---
title: "Beer Premiumization Enters the Second Half"
description: "2023 was a year of reversal for the beer industry, with production and sales surging in the first half but suddenly stalling in the second, leaving annual growth at just 0.3%. In previous years, local beers were rising while foreign beers declined, but last year Budweiser China and Carlsberg regained momentum, putting growth pressure on China Resources Beer and Tsingtao Brewery. The main reason is that local beer premiumization lacks a solid foundation, having achieved initial premiumization through top-down price increases, but still falling short in product strength, brand power, and control over high-end channels. The second half of China's beer premiumization requires a new approach to seize the initiative in the high-end beer market."
author: "杨伟"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-04-13"
language: "en"
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# Beer Premiumization Enters the Second Half

> 2023 was a year of reversal for the beer industry, with production and sales surging in the first half but suddenly stalling in the second, leaving annual growth at just 0.3%. In previous years, local beers were rising while foreign beers declined, but last year Budweiser China and Carlsberg regained momentum, putting growth pressure on China Resources Beer and Tsingtao Brewery. The main reason is that local beer premiumization lacks a solid foundation, having achieved initial premiumization through top-down price increases, but still falling short in product strength, brand power, and control over high-end channels. The second half of China's beer premiumization requires a new approach to seize the initiative in the high-end beer market.

**2023 was a year of reversal for the beer industry.** Production and sales surged in the first half but suddenly stalled in the second, causing annual beer output growth to fall back to 0.3%. In previous years, "local beers were rising, foreign beers declining," but last year Budweiser China and Carlsberg regained their footing, putting growth pressure on China Resources Beer and Tsingtao Brewery. The main reason is that **local beer premiumization lacks a solid foundation**; earlier, they completed initial premiumization through top-down price increases, but there are still shortcomings in product strength, brand power, and control over high-end channels. How can the second half of China's beer premiumization be executed to seize the initiative in the high-end beer market?

**Shift in Offense and Defense**

As most major beer companies disclosed their results, the public got a glimpse of the 2023 report card for the beer industry. Last year, Budweiser's beer sales volume in China grew 4.3% year-on-year, with market share up 69 basis points. Premiumization continued, with revenue per hectoliter up 8.1% year-on-year. For the full year, Budweiser China's total revenue grew 12.8%, normalized EBITDA grew 17.4%, and profit margin expanded 132 basis points, becoming the performance pillar of listed company Budweiser APAC (01876.HK). China Resources Beer (00291.HK) saw beer sales volume grow only 0.5% year-on-year in 2023. Thanks to premiumization, especially the boost from Heineken China, sales of sub-premium and above beers grew 18.9%, and revenue per ton increased 4.0%. Ultimately, the company's beer business revenue reached 38.316 billion yuan, up 3.7% year-on-year. A significant portion of China Resources Beer's growth at the listed company level came from the acquisition of Jinsha Wine, which cost billions. As for why this sauce liquor giant saw a sharp drop in performance in 2023, that is another story.

Another local beer giant, Tsingtao Brewery (600600.SH), was in a similar state. In 2023, sales volume slightly declined 0.8% year-on-year, with sales of main brand mid-to-high-end and above products growing 10.5%; revenue per kiloliter increased 6.4% year-on-year. For the full year, the company achieved operating revenue of 33.937 billion yuan, up 5.49% year-on-year, and net profit attributable to shareholders grew 15.02% to 4.268 billion yuan. Yanjing Beer (000729.SZ) expected net profit of 575 million to 685 million yuan, up 63.22% to 94.44% year-on-year. However, this performance surge can only be seen as a recovery; Yanjing's overall strength is still a magnitude behind China Resources and Tsingtao.

Carlsberg's main operating platform in China, Chongqing Brewery (600132.SH), saw sales volume grow 4.93% year-on-year in 2023, with high-end and mainstream products as the main growth points. Relative to the outstanding volume growth, Chongqing Brewery's performance growth was limited, with full-year revenue of 14.815 billion yuan, up 5.53% year-on-year, and net profit attributable to shareholders of 1.337 billion yuan, up 5.78% year-on-year. Zhujiang Brewery, supported by AB InBev and holding a second-largest shareholder position, also performed well in sales volume last year, growing 4.79% year-on-year, with high-end beer sales volume up 15.96%. However, the company's profitability did not keep pace, with revenue up 9.13% to 5.378 billion yuan and net profit attributable to shareholders of 624 million yuan, growing only 4.22%.

As for Lanzhou Yellow River and Tibet Development, one is obsessed with stock trading, the other is indifferent to beer operations, and both have beer businesses in joint ventures with Carlsberg, so they can basically be excluded from mainstream beer companies.

In the past few years, the overall liquor market has been under pressure. In 2022, baijiu, yellow wine, and rice wine all declined, while beer became the standout, with output up 1.1%, ending a multi-year decline, revenue up 10%, and profit up 20%. There was a clear trend of "local beers rising, foreign beers declining," with the local trio of China Resources, Tsingtao, and Yanjing putting significant pressure on Budweiser and Carlsberg. Last year, everything reversed. In 2023, baijiu continued to decline, beer output growth fell to 0.3%, and red wine and yellow wine resumed growth. Among beer giants, Budweiser and Carlsberg, benefiting from the recovery of nightlife channels, once again demonstrated the power of international high-end beers; fortunes reversed, and **the pressure for overall growth and continued premiumization once again fell on China Resources and Tsingtao.**

**Through the First Half**

China's beer industry has developed for decades, but whether in the early start-up phase, the mid-term one-city-one-beer phase, or the golden age after major consolidation, **local brands have always lacked a voice in the high-end market.** In those years, in the nightlife channels where high-end beer penetration was high, the drink lists were dominated by foreign beers like Budweiser, Heineken, and Carlsberg. At that time, local manufacturers were busy expanding production and increasing volume, using massive amounts of affordable beer to meet the booming mass market demand. In 1978, China's beer output was 400,000 tons, soaring to 49.36 million tons by 2014. As growth bottlenecks arrived, the beer industry entered an adjustment period from 2013 to 2015. Local manufacturers, mainly focused on low-end volume, suffered heavy losses. The beer industry learned from its pain, and during the recovery in 2016, local beer brands finally realized it was time to focus on quality improvement. Thus, a vigorous beer premiumization campaign began.

Tsingtao Brewery, which was already prominent in premiumization, launched a strategy of the Tsingtao main brand plus Laoshan as a second brand, using products like original pulp draft beer, Tsingtao White Beer, Centennial Journey, and Yishi Legend to continue attacking the high-end market. China Resources Snow, which achieved the world's largest sales volume, was relatively weak in premiumization. To address this, the company implemented a 3+3+3 strategy: 17-19 "shed burdens, strengthen foundation, accumulate energy," 20-22 "fight for high-end, improve quality, increase efficiency," and 23-25 "decisive victory in high-end." Besides launching products like Snow Pure, Old Snow, and Red Label, the most important lever for China Resources Beer's premiumization was actually the acquired Heineken. In 2023, Heineken China's sales volume reached 600,000 kiloliters, up nearly 60% year-on-year, making China Heineken's second-largest market globally.

Yanjing Beer adopted a **big single product + specialty products** strategy, and the excellent performance of high-end products like Yanjing U8 and Lion Craft Beer finally lifted Yanjing from the bottom. After a round of catch-up, the results were quite good. The net profit margin of the local beer trio was only about 5% in 2016, but by 2023, it had more than doubled. However, these achievements are still not enough. Currently, the proportion of high-end products among local beer manufacturers remains relatively low. In 2023, China Resources Beer's sales volume was 11.151 million kiloliters, with sub-premium and above accounting for less than 25%; Tsingtao was only 40%. Beer price per ton is even more telling. In 2022, international brand Budweiser reached 5,270 yuan per ton, Carlsberg's Chongqing Brewery was 4,915 yuan, while Tsingtao and China Resources were 3,986 yuan and 3,177 yuan respectively. After years of effort, local leading beer manufacturers finally pulled overall gross margin to the 40% line. However, foreign beer companies, and even their smaller counterparts, have maintained gross margins of around 50% for years. By 2023, when local beers were overshadowed by foreign brands, everyone abandoned illusions and began to re-recognize reality—**China's beer premiumization has only completed the first half.** The previous beer premiumization was top-down. Beer manufacturers replaced mass-market products with mid-to-high-end products, or even directly raised prices, to increase revenue per ton. A more long-term premiumization should be a comprehensive premiumization that matches supply and demand. How should this be understood?

**Comprehensive Premiumization**

Tsingtao Brewery, as the first-generation beer giant, has a history of 120 years; even China Resources Beer, which emerged through industrial capital operations, celebrated its 30th birthday last year. In terms of industrial accumulation, Tsingtao and China Resources are not inferior to foreign giants, and they have the capability and confidence to continue premiumization and lead China's beer industry to the next leap. In terms of products, industrial beer giants are gradually realizing that **the original production model, with less clean ingredient lists, produces "water beer" that can no longer meet the needs of users, especially young people.** In recent years, along the main line of beer premiumization, the beer industry has quietly been reducing capacity, becoming a hidden line of market improvement. Especially China Resources Beer, which has closed down traditional factories for several consecutive years, not hesitating to pay hundreds of millions of yuan in aftercare costs each year; at the same time, it has established new digital factories. Only with new production capabilities and better products can the industry adapt to the trends of supply-side reform and consumption upgrade. After all, for FMCG, the product is the foundation of all operations. At the end of 2016, China Resources Beer had 98 breweries; now there are only 62, optimizing more than one-third. Do other traditional beer giants have such courage?

In brand operations, each has its own focus, with Yanjing being the most aggressive. Inviting top celebrities like Cai Xukun and Wang Yibo as spokespersons is a youth-oriented brand strategy that other peers have not adopted. Channel transformation is equally important. Due to sales radius limitations, China's beer market has formed a regional fragmentation, with giants having clear spheres of influence and relatively stable market shares for years. As premiumization continues, to seek growth in a stagnant market, everyone will increase the canning rate to compete in the pan-national market. Then, traditional e-commerce and new e-commerce channels centered on live streaming sales have become battlegrounds for beer brands. On the other hand, traditional giants like Tsingtao and Yanjing are also actively laying out new retail channels such as brewpubs. TSINGTAO1903 and Yanjing Jiuhao have opened hundreds of stores nationwide. These are all inspired by Taishan Original Pulp and Ubrew. The transformation and upgrading of the beer industry, along with the entrenched situation formed by years of tug-of-war among beer giants, has given new forces like Taishan and Ubrew opportunities to increase penetration, and the craft beer market is maturing. In this process, **traditional beer giants and new beer forces learn from each other and accelerate iteration.** The craft beer transformation of some Yanjing products is one of the important reasons for its rise; Chongqing Brewery's acquisition of Jing-A is a landmark event in the integration of industrial beer and craft beer. New manufacturers like Zebra Craft Beer are also redefining craft beer using industrial beer production models. Next, **the beer market may usher in another wave of capitalization.** Some new beer forces, in this rare time window, have gained support from industrial capital and even listed independently. Previously, Taishan Beer had already reported plans for a Hong Kong IPO. At that time, traditional giants and new forces will join hands, and China's beer will usher in a comprehensive premiumization industrial upgrade.


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