Click to read the original article for details No summer is complete without beer. As an urbanized alcoholic product, beer only entered China in the early 20th century, yet it has now become the most consumed alcoholic beverage in the country. With the acceleration of urbanization and the rise of community culture, craft beer has begun to appear frequently among niche groups, starting from some core demographics, and gradually making its way to Chinese dinner tables, fully showcasing a spirit vastly different from industrial beer. The case we focus on in this article is Hema's own craft beer. Since entering the craft beer track in 2018, Hema has been tirelessly expanding its craft beer territory every year, from room-temperature series to short-shelf-life cold fresh and master-brewed series. Among them, the 28-day fresh beer series developed in cooperation with Lehui International drove a 600% year-on-year increase in beer category sales for that month, and it still ranks first in sales in this category today. The impressive revenue performance has attracted the attention of capital. With fresh food platforms and chain restaurants successively entering the field, and traditional beer giants also making their moves, the craft beer craze has stepped into the spotlight of the times. Does this mean a new opportunity in the 'craft beer era' has arrived? 01 When the characters '精' (essence) and '酿' (brew) come together, they form a high-level term that conveys a sense of craftsmanship. First, we need to understand: what exactly is the charm of craft beer? Craft beer is a borrowed term, originally called 'craft beer' in English, and was first clearly translated as '精酿' in the 2012 book 'Drink Beer You Brewed Yourself'. Craft beer has only been popular in China for about a decade, but in the minds of many consumers, it has quickly positioned itself as the opposite of industrial beer. The most prominent feature of craft beer lies first in its raw materials. Although it uses the same raw materials as industrial beer—malt, hops, yeast, and water—craft beer does not contain any additives during the brewing process, and the amounts of malt and hops are larger. In contrast, industrial beer may add rice, corn, starch, etc., due to cost considerations. In terms of process, 95% of industrial beer uses lager brewing, which is a method of accelerated fermentation that greatly improves production efficiency. Craft beer, on the other hand, uses ale brewing, where fermentation proceeds naturally without interference from artificial or other factors, resulting in a richer aroma and taste. If we were to mention the most attractive point for consumers, it would have to be the fascinating spirit that craft beer represents. The niche, independent, and diverse nature of craft beer represents contemporary alcohol consumers' resistance to industrialized life. Craft beer enthusiast Xiao Sui told The Narrowcast, 'Saying you only drink craft beer has become a trendy symbol in the circle, representing a lifestyle attitude.' Urban youth have fallen in love with craft beer, and the craft beer track has begun to heat up. According to data from the '2022 Taobao Tmall Alcohol Industry Trend White Paper', the compound growth rate of craft beer consumption scale is 39%. Over the past five years, the number of registered craft beer enterprises has maintained rapid growth. As of now, China has more than 3,800 craft beer-related enterprises. This also means that in the past five years, the number of newly registered craft beer-related enterprises has maintained rapid growth, with an average annual growth rate of 95%. Craft beer has also become a battleground that investors, literary youth, beer brands, and supply chains cannot afford to ignore. From family to workshop, from experience stores to custom OEM, from the solo performances of small brewery bars to the collective participation of industrial giants, China's beer industry has ushered in a new market trend. 02 The logic of people, goods, and scenes is being reconstructed, and the arrival of new retail is also stirring up the craft beer world. The beer market once reached an era of oversupply and stock. Affected by regional factors, various brands have carved up territories, each leveraging its own advantages to establish dominance in different regions. This competitive approach of enclosure has led to increasing industry concentration in China's beer sector, with industry bubbles being extremely compressed. Xu Jun, head of Hema Beer, stated: 'In fact, there was a pseudo-windfall in the craft beer market 5 or 6 years ago.' As a niche market, although there were signs of growth with players entering, craft beer failed to establish its own business model due to low production capacity and small category size, and was unable to provide a mass-market channel in terms of product pricing or product solutions. What Hema has achieved is truly igniting the craft beer track in China, allowing craft beer to 'break out of the circle'. Entering the craft beer field with a price advantage, Hema launches exclusive newly developed craft beer products every year, using its mass-market channels to break the constraints of craft beer as a niche product and lower the consumption threshold. Craft beer has a strong social gene, and the multi-scenario combination of both supermarkets and dining gives craft beer multiple combinations. For example, this year's Hema night market event 'Hema Yesi' paired barbecue with fresh beer to attract customers, transforming offline stores into new consumption scenes. The integration of online and offline drove overall sales in July to 1.5 times that of the previous year. The demand for freshness in fresh beer means a need for shorter transportation radii, which is the 'price' of pursuing freshness. Ensuring the content of live yeast in the finished product is a problem that most companies in the craft beer industry find difficult to solve geographically. Lehui International, which originally came from brewing equipment manufacturing, had been looking for a breakthrough into the C-end market, but it wasn't until its brand 'Fresh Beer 30km' cooperated with Hema that the path between consumers and factories was finally opened. Hema's own 30-minute delivery service improves logistics efficiency, allowing consumers to enjoy craft beer in more settings and at more times. This taste pleasure is no longer exclusive to connoisseurs in offline bars. Users in Hema's delivery area can simply tap their phones online and enjoy fresh craft beer at home within a short time. The current iteration of consumers also directly corresponds to the high-net-worth, precise customer base that Hema serves. Hema's core customer group consists of post-80s and post-90s, middle-to-high-income people in first- and second-tier cities. Consumers who pursue a better life are more willing to try new things like craft beer and have a high acceptance rate. Hema's thinking, organization, and speed take these user needs into account, and this is also the core secret behind its confidence in competing in the craft beer track. At the same time, companies that can find the best balance between technology and business will be able to quickly seize the high ground in this upgrade battle for fresh craft beer. 03 Craft beer has a larger profit margin than industrial beer. In the U.S. market, craft beer accounts for 14% of sales volume but over 25% of sales revenue, far exceeding the industry average. In China, the market share of high-end beer, led by craft beer, is gradually rising, and its impact on the profits of some beer companies is becoming increasingly significant. However, although more and more Chinese consumers are drinking craft beer, compared to industrial beer, the penetration rate and consumption volume of craft beer are still relatively low. If we refer to the development path of European and American countries, the Chinese craft beer market has an optimistic future. The connection between beer premiumization and new retail innovation models allows 'craft liquid bread', rich in sugars, vitamins, and other nutrients, to directly meet the new generation of consumers' demand for healthy, quality products. In addition, the demand for beer products from female consumers and Generation Z is also continuously enriching the product matrix of beer brands. Xu Jun said: 'The future direction of Hema craft beer is to continuously launch better products that suit craft beer users and enthusiasts. On the supply chain side, we will also combine Hema's supply chain advantages with factory advantages to provide consumers with fresher and better-tasting beer.' In fact, the optimal solution for making craft beer well is to achieve nearby supply. Hema provides quality products to consumers in various regions at competitive prices, which is the best reason to break the existing pattern. Compared to latecomers in fresh food e-commerce and catering companies, Hema's market share in the craft beer track has already surpassed similar players. Judging from Hema's previous successes with flowers, bakery, and other hit products, Hema has more experience in building 'branding' and product strength. Rather than thinking about how to use advantages to win the craft beer race, Hema hopes that more fresh beer players will open new directions and jointly push craft beer to a higher level, attracting new users who previously disliked or rejected beer, rather than just focusing on the existing market share. After all, when a trend comes again, jointly 'making the cake bigger' is the most important foundation for 'dividing the cake' well. Source: The Narrowcast (ID: exact-interaction), Author: Gu Yuan [Mondelez Greater China Sales Head Guo Zhihai] Salute to channel partners, meet in Chengdu, August 31 - September 2, 2022 (7th) China FMCG Channel Innovation Conference. __-END-**_