare." Snow vs. Budweiser, as well as Tsingtao and Yanjing, are mostly concentrated in the east. Western breweries, far from the fray, were living comfortably. Carlsberg seized this gap, raised its banner, and the regional giants of the northwest quickly submitted: Chongqing Beer, Tibet Development (000752.SZ), Dali Beer, Lanzhou Yellow River (000929.SZ), Ningxia Beer, Wusu Beer, and Qinghai Jianiang. Carlsberg soon controlled China's western beer industry. After establishing a foothold in the west, there are reports that Carlsberg is preparing to bid for Asahi's 20% stake in Tsingtao Beer. If this deal is finalized, the dual hegemony of Budweiser and Snow will become a three-way battle among Budweiser, Snow, and Carlsberg. Of course, besides these major giants, there are numerous local small breweries in China's beer market. Some sell well within their province, while others only sell in a single city or county. When Brother Wei was on a business trip in northern Heilongjiang, he saw local beers in several county towns, and even a large farm enterprise had its own beer brand, producing and selling its own. However, as the structure of China's beer market shifts from "big fish eating small fish" to "big fish eating big fish," and as the overall beer market declines, the living space for these small local brands surviving in the cracks will only shrink. Source: Zebra Consumption (ID: banmaxiaofei) -END-