According to Nikkei Chinese, restructuring trends in China's beer industry are strengthening again. Due to China's economic slowdown and other factors, the beer market has contracted for three consecutive years since peaking in 2013. Overseas players have also intensified their攻势, and top-ranked China Resources Beer and second-ranked Tsingtao Brewery continue to see weak performance. With no signs of recovery, merger and acquisition speculation centered on CR Beer and Tsingtao has emerged. In the world's largest beer market, a new restructuring drama may be about to unfold. At CR Beer's results briefing for fiscal 2016 (ending December 2016) held in late March, CEO Hou Xiaohai stated that if major opportunities arise, both domestic and overseas acquisition opportunities would be considered. He was proactive about acquisitions. CR Beer recently reported a 6% year-on-year decline in net profit to 629 million yuan. Due to the company's weak performance, reporters' questions focused mainly on M&A strategy. In China, there is widespread speculation that Japan's Asahi Group Holdings will sell its approximately 20% stake in Tsingtao Brewery. If CR Beer acquires Tsingtao's shares, it would create a giant alliance with a market share exceeding 40%. When asked about acquiring Tsingtao shares, Hou hesitated in his response but said that equity acquisition is a matter for both parties and specific details would not be disclosed at the meeting, hinting at interest. Tsingtao Brewery's financial report showed a 39% year-on-year decline in net profit to 1.043 billion yuan. Domestic sales fell by about 7%, which was directly reflected in its performance. Some have pointed out that it is the first time both the top two beer companies in China have seen profit declines. The main reason for the deteriorating performance is market contraction. China's domestic beer production was approximately 45.06 million kiloliters (2016), about twice that of the second-ranked United States and about eight times that of seventh-ranked Japan. However, the beer market peaked in 2013 and then began to shrink. The recently released 2016 market size also decreased by 4% year-on-year, marking three consecutive years of negative growth. The reasons include China's economic slowdown, reduced demand for banquets due to the anti-corruption campaign, and consumers' tastes diversifying toward other alcoholic beverages such as wine and whiskey. Chinese beer manufacturers typically produce 500ml bottles priced at 2-3 yuan. A senior executive at a beer manufacturer revealed, "The alcohol content is basically 2-3 degrees, and the taste is very light. Consumers are gradually getting tired of it." This factor has also exacerbated the market contraction. Consequently, besides CR Beer and Tsingtao Brewery, other beer manufacturers are also struggling. Beijing Yanjing Brewery, the fourth-largest, reported declining revenue and profit in its January-September 2016 results. Some believe that Tsingtao Brewery, which has seen declining revenue and profit for two consecutive fiscal years, cannot rebuild on its own, and stock market activity around Tsingtao's shares has become increasingly active. According to local media reports, based on Tsingtao's current share price, Asahi's 20% stake is worth approximately $1.2 billion. Regarding the acquisition of Tsingtao's shares, besides CR Beer, Denmark's Carlsberg has also shown interest. Tsingtao Brewery also hopes to achieve self-reliance and survival, aiming to acquire Carlsberg's Chongqing Brewery. CR Beer terminated its joint venture with UK-based SABMiller in 2016 and raised HK$9.5 billion through a capital increase. It is reported that CR Beer is not only considering acquiring Tsingtao but also discussing acquisition negotiations with Yanjing Brewery. China once had about 800 beer manufacturers, experiencing an era of fierce competition. However, after the rapid economic growth of the 1990s, beer manufacturers like CR Beer successively acquired local small and medium-sized breweries to expand scale. Now, the top five brewers hold a 70% market share in a monopolistic market. With the beer market shrinking, the top five brewers have begun quietly discussing new restructuring. -END-