Craft beer refers to beer brewed with only four basic ingredients—malt, hops, yeast, and water—without any artificial additives. Compared with traditional industrial beer, craft beer offers higher quality and richer flavors. As the beer market shifts toward premiumization, craft beer has undoubtedly ridden the wave of transformation. However, in recent years, the development of craft beer has been far from achieving large-scale breakout.

Beer Growth Peaks, Turning to Craft Beer

The opportunity for craft beer comes from industrial beer. As industrial beer consumption weakens, new development demands have shifted toward craft beer. Euromonitor data shows that China's total beer production and sales have shown significant growth since 2005, peaking in 2013 with both exceeding 50 million kiloliters, followed by a decline. In 2020, the decline was exacerbated by restrictions on dining and reduced gatherings due to the pandemic. Meanwhile, the slowdown in the growth of the main beer-consuming population (ages 20-50) and the increase in per capita consumption are compressing future beer sales growth. Data shows that China's per capita beer consumption has reached 36.2 liters per year, which is not far from Japan (43.8 liters) and South Korea (37.2 liters), leaving limited room for improvement. It is predicted that beer sales in China will remain relatively stable in the coming years. In the first half of the year, the performance data of several beer companies once again confirmed the weak growth of the beer market. Among the top five beer companies in China, the top three by share—China Resources Beer, Tsingtao Brewery, and Budweiser APAC China—all saw sales declines in the first half, down 3.4%, 7.82%, and 8.5% year-on-year, respectively. In addition, all three companies saw revenue declines. Looking at a longer timeline, from 2014 to 2023, Tsingtao Brewery's revenue grew from 29 billion yuan to 33.94 billion yuan, an increase of only nearly 5 billion yuan over ten years, reflecting the slowdown of the industry.

As the beer industry's growth rate declines, overcapacity, and companies have to find new growth drivers, craft beer has welcomed new opportunities. 2013-2017 was a period of rapid growth for China's craft beer market. During this period, domestic beer leaders such as Budweiser and Tsingtao Brewery began to lay out craft beer categories, and the number of craft breweries increased rapidly, with a high growth of industry entrants. 2021 was called the "first year of craft beer." According to incomplete statistics from "Qujie Business," in that year, craft beer brands in China raised more than 1 billion yuan in financing, with 15 craft beer brands such as Bishan Village, Taishan Original Pulp, and Xinling Beer receiving funding, and 16 investment institutions invested in the craft beer track two or more times. Beer growth has peaked, seemingly signaling the arrival of spring for craft beer, but development has not met expectations.

The "Mountain" of Craft Beer

An indisputable fact is that craft beer is still a segment awaiting explosion. Beer giants are important players in craft beer. AB InBev, through a series of self-built and acquired brands, owns dozens of craft beer brands including Goose Island, Blue Point, 10 Barrel, Elysian, and Platform. In the Chinese market, AB InBev focuses on operating Goose Island and the local Chinese craft beer brand Boxing Cat. In addition, in 2023, Carlsberg Chongqing Brewery acquired "China's No.1 craft brewery" Jing-A, a major event of beer giants incorporating craft beer. Besides, other beer giants are also building craft beer production lines, but no large-scale brands have emerged yet.

In channels such as bistro bars, supermarkets, and new retail, craft beer is also growing wildly. For example, Pangdonglai launched craft wheat beer, and Hema has German-style wheat white beer. In 2017, Ubrau launched Ubrau Craft Beer Bar, which now has over 2,000 craft beer bars nationwide.

The slow development of craft beer is, in the industry's view, most directly due to the small market size and limited imagination space. According to CICC data, in 2020, China's craft beer market size was about 41.5 billion yuan, accounting for less than 7% of the entire beer industry. Before that, this figure had never exceeded 1%. Lin Lin, president of the Shanghai Craft Beer Association, also mentioned, "When talking about how the five major groups view the current craft beer trend, I said the five major groups don't look at it; they look down on it. Indeed, the meat in the entire craft beer industry plate is not enough to fill their teeth." Some industry insiders also pointed out that craft beer is one of the new growth drivers for major beer manufacturers, and it still has significant growth space in the Chinese market. Therefore, both leading brands and new brands are laying out in the craft beer field in advance, but the future share of craft beer in the entire market will not be very high. This is largely related to the characteristics of craft beer itself.

On Xiaohongshu, a blogger introduced craft beer as follows: "Craft beer is just one branch of beer, but such a 'niche' category is more complex than any other alcoholic beverage in the world. It is precisely because of this complexity that craft beer is further divided into several styles, and each style, due to factors such as raw materials and recipes, brings a myriad of flavor characteristics to the liquid." It can be seen that compared with beer, craft beer is more "complex" and the track is relatively niche. At the same time, craft beer is considered a more premium beer, which means a higher price. A craft beer consumer once calculated how many bottles of "water beer" (cheap industrial beer) one glass of craft beer can buy. "A bottle of Rochefort at the downstairs supermarket costs enough to buy four bottles of Tsingtao, and two cans of 330ml Dajiu Brewing can buy me a whole case of Harbin Beer at the supermarket." On social platforms, many consumers who love craft beer complain that it is too expensive. To drink good and affordable craft beer, many people ask for recommendations and group invitations in the comment sections. To date, there is still no craft beer brand that has become particularly prominent, which may also indicate that although there are many entrants, not many are truly dedicated to creating high-quality products that meet market demand. And this precisely means that craft beer still has considerable growth space.

Compared with the 10%-25% market share in Europe and the United States, China's craft beer industry still has a lot of room for growth. According to data from Zhongyan Network, by the end of 2023, the scale of China's craft beer market had reached 6.8 billion yuan, a year-on-year increase of 3%. It is expected to maintain high growth in the coming years, reaching 130 billion yuan by 2025, and further growing to 160 billion yuan by 2026, with a growth rate far higher than that of the beer industry. Tianyancha data shows that from January to July 2024, more than 2,300 related enterprises were newly registered. In the past three years, the number of registered craft beer-related enterprises was over 1,700, 2,200, and 3,100 respectively, with more and more enterprises entering the market. Entrants are still increasing, and industry competition still has multiple possibilities. What is certain is that as young people's demand for beer and consumption scenarios change, they are no longer satisfied with traditional industrial beer and instead prefer niche and personalized craft beer. In the future, whether "niche" craft beer can achieve better development will depend on how brands create products and meet consumer needs.

References:

  1. Qujie Business: Young people's new favorite after work, is craft beer popular again?
  2. Zhenshi Research Office: Craft beer, a cultural industry
  3. GPLP: Is craft beer the next outlet?
  4. Snow Leopard Finance: Cross-border "barbarians" bring high-priced craft beer down to 9.9 yuan
  5. Wine Industry Reference: Beer giants' craft beer transformation