Click the image to scan the code for details. The combination of beer and football always creates a magical chemistry. The World Cup is a grand event for football and a battleground for major beer brands' marketing. After four consecutive years of declining production and sales, the beer industry seems to have regained vitality under the tailwind of the World Cup. According to media reports, as early as one month before the World Cup began, Tmall had stocked 100,000 tons of beer, ten times the amount stocked for the previous World Cup. During the same period, search volume for beer increased by 100%. According to JD Wine data, during the just-concluded 618 shopping festival, 500,000 cans of beer were sold within just one minute of sales starting on June 18. However, unlike the previous aggressive corporate mergers and acquisitions, low-price battles, and territorial expansion, the current beer industry seems to have collectively entered a period of consolidation. At the same time, domestic beer sales are declining, while imported beer continues to surge. This seems to indicate that the era of high-end and diversified beer has arrived.

  1. Beer sales have declined for four consecutive years In recent years, Chinese beer manufacturers have not had an easy time. According to data from the National Bureau of Statistics, in 2017, China's beer market produced 44.01 million kiloliters, a year-on-year decrease of 0.7%. This marked the fourth consecutive year of decline in domestic beer production and sales since 2014. Among 447 beer companies above designated size, 132 suffered losses. Data source: National Bureau of Statistics According to data collected by Tsingshan Capital, the sales data of several major domestic beer producers over the past decade generally show a pattern of initial growth followed by decline. Tsingtao Beer's sales peaked at 9.15 million tons in 2014, the highest in ten years, and then declined year by year for the following three years. Yanjing Beer and Chongqing Beer both reached their sales peaks in 2013, at 5.714 million tons and 1.202 million tons, respectively. The overall market trend is similar to these companies: after reaching a historical high in 2013, domestic beer market sales began to decline and continued through 2017.
  2. Beer's self-rescue: plant closures after M&A wave, price increases after price war Due to poor performance at the domestic beer consumption end, the strategy of continuous production expansion before 2014 was no longer applicable. Starting in 2015, major beer companies stopped expanding capacity and closed small-scale, inefficient plants. AB InBev closed its plant in Zhoushan; China Resources Beer closed 3 plants in 2015 and 7 in 2016; Zhujiang Beer closed its Shantou plant producing low-end bottled beer in March 2017; Carlsberg closed 17 plants in China in 2016, and its subsidiary Chongqing Beer also closed or sold some loss-making branches or subsidiaries from 2014 to 2016. Image source: Tsingshan Capital At the same time, the top four companies in China's beer market share—China Resources Snow, Tsingtao Beer, AB InBev, and Yanjing Beer—announced price increases at the beginning of this year. Among them, Yanjing's 460ml original beer increased by 1 yuan per bottle at retail; China Resources Snow's Pure and Brave the World products increased by 2-10 yuan per case; Tsingtao Beer also issued a price increase notice to distributors. Overall, this collective price increase ranged from 5% to 15%. This is also the first collective price increase in the beer industry since the last wave of increases in 2008. Beer companies attribute the price increases to costs, but in the industry's view, beyond costs, after years of price wars and industry mergers and acquisitions, the Chinese beer market has become a low-margin industry, especially in the mid-to-low-end market. This round of price increases is undoubtedly repaying historical debts.
  3. Fewer people are drinking beer With the aging of the domestic population, the proportion of the main beer consumer group in the total population continues to decline, the demographic dividend is gradually disappearing, and significant sales growth is no longer realistic. According to Euromonitor International data, in 2017, the proportion of the main beer consumer group aged 20-50 in China fell to 48.57% of the total population, down 3 percentage points from 2011. Considering China's large population base, it can be estimated that the main consumer group has decreased by about 40 million people. Based on the current per capita beer consumption of 37 liters, the overall demand in the domestic beer market decreased by 1.48 million tons between 2011 and 2017. On the other hand, the number of blue-collar workers, who are the main beer consumers, has also declined. Bain & Company's "2016 China Shopper Report" mentioned that the decreasing number of workers has increasingly exacerbated the decline in sales of categories mainly consumed by blue-collar workers, such as beer and instant noodles. At the same time, China's per capita beer sales have exceeded the world average. According to data from the China Alcoholic Drinks Association, China's per capita beer consumption is currently about 37 liters per year, higher than the world average of about 33 liters per year. In the long run, domestic beer consumption will enter a period of slow development. For the above results, consumption upgrading is one of the main factors. On the one hand, the previous strategy of attracting consumers with low prices and good quality has become weak. As consumers' economic capacity improves and their consumption concepts change, they now tend to buy higher-end beer. On the other hand, emerging low-alcohol categories have developed rapidly in recent years, attracting the attention of young groups.
  4. How to upgrade beer consumption? High-end beer market On the one hand, low-end beer continues to decline; on the other hand, high-value-added beer shows rapid growth. From 2011 to 2016, the sales share of mid-to-high-end beer increased from 15.9% to 25.3%, and the market share increased from 38.4% to 57.4%. According to Euromonitor forecasts, by 2020, the revenue shares of high, mid, and low-end will be 44.2%, 28.3%, and 27.5%, respectively. According to incomplete statistics from Tsingshan Capital, China Resources, Tsingtao, Yanjing, AB InBev, and Carlsberg have all laid out product lines in the mid-to-high-end market above 10 yuan. However, the high-end route of domestic brands has not been effective so far. The sales growth rate of imported beer remained between 50% and 80% for five consecutive years from 2012 to 2016, squeezing the market share of domestic beer companies. In addition, small and beautiful craft beer, with its rich variety and ability to meet health, diversity, and personalization needs, has also performed well. New generation consumption scenarios Unlike baijiu consumption, beer needs to create easily accessible consumption scenarios to increase sales and capture market share. One important reason young people prefer beer is that it serves as a social drink in their consumption, helping to maintain a relaxed and joyful social atmosphere, rather than simply drinking to get drunk. Secondly, from the perspective of consumption scenarios, in family/friend gatherings of young groups, there are more mixed-gender scenarios, and the demand for product diversification (especially beer for women) is more prominent. At this time, by capturing the consumption habits of important young groups with new categories, creating personalized and fashionable product concepts, and meeting the emotional value propositions of young consumers, long-term consumption habits can be cultivated. Substitute products for beer With the improvement of consumers' health awareness and the improvement of consumption structure, traditional beer has become less attractive to consumers, and emerging low-alcohol drinks have become substitutes for beer. Looking at the history of beer development in the United States, beer consumption among young people aged 18-29 has declined significantly, replaced by wine and alcoholic beverages. In 2016, Roland Berger's report "The Alcohol Consumption Revolution Brought by Young Consumers" stated that compared with the weakness of ordinary beer, imported high-end beer and emerging low-alcohol categories (such as premixed drinks and fruit wine) have developed rapidly, becoming one of the few bright spots in the overall sluggish market. At the same time, many giants in the beverage industry have also crossed over to sell alcohol. For example, Starbucks and Coca-Cola have successively launched alcoholic beverages. Some beer brands have launched non-alcoholic beer. According to Reuters, from 2010 to 2015, sales of non-alcoholic beer in Europe grew by 5% each year. In Asian countries such as Japan, although beer categories (traditional beer, sparkling liquor, third-category beer) have seen shipments decline for 12 consecutive years, non-alcoholic beer has bucked the trend: in 2016, sales of non-alcoholic beer by the four major beer producers—Suntory, Asahi, Kirin, and Sapporo—increased by 1.8% year-on-year, with women and young consumers particularly favoring non-alcoholic beer. In the past, the main consumers of non-alcoholic beer were those who could not drink alcohol, pregnant women, and drivers. But now, more and more people want a healthier lifestyle and have reduced their alcohol consumption. Finally, as the post-80s and post-90s young consumer groups become the main consumption force, their large population and unique growth environment different from other age groups make them a very special consumer group, sparking consumption revolutions in many industries. For example, in the clothing industry, the "fast fashion" trend focusing on trendiness and personalization has risen; in the catering industry, "new-style dining" focusing on product characteristics and personalized consumption experiences has emerged. In the beverage industry, products are provided that align with dietary plans (such as health and wellness) and current moods or improve mood. The consumption characteristics of young groups, such as pursuing diversity, personalization, convenience, and "seeking novelty and change," also profoundly affect the consumption landscape of the alcohol industry. Source: Tsingshan Capital (ID: cyanhillvc) -END-