---
title: "China's Beer Leader China Resources Breweries Admits: Low Growth Puts Pressure on Industry"
description: "Hou Xiaohai, executive director and CEO of China Resources Beer, believes the beer industry is undergoing four major changes that practitioners must learn to face. With production declining for three consecutive years, the industry faces significant pressure from low or negative growth."
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published: "2017-03-20"
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# China's Beer Leader China Resources Breweries Admits: Low Growth Puts Pressure on Industry

> Hou Xiaohai, executive director and CEO of China Resources Beer, believes the beer industry is undergoing four major changes that practitioners must learn to face. With production declining for three consecutive years, the industry faces significant pressure from low or negative growth.

Hou Xiaohai, executive director and CEO of China Resources Beer, believes the beer industry is undergoing four major changes that practitioners must learn to face.
As of the end of last year, China's beer industry had seen three consecutive years of declining annual production. Will it follow in the footsteps of cola and instant noodles, which have seen sales decline significantly for many years?
**"Low or even negative industry growth puts great pressure on beer companies."** On March 18, at the China International Alcoholic Beverages Forum themed "Drink the Future, Taste the Value" hosted by the China Alcoholic Drinks Association, Hou Xiaohai, executive director and CEO of China Resources Beer (0291.HK), admitted this.
**Data from the National Bureau of Statistics shows that last year, China's beer production was 45.064 million kiloliters, a year-on-year decrease of 4.4%, marking the third consecutive year of decline.** Industry analysts believe that slowing domestic economic growth, sluggish consumption in mid-to-high-end dining, and abnormal weather have all adversely affected beer sales.

Compared with the single-digit declines in China's beer production over the past three years, carbonated beverages represented by cola and instant noodles have fared even worse. According to data released by the Chinese Institute of Food Science and Technology, China's instant noodle market has been declining for several years since 2012. In 2015, total production of instant noodles in mainland China was 36.249 billion packs, down 8.54% from the previous year; sales revenue was 49.091 billion yuan, down 6.75% year-on-year.
For the reasons why instant noodles are no longer favored by Chinese consumers, media analysis reports suggest: first, homogenization, lack of variety, price competition, and lack of innovation; second, the image of instant noodles as "fried" and "containing artificial additives" has led many consumers to choose alternatives. The deeper reason is that instant noodles have not kept pace with the consumption upgrade and industrial transformation brought about by economic development.
Carbonated beverages represented by cola also face significant pressure from declining revenue. Financial reports show that in 2016, Coca-Cola saw its fourth consecutive year of declining performance, with revenue of $41.863 billion, down 5.49% year-on-year; net profit was $6.527 billion, down 11.21% year-on-year. In November last year, Coca-Cola chose to "slim down" and restructure, handing over its bottling operations in China to two franchise partners, COFCO and Swire.
As fellow fast-moving consumer goods, beer has also begun to see declining sales in recent years. Hou Xiaohai, executive director and CEO of China Resources Beer, which has been the sales champion in China's beer industry for many years, has a clear understanding: "The beer industry is undergoing four major changes, and as practitioners, we must learn how to face them."
He said that in the past, China's beer industry emphasized scale and channels, so **once the industry experienced low or even negative growth, it felt great pressure. This is the first major change.**
**In addition to industry growth pressure, the value of beer brands has become more prominent.** Hou Xiaohai believes that this puts pressure on all Chinese beer giants to further enhance brand value, not only Snow but also Yanjing Beer and Tsingtao Beer. In the international market, Chinese beer brands still lag behind world brands such as AB InBev in terms of market share and influence.
**The third is the accelerating pace of product premiumization.** Hou Xiaohai revealed the collective confusion of the beer industry for the first time: "As manufacturers, we are all launching high-end products and personalized beers. But consumers are upgrading faster; often we think our high-end beer should look like this, but in consumers' eyes, it's still mid-range."
**The fourth is production concentration, which is both an advantage and a disadvantage.** He said that Chinese beer companies have basically expanded their territory through mergers and acquisitions, growing into giants by swallowing smaller players, which is related to the sales radius of beer. But in the face of consumers' demand for more distinctive and richer-flavored products, many factories acquired through M&A have now become a disadvantage.
**Hou Xiaohai admitted that, leveraging the internet, the beer industry is undergoing unprecedented marketing transformation.** However, the low unit price of beer means that the logistics cost of internet delivery accounts for too high a proportion, so Snow Beer is trying to sell high-end products in flagship stores on Alibaba and JD.com, targeting consumers who seek personalization and high quality.
"Don't just view beer as a commodity, but also as a work of art." At the just-concluded National People's Congress and Chinese People's Political Consultative Conference, Sun Mingbo, chairman of Tsingtao Brewery Co., Ltd., responded to the decline in China's beer industry in this way. He said that although beer is an industry that emphasizes scale, consumers' demand for diversity, personalization, and high cost-performance is the proposition for supply-side reform.
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