---
title: "Beer Enters Consumption Peak Season, Premium Beer Sees Both Volume and Price Rise"
description: "As summer heat peaks, beer sales enter their best period of the year. This year's peak season differs from previous years, with premium beer showing notable growth in both volume and price due to consumption upgrades and product structure adjustments."
author: "梁丽群、李俊平"
publisher: "New Distribution"
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published: "2019-07-06"
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# Beer Enters Consumption Peak Season, Premium Beer Sees Both Volume and Price Rise

> As summer heat peaks, beer sales enter their best period of the year. This year's peak season differs from previous years, with premium beer showing notable growth in both volume and price due to consumption upgrades and product structure adjustments.

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As the country enters the high-temperature season, beer sales enter the best period of the year. How is this year's beer peak season different from previous years, and what new trends are emerging in beer consumption? CCTV's "Trading Time" program has reported on this, and let's take a look at the analysis of this year's beer industry characteristics by major beer giants.
**Beer Enters Consumption Peak Season, Premium Beer Sees Both Volume and Price Rise**
**Zeng Weicheng, Founder of Changgan Beer:** Since May, our monthly sales have grown 20% month-on-month, with production and consumption rising rapidly. We expect June to continue the upward trend, similar to May.
**Bi Chaojiao, General Manager of Marketing Center, China Resources Snow Breweries (China) Co., Ltd.:** From January to May, our total volume grew by about 2%, with mid-range and above growing over 5%, and high-end and above growing nearly 15%. These figures are better than the same period last year and the year before.
After visiting several beer companies, reporters learned that due to excessive rainfall across the country, especially in the south, temperatures have generally been lower than usual. Although beer has entered the traditional peak season, sales in May and June did not see the same significant growth as in previous years. Within this limited growth, due to consumption upgrades and product structure adjustments, premium beer has shown growth significantly higher than the industry average.
**Wang Zhibin, Vice Chairman of Zhujiang Beer Co., Ltd.:** This year, the trend of rising average selling prices has continued. Of course, this price increase is not simply raising prices on existing beers; it is mainly driven by the higher proportion of premium products or improved product quality. The increase in the share of mid-to-high-end products has driven up the average selling price of beer. For example, our company's revenue per ton of beer increased by about 5% on average last year.
**Multiple Measures to Enhance Competitiveness, Beer Manufacturers Target Premium Consumption Market**
Currently, the beer industry is shifting from low-end price wars to competition in the premium brand segment. Consumption upgrades and higher per-ton prices are the core drivers on the demand side for the future development of the beer industry. What measures are beer companies taking to upgrade their product structures and achieve greater profits?
**Bi Chaojiao, General Manager of Marketing Center, China Resources Snow Breweries (China) Co., Ltd.:** Since 2014, our high-end segment has grown by over 10% annually. At the end of April 2019, we finally signed the agreement through all necessary steps. Currently, the entire Heineken China business has been acquired by our new company, and the Heineken brand will be managed and sold in China by the new company. In addition to Heineken, we will introduce more new international brands to form a portfolio.
With continuous consumption upgrades, beer companies are not only building brand portfolios to capture the premium and super-premium segments, but some are also innovating in R&D and creating new consumption scenarios for consumers to drive sales.
**Yang Ke (Jan Craps), CEO and President of Budweiser Asia Pacific:** Our communication strategy is expanding from music and electronic dance music to lifestyle, sports, and fashion. For Corona, we have launched a smaller premium version, creating new consumption scenarios for consumers. In craft beer, we have also launched several new products under our Shanghai craft beer brand.
**Zeng Weicheng, Founder of Changgan Beer:** At first, without Chinese labels, many people thought it was cocktails or juice. After adding Chinese labels, people saw the beautiful bottle and tried it, and the taste was good because it's refreshing.
**He Yong, Executive Deputy Secretary-General of China Alcoholic Drinks Industry Association:** From January to April, production by domestic companies above designated size grew 0.79% year-on-year, a slight increase. However, sales revenue grew 6.57%, and profits grew 24.07%. These economic indicators show the adjustment and transformation of product structure, indicating that the added value of products is increasing, and the proportion of mid-to-high-end products is rising rapidly.
**Manufacturing VAT Reduced by 3%, Beer Companies Benefit**
This year's government work report clearly stated that from April 1, 2019, the VAT reform would be deepened, reducing the tax rate for manufacturing from 16% to 13%. How much will the beer industry, which has traditionally had thin margins, benefit from this?
Wang Zhibin has been in the beer industry for over 20 years. When asked what the 3% VAT reduction means for beer companies, he excitedly told reporters that the tax cut significantly reduces cost pressure. Based on his company's base last year, the 3% VAT reduction could increase profits by about 70 million yuan.
**Wang Zhibin, Vice Chairman of Zhujiang Beer Co., Ltd.:** The tax burden in the beer industry is about 20%. For example, if a bottle sells for 10 yuan, 2 yuan goes to taxes. With the 3% VAT reduction, each case of beer can reduce taxes by 4 to 5 jiao, meaning companies can increase profits by 4 to 5 jiao per case. This is the state giving way to enterprises, which is beneficial for sustainable development.
**Bi Chaojiao, General Manager of Marketing Center, China Resources Snow Breweries (China) Co., Ltd.:** This is absolutely a very good thing for the beer industry. Based on our overall figures last year, with revenue over 30 billion yuan and gross profit over 11 billion yuan, a simple calculation shows that 3% of 11 billion is about 300 million yuan. That's 300 million yuan for us, which we can invest in market development.
**Yang Ke (Jan Craps), CEO and President of Budweiser Asia Pacific:** We are very pleased with the government's decision to support manufacturing, as it's no secret that manufacturing is highly competitive. Additional investment can help support our innovation initiatives and allow us to do more R&D. We are also investing in environmental protection; we have invested 24.5 million RMB to install solar panels on the roof of our factory. This is our largest factory in Asia, and we are striving to use green electricity to brew beer.
According to statistics from Zhongtai Securities, from April 1, 2019, the VAT rate for manufacturing dropped from 16% to 13%. The tax cut contributes significant profit elasticity to the beer industry, which has low profit margins. Based on 2018 financial reports, when the VAT rate drops by 3 percentage points, the net profits of Yanjing Beer, China Resources Beer, Tsingtao Beer, Zhujiang Beer, and Chongqing Beer are theoretically expected to increase by 83.9%, 50.9%, 22.9%, 16.3%, and 13.6%, respectively.
The Shenwan Beer Index includes 7 companies. From last year's annual reports, Zhujiang Beer, Yanjing Beer, Chongqing Beer, and Tsingtao Beer were profitable, while Huiqun Beer, Lanzhou Yellow River, and *ST Xifa were loss-making. From this year's first-quarter reports, the industry continued its rapid growth trend, with all six companies except *ST Xifa achieving profitability. Tsingtao Beer, Chongqing Beer, and Zhujiang Beer all achieved over 20% growth in non-GAAP net profit attributable to parent company.
Industry insiders say that the beer industry can continue to be watched, and investors can consider targets with higher-end structures.
**Fan Jinsong, Chief Analyst of Food and Beverage at Zhongtai Securities:** The first type of company has strong execution, strong teams, decisive action, and strong corporate logic. The second opportunity is companies with strong brands that cater to consumption, similar to high-end liquor brands. As consumption upgrades continue, higher-end structures and brands will continue to benefit. This is an opportunity in two directions. The second risk is unpredictable factors such as weather or policy.
Source: CCTV Finance "Trading Time"


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