Beer is a market worth hundreds of billions. From the industry landscape, the five major beer giants—Snow, Tsingtao, Budweiser, Carlsberg, and Yanjing—occupy 83% of the market share.
Although the market is monopolized by giants, it is not without change. With the improvement of people's consumption levels and the aspiration for a better, quality, and diverse life, more and more consumers are seeking beers with better taste and flavor.
Based on this, we see beer giants are increasingly focusing on the mid-to-high-end market. Typically, Snow launched the upgraded version of Brave the World, as well as high-end products like Black Lion and Mars Green. Through share swaps, they also acquired the China business of international brand Heineken. Meanwhile, Tsingtao Beer has been experimenting, launching mid-to-high-end products such as August, 1903, White Beer, and Dark Beer.
But behind the giants' push into mid-to-high-end, there is a huge force that cannot be ignored—craft beer. Although the overall scale is still small, from the development in recent years, it has almost reached a state of blowout.
According to industry data, in 2013 there were 17 craft beer enterprises in China, 33 in 2014, 74 in 2015, 293 in 2016, and by 2019, nearly 2,000 craft beer enterprises. In just 6 years, from scratch, from a dozen to thousands, domestic craft beer has almost quickly completed its embryonic stage and entered a new development phase.
But frankly speaking, although domestic craft beer has entered a new phase, we also see that all five major domestic giants have entered the craft beer field. The covetousness of industrial beer giants poses a considerable challenge to the innovation and entrepreneurship of craft beer.
How should innovative craft beer be done?
Recently, we had an in-depth exchange with Mr. Pan Dinghao, co-founder of Panda Craft Beer. As a leading brand in the craft beer field, Panda Craft Beer has gone from the launch of its first bottled product in October 2013 to a 119 million A-round financing in May 2017. Now they are at the forefront of craft beer. How did they do it, and how do they understand this new market of "craft beer"?
-01- Two Years of Head-Down Development, Quickly Building the Foundation
After receiving 119 million in financing in 2017, Panda Craft Beer rarely showed its face externally. In 2018-2019, what did they do? Pan Dinghao told New Distribution that in these two years, Panda Craft Beer has been building the foundation. Before that, from opening stores to having an independent production line, and then in 2018, we bought 40 acres of land in Anshun, Guizhou to build a brewery. It is basically completed and is now in the equipment commissioning stage.
In addition to backend production, on the front-end market side, in 2019, in Beijing, Shanghai, Chengdu, Hangzhou, Guangzhou, Shenzhen and other places, Panda Craft Beer carried out the "Never Drunk in China" marketing campaign, gaining a large number of users. Through this series of actions, Panda Craft Beer has made great strides almost every year, from revenue of 40 million in 2016 to over 100 million in 2018.
In terms of market layout, Panda Craft Beer focuses on offline channels. According to Pan Dinghao, they have basically entered all mainstream KA modern channels, such as FamilyMart, Hema, Walmart, Ole, Today, etc.
-02- How Should Craft Beer Be Sold: Online or Offline?
In recent years, craft beer brands have sprung up, but their marketing strategies vary greatly. Some focus on online, using social media and e-commerce platforms to complete user awareness and transactions; others focus on offline, expanding through restaurant and retail stores to achieve consumer brand awareness and purchase.
But for Panda Craft Beer, neither of these paths is ideal. Pan Dinghao told me that both traditional industrial beer and emerging craft beer need a consumption scenario. Our definition of beer is a random consumer product.
He explained that craft beer is not like red wine, where a friend brings a good bottle from abroad and invites three or five friends to share. But drinking beer or baijiu is different; I need to drink now. If I can't get Panda Craft Beer, I might consider Snow or Yanjing. Even if he is a craft beer enthusiast, if the surrounding environment doesn't allow him to buy it, he can lower his standards and choose something else. So craft beer is a scenario-based consumer product.
In addition, the consumption scenario for craft beer is different from abroad. In the West, consumers can buy many cases of craft beer at once in supermarkets, store them in the freezer, and drink whenever they want, or have parties at home with friends. But this consumption scenario is not suitable for China. First, there is no place for consumption (limited living environment); second, the young mainstream consumer group is unwilling to cook and has no time to organize such activities at home.
From Panda Craft Beer's past sales proportion, the catering channel still accounts for the majority. Therefore, Panda Craft Beer positions itself as a heavy offline FMCG brand. Opening stores in the early stage was also to popularize craft beer culture. As a brand new thing, consumers cannot simply understand the cultural story behind a bottle of beer. The only way is to open a store where consumers can experience how to drink craft beer, what food to pair with, and how to pour the beer.
Craft beer is not just beer; it represents a new lifestyle, more quality, and more ritual in life, rather than "stepping on a case of beer and shouting until everyone finishes before leaving." So Panda Craft Beer hopes to use its stores to educate on craft beer culture, and of course, it is also a brand promotion.
Finally, when consumers have developed consumption habits, their consumption will not be limited to craft beer stores, but also in modern channels like KA/CVS, and catering channels. Currently, Panda Craft Beer has covered 10,000 points of sale offline. Next, they will cooperate with local distributors to cover more regions and points of sale.
Of course, Pan Dinghao knows that relying only on 13 stores for brand promotion is not enough; more ways are needed to let consumers know Panda Craft Beer. Based on this, Pan Dinghao first defined his target consumer group: people who demand quality life. Those who represent quality life are naturally enthusiastic or even skilled in literature, sports, and music. So Panda Craft Beer sponsored a large number of literary, theatrical, sports, and music events, and also made co-branded craft beers with related activities.
By associating with the lifestyles and interests of these target consumers, Panda Craft Beer tells consumers what Panda Craft Beer is, communicates and connects with users, and these people are also opinion leaders among their friends.
The above is not only Pan Dinghao's understanding of the craft beer market, but also the marketing strategy that distinguishes Panda Craft Beer from other craft beer brands.
-03- The Future of Craft Beer: Traditional Giants vs. Entrepreneurial Newcomers
There is no doubt that the future of beer will include craft beer. But how much? Unknown. Some may compare China's craft beer market to the United States. The US is currently in the mature stage of craft beer, with more than 8,000 brands. Almost in any region or corner, even at highway rest stops on rural roads, you can see craft beer for sale.
But Pan Dinghao believes that a similar situation will not occur in China. The US is relatively special because each state has its own laws that protect local brands, giving them many preferential treatments, while imposing many restrictions on out-of-state brands. This leads to a situation of regional fragmentation, which can accommodate more than 8,000 craft beer brands. But in China, any brand from any province can sell nationwide without hindrance.
What will the Chinese market be like?
From the current perspective, craft beer is still in the early development stage, belonging to the education and popularization period of craft beer culture. Although it is early, at present, traditional beer giants have seen the growth of craft beer and have tasted the benefits in the process of increasing their investment. They use the name of "craft beer" to seize the market. Although it is not real craft beer, consumers may not care. But for innovative craft beer brands like us still in the startup phase, it is painful.
Even if craft beer brands work hard to achieve 1% market share, Snow or Budweiser might casually "throw" two brands and achieve 2%-3% through their original strong network coverage. Pan Dinghao said, we hope more and more craft beer brands appear. Only then can we promote craft beer culture. The earlier the stage, the more vague consumer awareness. We should help each other, popularize in time, and make the cake bigger. If only 1-2 brands grow strong, it is useless; it cannot be called an industry.
Pan Dinghao frankly admitted that the window period for China's craft beer development will be very short. For example, craft beer brands represented by Panda Craft Beer popularize craft beer culture by opening stores in various places, but traditional beer giants will not do this, even if they cannot be called "authentic" craft beer. Now these giants have entered the layout stage, and it may take only 3-5 years to fully expand. Whoever enters early has the opportunity; it will become increasingly difficult later.
In summary, innovative craft beer brands have many opportunities, after all, they have just entered the development stage, and it is also a trend that consumers will inevitably choose. But it is undeniable that the entry of industrial beer giants will affect the development of craft beer. The impact may be large or small. Therefore, innovative craft beer must continue to work hard. The industry has opportunities and the market has capacity. It depends on your efforts and how much share you can get!