Read the original for details Chinese beer's imagination space has been reopened Over the past two decades, Chinese beer has undoubtedly been one of the most fiercely competitive categories. Every beer brand aspiring to have a future has invested enormous sums in the market, mobilized the largest sales forces, and faced the highest intensity of market competition, with terminal competition even involving violent struggles at times. Therefore, there is an almost uncontroversial view: the beer industry is one of the industries that best represents the competitive changes in China's FMCG market over the past two decades. The 20-year beer war was a comprehensive conflict combining capital strength, corporate strategy, brand, channels, and terminals. In this war, thousands of beer brands disappeared into the smoke of market competition. After the TOP5 group, including Snow, Budweiser, Tsingtao, Carlsberg, and Yanjing, formed a combined share of over 80%, China's beer market became a game for giants, and for a long time, it lost its imagination. This competitive state, which induced aesthetic fatigue, finally began to break in 2021. Some new changes marking the second half of Chinese beer have made the game interesting again, and the imagination space for Chinese beer will be reopened. Strategic consensus among giants Opens up diversification in Chinese beer 1. Profit growth becomes the primary pursuit, and premiumization becomes the strategic consensus among giants In 2013, the scale of China's beer market reached a historic 50.58 million kiloliters, but then declined for five consecutive years, stabilizing only in 2018. The market pie will not grow forever; China's beer market entered a long sideways period in terms of scale. The industry's tonnage scale has stopped rising, and a terrifying balance has formed among the T5 giants, where no one can eliminate another. The story of scale has reached its end in China's beer market. With little possibility of tonnage growth, increasing ton price has become the inevitable or even only choice to drive continued growth for the giants. To raise ton price, brands and products must develop toward high-end; otherwise, consumers won't buy it. For profit growth, besides premiumization, they also need to pursue efficiency improvements to reduce production and sales costs per ton of beer. Therefore, around 2020, the T5 brands simultaneously focused on high-end development, opening the prelude to premiumization among Chinese beer giants. China ranks first in total beer consumption globally, with the US second, and the development of the beer industries in China and the US is quite comparable. We can see that before 1980, the US beer market was also dominated by homogeneous products and scale competition. After 1980, the US entered a sideways period similar to China's beer market today. After that, the US also embarked on a vigorous path of premiumization. Budweiser became famous in this battle, becoming the world's largest premium beer brand. According to Euromonitor data, in 2019, the proportions of high, medium, and low-end products in China's beer market were 11%, 21%, and 68%, respectively, while in the US they were 44%, 33%, and 23%. China's beer market has four times the growth space in the high-end segment. Therefore, for the future of China's beer market, premiumization is an inevitable choice. For Chinese beer brands, if they can win the high-end battle, they may one day follow the path of international growth like Budweiser. 2. After market premiumization, China's beer market becomes vibrant again An objective fact is that in every industry, the strategic choices of industry giants will profoundly affect the industry's development process. For example, Moutai in China's baijiu industry. It is because Moutai, as the industry leader, continuously breaks through the industry ceiling in value and price bands that today's baijiu industry has well-known brands across high, medium, and low price bands, and presents an industry scene of "each having its own beauty." The same is true for China's beer industry. When industry giants are still expanding their territories and aiming for scale maximization, the industry appears dull and lifeless. The opening of the premiumization curtain in Chinese beer has undoubtedly revitalized the market. A vibrant Chinese beer market will innovate in products, brands, channels, and other aspects, entering a colorful new era. Phenomena and conjectures in the era of Chinese beer premiumization Conjecture 1: Beer players will flourish again For some craft beer enthusiasts, craft beer is not unfamiliar. However, in the previous decade or so, craft beer could not develop well, not only because the external consumer market was immature, but also because beer giants were fighting fiercely in the mainstream beer market. After the T5 group shifts toward high-end, high-end products will inevitably show a trend of diversification. This is not only reflected in beer giants continuously launching innovative flavors and styles of high-end products, but also in many craft beer entrepreneurs gaining more development opportunities. The capital market is always the most sensitive; recently, craft beer brands have continuously received venture capital investments, which is a very clear signal. In the high-end market, the more players, the more interesting it becomes. Of course, when the five giants march toward high-end, their investment and terminal blockade in the mainstream beer market will greatly weaken. Therefore, some regional beer brands may find opportunities to expand sales in the mainstream beer market. This can also be considered a benefit given by the industry giants. Conjecture 2: The proportion of brand marketing expenses will rise significantly In the past two decades, the theme of beer competition was "terminal is king." Therefore, billions of beer brands' marketing expenses were invested in dining terminals in the form of "store purchase fees," while brand marketing expenses were relatively stingy. In the high-end market, relying solely on terminal store locking is not enough; it is also necessary to invest heavily in consumer brand recognition, and there have already been some signs of this. Since 2020, almost all five beer giants have simultaneously launched a war of brand endorsers. A series of top-tier young celebrities, including Wang Yibo, Xiao Zhan, Gong Jun, Cai Xukun, and Wang Jiaer, have been snapped up by the five major beer brands. The most unfortunate was Carlsberg's Tuborg brand, which had just spent a huge sum to invite Kris Wu as its global spokesperson, only for Wu to be doomed due to alleged crimes a few days later. For Carlsberg, which has always placed great importance on financial actuarial calculations, this was a painful loss. Not only in endorsers, but it is also expected that sponsorship expenditures for sports events, fashion events, and trend activities will rise significantly in the future. After all, from global experience in building high-end brands, long-term sponsorship of top events is one of the most effective means to build a high-end brand. Conjecture 3: In the high-end market, Chinese elements and imported brands shine together With the strong development of China's economy in recent decades, China's national strength and influence in global affairs are increasing day by day. Therefore, the post-90s and post-00s generations of Chinese consumers have strong national confidence and do not have the subconscious notion of "imported is always best" that previous generations had. On the contrary, they identify more with China's excellent traditional culture and elements, which is also reflected in Chinese brands. The popularity of China Resources Snow Breweries' products such as Brave the World, Ingenuity, and Facial Makeup proves this. Therefore, future Chinese beer brands may gain more opportunities from consumers. Of course, at this stage, high-end brands under Budweiser and Carlsberg still hold the main share of the high-end market, and Chinese brands are still in the challenger position. But the offensive posture of Chinese brands is extremely fierce, especially the wave after wave of attacks launched by China Resources Snow on the high-end and super-high-end beer market. Even this year, China Resources Snow launched "Li" (醴酒), a beer with the cultural background of China's five-thousand-year brewing culture, priced at nearly 500 yuan per bottle, breaking the traditional price imagination of beer and gaining extremely high market attention. From the current competitive situation, Chinese beer brands led by Snow Beer and Tsingtao Beer have launched waves of attacks in the high-end market and achieved very good growth. Among them, Snow Beer, which proposed the strategy of "decisive battle for high-end," has been the most resolute in its attack and the most thorough in its actions. Conjecture 4: The five giants will continue to invest in the supply chain, improve efficiency, and reduce operating costs In an era when rapid scale expansion is not feasible, pursuing rapid profit growth is inevitable. Rapid profit growth comes from both high gross margins of products and reduced unit costs from efficiency improvements. Efficiency improvements mainly occur at two levels: one related to production and the other to sales. The past two decades were an era of capacity growth, with relatively extensive competition, generally involving fierce market battles, acquiring competitors if they couldn't be killed, and then replacing brands after acquisition. This has led to two problems today: inefficient capacity and unreasonable layout; and high channel costs and unreasonable investment. China Resources Snow's measures in recent years to optimize capacity and upgrade channel models have been highly effective and are likely to become actions that the five major groups will take one after another. Capacity optimization involves first, closing down backward and unreasonably laid-out factories to release resources; second, adopting new technologies to improve modern enterprise management levels, achieving larger-scale production with fewer people, better technology, and more scientific management. Channel model upgrade refers to brands systematically and step-by-step returning the main market execution functions to distributors, thereby reducing internal management friction and stimulating channel functions, thus achieving more quality growth rather than mainly horizontal growth in the capacity growth era. The second half of China's beer market has just begun, and the imagination space has just opened. The only thing we can be sure of is that Chinese beer competition has moved away from boring competition and toward brilliance! The imagination and creativity of Chinese beer people will be fully demonstrated in the coming era! -END- PS: The 2021 (4th) China FMCG Conference, hosted by "New Distribution," is about to open in Shanghai. Focusing on industry trends + practical cases + growth connection as the core, 3,000 FMCG practitioners will gather at the event. 10 thematic forums cover new retail O2O, community group buying, short video live e-commerce, distributor transformation, rise of new consumer brands, interpretation of new alcoholic beverages, distribution B2B supply chain, omni-channel marketing, B2B2C new technology applications, etc., with operators from various segments bringing the latest case interpretations. Some of the heavy guests confirmed so far include: 1. Tao Shiquan, founder of Jiangxiaobai; 2. Yao Xuhong, general manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, global expert partner at Bain & Company and former vice president of marketing for Coca-Cola China; 4. Chen Xiaodong, senior vice president of Nestlé Greater China; 5. Zhang Fujun, president of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, general manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, vice president of Junlebao Dairy Group; 8. Yang Shun, COO of Lipton Greater China; 9. Zhang Yipeng, general manager of Kuaishou E-commerce SKA Brand Operations Center; 10. Li De, e-commerce general manager of Gold Hong Ye Paper Group... A grand event for FMCG people, you must be there! Are you "watching" me?