On August 18, China Resources Beer (00291.HK) announced its interim results for the six months ended June 30, 2021. In the first half of the year, sales revenue reached RMB 19.634 billion, up 12.8% year-on-year; sales volume was approximately 6.337 million kiloliters, up 4.9% year-on-year; net profit was RMB 4.291 billion, up 106.4% year-on-year.
Especially in the premium segment, the premium strategy has been effective. According to the interim results, sales of sub-premium and above beer exceeded 1 million kiloliters, a significant increase of 50.9% year-on-year, indicating a notable structural upgrade.
Why has Snow Beer achieved such growth in the premium segment, an area it previously rarely ventured into? Why do we believe Snow Beer is a brand that must be watched and studied in the Chinese FMCG market? What specific actions has Snow Beer taken under its premiumization strategy, and what have been the results?
With these questions, New Distribution conducted an in-depth investigation of the Zhejiang market, hoping to use Zhejiang, one of China's main battlefields for premium beer, as a sample to gain insights into the actual implementation of Snow Beer's premiumization campaign.
The article will be long, but trust us, it will be worth it.
Why should we pay attention to and study Snow Beer?
Over the past four decades, China has been recognized globally as a market that continuously creates miracles. If you want to study China's consumer market, the development of Chinese brands, or corporate growth, Snow Beer is a brand you cannot bypass. Here are several reasons why you must pay attention to and study Snow Beer.
First, rocket-like growth speed.
In 1993, China Resources formed a joint venture with Shenyang Snow Beer. Just 12 years later, in 2005, Snow Beer became the sales leader in China, the world's largest beer market.
Since then, it has never lost its leading position. Beer is a relatively mature consumer product category, and such speed is extremely rare in the history of consumer goods companies worldwide.
Second, a long-term lonely but persistent brand strategy.
When almost everyone subconsciously believed that beer culture was authentically German or American, Snow Beer stood its ground, moving forward alone, insisting on incorporating Chinese cultural elements into its brand.
Today, with the revival of guochao (national trend), Snow's actions may seem unremarkable, but it has persisted for nearly two decades.
From changing the Snow brand logo to a traditional paper-cut snowflake image, to long-term sponsorship of Tsinghua University's research on ancient Chinese architecture and continuous hosting of ancient architecture photography contests, to unswervingly building brands like "Brave the World," "Craftsmanship," "Facial Makeup Series," and "Li," it is accurate to say that Snow Beer is a brand that has integrated Chinese culture into its very being.
Third, unique competitive and operational strategies.
Even in the history of world beer, Snow Beer's corporate strategy is exceptional.
Twenty years ago, in the debate over whether brand or sales volume was more important, it proposed the famous assertion: "What is a brand? Sales volume makes a brand!"
With its "along the river and coast" development strategy and core tactics of "strong terminals, extensive promotions," Snow Beer firmly secured its position as China's sales leader. Of course, at the same time, Snow Beer was once regarded as a representative of low-priced beer due to its high proportion of mainstream beer.
Fourth, in 2020, Snow Beer announced its new era strategy.
When people thought there was nothing new in Chinese beer, Snow Beer once again made a stunning move.
On November 18, 2020, Hou Xiaohai, CEO of China Resources Snow Beer, publicly announced the "China Resources Snow Beer New Era Strategy" at the national channel partner conference.
"Winning the premium segment" is the core of the new strategy, divided into three stages: "layout, decisive battle, and victory," spanning nine years, internally called the "3+3+3 strategy." Hou Xiaohai declared that the layout stage was complete, and 2021 was the first year of the second stage, the "decisive battle."
The "Snow New Era Strategy" was like a thunderbolt, causing an uproar in the industry.
What gives Snow the right to compete in the premium segment? Does Snow have the brand, team, and channels with the genes for premium? Does it have a premium team, experience, or resources? Is Snow's confidence and reliance simply the newly integrated Heineken China market? Some industry insiders even said they were ready to "watch Snow make a fool of itself."
Looking at Snow Beer's past 30 years, its corporate strategy formulation has been very rigorous, and almost all have been realized. So, does Snow's premium strategy have a chance to succeed? What is the logic behind its potential success?
After a year, has Snow's premium strategy achieved successful sample markets? What huge impact will this have on the Chinese beer industry and even Chinese brands? Chinese marketing today has entered a no-man's land without teachers or signposts. Will Snow Beer's sample research point a direction for the future marketing of Chinese brands?
These questions are likely of common concern to all who follow Snow and the beer market.
Why choose the Zhejiang regional market as an observation sample?
Zhejiang is China's second-largest beer market, with mature consumption and significant sample value. The beer market capacity in Zhejiang exceeds 2 million tons, with per capita annual consumption above 60 liters, more than twice the national average.
The main provinces and cities for premium beer consumption in China are Fujian, Zhejiang, and Guangzhou, with Zhejiang being one of the most important markets for premium beer. Snow Beer holds over half of the total share in Zhejiang, making it a relatively strong market.
To observe the implementation of Snow's premium strategy, a relatively strong market naturally provides a more objective reflection. If the strong market is not performing well, the situation in weaker regions is self-evident.
1) Brand landscape of the Zhejiang beer market
In the Zhejiang beer market, the main competing brands, ranked by market influence, are Snow, Budweiser, Yanjing, Qiandaohu, and Tsingtao.
Snow Beer has been deeply rooted in the Zhejiang market for many years, holding over half of the market share, and is the absolute leader in the mainstream and mid-range segments. Its core brands mainly include Heineken, Brave the World superX, and Brave the World.
Budweiser is mainly distributed in Wenzhou, Taizhou, and Zhoushan in Zhejiang, with main products including the Budweiser series, Hongshiliang, Harbin Beer, and some affiliated brands.
Yanjing Beer is mainly distributed in central Zhejiang, with a relatively low share, primarily using Lishui as its base market to cover surrounding areas.
Qiandaohu Beer is a unique and distinctive brand, mainly centered in Chun'an, and is a small but beautiful enterprise.
Tsingtao Beer is scattered throughout Zhejiang, relying basically on brand power for natural radiation, without an obvious base or concentration area.
(Snow staff walking the market at Zhejiang Shizu convenience stores)
2) Characteristics of the Zhejiang beer market
Zhejiang has a developed economy, good urban construction, high consumption levels, high per capita beer consumption, and many private enterprises, all of which are conducive to the development of premium beer. Therefore, many cities in Zhejiang have entered Snow Beer's premium strategy sequence.
In Snow Beer's premium high ground "two provinces, five cities, eight highlands," Zhejiang is one of the two provinces, Hangzhou is one of the eight highland cities, and Wenzhou is one of the N central cities. This shows the importance of the Zhejiang market in Snow's premium strategy map.
The Zhejiang beer market has significant north-south differences. The so-called northern Zhejiang includes Jiaxing, Hangzhou, Shaoxing, and Huzhou, abbreviated as Hang-Jia-Hu-Shao. The northern Zhejiang region was once home to wealthy and cultured officials of the Southern Song Dynasty. Alcohol consumption includes baijiu, huangjiu, and beer, with beer consumption at the East China average level.
Southern Zhejiang is completely different. Southern Zhejiang refers to the Wenzhou and Taizhou areas beyond Ningbo. People in southern Zhejiang are wealthier, but wealth is hidden among the people, not visible in urban construction. However, beer consumption is very high, with per capita beer consumption approaching American levels.
The premiumization foundation of the Zhejiang beer market is relatively good. Budweiser entered early and has been promoting premium products, including the super-premium Corona. In Zhejiang's premium market, the southern Zhejiang region is the core of the core.
For example, the Wenzhou market is the largest premium beer market in Zhejiang. Wenzhou has a population of 9.8 million, with a market capacity of about 400,000 to 500,000 tons, and premium beer accounts for about 20%.
According to market feedback, Budweiser has three main markets in China: Guangdong, Fujian, and southern Zhejiang. Southern Zhejiang refers to the Wenzhou and Taizhou areas, with Wenzhou alone accounting for half of Budweiser's sales in Zhejiang.
The distribution of premium beer in the Zhejiang market is not uniform; nearly three-quarters of premium beer consumption is in southern Zhejiang. Looking at the southern Zhejiang market alone, there is almost no beer below 8 yuan, but in northern Zhejiang and other areas, the proportion of premium beer is much lower.
Several challenges for Snow Beer in going premium
In the premium and super-premium segments of the Chinese beer market, Budweiser and Carlsberg have been the main players, with Budweiser firmly holding over half of the premium share.
Objectively speaking, the challenges Snow Beer faces in going premium are not only Snow's challenges but also the collective challenges faced by all Chinese brands in the beer sector.
Everyone is attacking the premium segment, but only Snow Beer has clearly made it its core strategy, which is also the vision and mission expected of a qualified industry leader.
The challenges for Snow Beer in the premium market, as commonly recognized in the industry, are as follows:
First, brand and product structure. The purpose of marketing is to build awareness, but changing awareness is harder than building it.
Second, shortage of premium operation models, experience, and resources. In the premium market, the operation of brand, channels, and promotion differs significantly from the mainstream mass market.
Third, lack of tactics for the premium market. When the team lacks experience in premium operations, clear and definitive tactical guidance is most needed. Without this guidance, the team may lack clear tactics, clear goals, and measurable standards when operating in the market.
In terms of brand and product structure, Snow Beer has apparently made sufficient preparations during the layout phase over the past few years.
From the gradually clear product matrix of Snow Beer, in the past few years, through the dual-wheel brand layout of "international + domestic," Snow Beer has reached a leading level in the country in terms of premium brand and product richness.
Domestic brands:
In the 18 yuan+ segment, there is the Facial Makeup series, reflecting the brand height of traditional Chinese classic culture; in the 15-18 yuan segment, there is the "Craftsmanship" series;
In the 12-15 yuan segment, the trendy and fashionable big single product Mars Green has achieved rapid growth in multiple markets; superX, in the 8-10 yuan segment, is an upgraded product of Brave the World, positioned as challenging and cool, with growth exceeding 50% in 2020.
International brands:
In the super-premium segment above 15 yuan, there are Sol and Yuse; Heineken is positioned at 12-15 yuan, with rapidly increasing market acceptance, growing over 40% in 2020; Redd's, priced at 10-12 yuan, is Heineken's second-largest global brand and was launched in the Chinese market in 2021.
The most critical step is whether the integration between China Resources Snow and Heineken China after their strategic cooperation goes smoothly.
Before integration, Hou Xiaohai, CEO of China Resources Snow Beer, emphasized maintaining Heineken's characteristics as much as possible. Snow proposed "dual benchmarking, creating first-class," referring to international benchmarking against Heineken and Budweiser.
The exchange of top technical talent between Snow Beer and Heineken teams has also been very in-depth. It is understood that the Jiashan Heineken factory basically implements Snow's processes in its financial system and management system.
In quality management and factory management, Heineken's characteristics are basically maintained, and Snow is even promoting many of Heineken's factory management advantages to Snow Beer factories.
Judging from the current performance of the Heineken brand in the Chinese market, it has already entered a high-speed growth channel, indicating that the first phase of integration between the two sides has been very successful.
A good strategy can be broken down into fine-grained and implementable tactical methods, and when these tactical methods are combined, they can be completely consistent with the original strategic direction. Mao Zedong's sixteen-character guerrilla strategy is tactical in every word, but together they form a strategy.
Snow Beer's premium strategy has several core points:
At the brand level, it is the "4+4" dual-wheel development of international and domestic brands;
At the market layout level, there are core premium markets of "two provinces, five cities" and "eight highlands";
At the channel and talent level, there are the "Sword Casting Action" and the high-end key account platform represented by "Huading Club";
At the terminal level, there are the "high ground strategy" and "smart channel marketing";
At the promotion level, there are the "flying team strategy" and "three meetings and one lesson," etc.
These concepts are difficult for people outside the Snow system to understand directly, so we have specifically selected the significant Zhejiang market as a sample for interpretation to help readers better understand Snow's premium strategy and implementation tactics.
Interpreting Snow's premium combat strategy in Zhejiang
Through visits to Snow Beer's Zhejiang regional market and in-depth exchanges with Zhang Ying, General Manager of Snow Beer's Zhejiang Marketing Center, as well as regional managers, multiple distributors, and sales terminals, we attempt to understand and sort out Snow Beer's premium combat strategy in the Zhejiang market.
1) Product: International + domestic premium product dual combination
Snow has set only Budweiser as a competitor in the Zhejiang market, which is consistent with Snow Beer's dominant position in overall share in Zhejiang.
The dual-brand combination of "Chinese brands + international brands" has changed the previous weakness of Snow's single brand being relatively thin. Heineken has become the most important weapon for Snow to counter Budweiser. Judging from the performance in the Zhejiang market, using Heineken to counter and suppress Budweiser has been quite effective.
The power of this combination of Chinese brands + international brands fully leverages Snow Beer's strong channel advantages. Previously, many of Snow's key stores could not achieve store control because terminals would reflect that you did not have international brands. Now, with the product combination of Heineken, Redd's, Tiger, etc., the improvement in terminal control is significant.
Heineken also launched Heineken Silver specifically for the Chinese market's consumption characteristics. Heineken's classic taste is stronger, favored by beer enthusiasts; Heineken Silver is lighter, suitable for casual drinking.
After its launch in 2020, Heineken Silver achieved ultra-high-speed growth, and this product accounts for most of Heineken's overall growth.
The domestic-international dual combination strengthens store control capabilities and also enhances the ability to enter premium core stores. At the same time, the high richness of brands and products, in turn, better meets consumers' diverse needs and terminals' profit demands.
2) Channels: Sword Casting Action and high-end key account platform
The so-called Sword Casting Action is a strategic action initiated by China Resources Snow Beer at the national level, involving in-depth discussions and strategic cooperation with premium operation talents and premium operation channel distributors.
In 2020, in markets where international brands are concentrated, such as Taizhou, Wenzhou, Huzhou, and Ningbo, the Sword Casting Action achieved significant results, bringing in many high-end key accounts that previously operated Budweiser, Corona, and Tsingtao Beer, and also recruited many local sales backbone talents from international brands.
In the sword casting process, Zhejiang Snow has two standards. First, terminal orientation: customers must have high-end store networks and resources; second, customers' thinking must be in sync with Snow's decisive premium thinking and reach a strategic consensus.
The Sword Casting Action brought fresh blood and high-end terminal resources to Snow Beer, but Snow's core channel strategy is still to discover and train premium distributors within its own distribution system. Here we must mention Snow's high-end key account platform organizations: Huading Club, Huazun Club, and Huajue Club.
Snow's Huading Club, also called the Million Club, is only open to customers with annual sales of premium products exceeding one million cases.
Currently, seven customers in Zhejiang Snow meet this standard, and Snow hopes to have several times the current number of key accounts enter the Million Club in the coming years. The Huading Club, as a high-end key account platform, exists precisely to help Zhejiang Snow achieve this goal.
At the national level, it is the Huading Club; at the regional level, it is called Huazun Club. Zhejiang Snow provides many learning and training opportunities to regional Huazun Club members.
First, exchanges and training within the region are often held, with advanced driving backward, and advanced stimulating backward; second, comprehensive response and support from company management to business, even helping distributors train successors.
When a regional Huazun Club member's premium sales exceed one million cases, it is time for them to upgrade to a national Huading Club member.
In a sense, the more Huading Club members in a regional market, the greater the share and control in the premium beer market.
In the distributor training segment, there is a long-term training course called "three meetings and one lesson." The so-called "three meetings and one lesson" refers to investment promotion meetings, customer meetings, tasting sessions, and channel training courses.
Through "three meetings and one lesson," we unify understanding, synchronize corporate development changes, publicize the company's spirit and requirements, and replicate and transmit successful tactics and cases from various regions in the premium field.
3) Terminals: High ground big store model and key person marketing
First is terminal screening. Snow re-screened nearly 200,000 terminals in Zhejiang and selected about 10% as the main terminal battlefield for the decisive premium battle. These selected 10% terminals are called high grounds. The selection criteria for high grounds are first, distinctive; second, high sales; third, good structure; fourth, good reputation.
The core of the high ground strategy is focus, directing channel marketing and business personnel's focus, as well as all market resources, to high ground terminals. If you try to cover hundreds of thousands of stores, you will be grasping at everything and fall into the logic of mainstream beer coverage.
From a business personnel perspective, a salesperson selling mainstream beer like Brave the World will have familiar streets, stores, and owners. When the company requires promoting a new product, their first reaction is to sell it to familiar customers.
But that customer may not be suitable for selling premium. Based on Snow Beer's previous main battlefield, it is probably not suitable.
So it is necessary to find better customers and places more suitable for selling high-end beer. Their sales behavior and operation methods are completely different from before. This business personnel needs to completely reverse their understanding and habits; this is the greatest significance of the transformation.
The nightlife market in Zhejiang is very developed, making it one of the main battlefields for premium beer and one of the strategic priorities for Zhejiang Snow.
It is understood that Zhejiang Snow's nightlife region may be the largest nightlife region in Snow nationwide. In this form of terminal, Snow's channel marketing focuses on "key persons."
Anyone who has influence on entering the nightlife venue or on business is a key person. Snow pursues not just entering the store but also deep cooperation and how to obtain better support.
For example, Boss Qian is the owner of a nightlife venue and also the president of the local entertainment association. Compared to profit, he may value resources more.
Snow Beer now has the international brand Heineken and celebrity endorsers like Jackson Wang, Wang Yibo, and Gong Jun. He will feel that Snow is a resourceful company, and cooperating with Snow will make him feel superior to others. For such terminals, how to give them a different experience and feeling is very important.
4) Promotion: Deep and thorough offline, amplified online
Zhejiang Snow divides promotion into three major parts: online communication, themed activities, and channel marketing. Channel marketing is mainly implemented by regions under the guidance of Snow headquarters. Snow headquarters has a comprehensive system design for channel marketing called "smart channel marketing."
The online part is divided into national and regional. Based on the national layout of the Heineken brand, Snow headquarters will have national online advertising, while regional media will be invested by regional companies.
Regional investment considers more realistic goals: where to place resources, which target group to influence, how the investment mix matches market goals, and what goals the investment should achieve.
For example, in July, the Hangzhou market launched the largest skydome advertisement in Asia on the West Lake, with an advertising area of 6,000 square meters, also including subway stations in various cities. The Wenzhou market invested in many billboard advertisements.
In addition to online advertising, offline activities mainly include beer festivals, music festivals, and themed activities like the "Double Euro" landing, as well as finding chain stores like Shizu convenience stores to create image stores and experience stores. Current offline promotion is still focused on a few high-end core areas such as Hangzhou, Wenzhou, and Taizhou.
Additionally, Zhejiang Snow has adhered to Snow headquarters' "flying team strategy." Unlike previous in-store promoters, flying team members are positioned as brand ambassadors and atmosphere groups for Snow or Heineken, with a slight sales conversion role.
The basic strategy of the flying team is still to focus resources, either going to core big stores or walking to food streets. The flying team's task is not to sell beer but to interact and communicate with consumers, play small games, and let consumers feel fun when drinking beer.
The flying team's task is not to sell beer, but to bring consumers a good brand experience.
After nearly two years of building the premium market, Zhejiang Snow has seen significant growth in the premium segment. It is understood that Zhejiang Snow has achieved multiple-fold growth in premium products such as Heineken and Redd's, and Snow's premium series products have also benefited from the expansion of the premium battlefield, achieving rapid growth.
Taking the performance of Snow in the Wenzhou market as an example, before the launch of the decisive premium battle, Snow mainly focused on mid-range and below, with little achievement in high-end beer. After Snow acquired Heineken China, great progress was made.
Previously, Snow could not enter the top ten food stalls in Wenzhou, and even if it did, the volume was relatively small. But after the Sword Casting Action, it entered nine of the top ten food stalls, except one that was bought out by a competitor.
Zhejiang distributors talk about "decisive premium battle"
Zou Tao is one of Snow's distributors in Wenzhou, having cooperated with Snow for 23 years. In 1998, he worked at a Snow distributor in Dalian. In 2006, he traveled thousands of miles to settle in Wenzhou and start his own business as a Snow Beer distributor, with an annual sales scale of over 30,000 tons.
In 2020, Zou Tao attended Snow Beer's national channel partner conference and was so excited that he wrote an article titled "Awesome, My Snow." He said that previously his identity was called "distributor," but suddenly one day it became "partner," and the sense of identity and pride was very different.
During the exchange, Zou Tao said that his Heineken sales this year have roughly tripled year-on-year, and he expects to double again next year.
Ye Zhongfu, founder of Taizhou Zhongxin Trading, has been professionally selling beer since 1996. He was also a major distributor of Tsingtao Beer canned products, once achieving the number one in the country. Budweiser has always been his competitor, and he joked that he has been fighting with Budweiser all his life.
Ye Zhongfu began cooperating with Heineken in 2010, with an annual scale of about 300,000 cases. After Snow's cooperation with Heineken China, he felt significant changes, and this year he expects about 900,000 cases.
Now, investments in terminal channels and market control have increased, especially after the launch of Heineken Silver, which has grown very rapidly in Taizhou.
Yiwu Huihua Liquor is a professional liquor company founded by Chen Xiongfu. In the Huihua brand system, beer includes Snow and Heineken; baijiu includes Yanghe, Luzhou Laojiao, and Xijiu; red wine includes Changyu; foreign liquor includes Pernod Ricard and Hennessy; and it also handles Red Bull and Coconut Palm. The team scale reaches 230 people.
Yiwu is a county-level city, with a population of about 2.5 million including migrants. There are over 8,000 catering terminals, over 7,000 modern small retail outlets, and about 1,000 famous tobacco and liquor stores and special channels. Huihua Liquor has basically achieved full coverage.
Currently, Snow is the core business of Huihua Liquor, accounting for over 40%. In terms of product structure, Super Brave the World accounts for the largest share. After starting Heineken in 2019, the growth rate has been very high, especially for Heineken Silver. Chen Xiongfu believes that the Heineken series will become the main growth engine for Huihua Liquor in the next step.
Snow's share in Yiwu is very high, with last year's scale exceeding 3 million cases. Regarding market share, Chen Xiongfu said: "Budweiser only sells 1 million cases a year in Yiwu; our total volume has long surpassed it."
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