---
title: "The New World of Chinese Beer"
description: "At the 7th China FMCG Channel Innovation Conference held in Chengdu from November 3-5, 2022, Hou Xiaohai, CEO of China Resources Beer and Chairman of China Resources Snow Breweries, delivered a keynote speech on why Snow Beer underwent transformation and the concept of the 'New World' of beer. He outlined the major changes in consumption, venues, products, and pricing, and emphasized the need for companies to adapt to the new era."
author: "侯孝海"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-11-05"
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---

# The New World of Chinese Beer

> At the 7th China FMCG Channel Innovation Conference held in Chengdu from November 3-5, 2022, Hou Xiaohai, CEO of China Resources Beer and Chairman of China Resources Snow Breweries, delivered a keynote speech on why Snow Beer underwent transformation and the concept of the 'New World' of beer. He outlined the major changes in consumption, venues, products, and pricing, and emphasized the need for companies to adapt to the new era.

From November 3 to 5, 2022, the "7th China FMCG Channel Innovation Conference" hosted by New Distribution, a professional new media platform for FMCG, was successfully held in Chengdu.
This article is based on the keynote speech delivered by Mr. Hou Xiaohai, CEO of China Resources Beer (Holdings) Co., Ltd. and Chairman of China Resources Snow Breweries (China) Co., Ltd., at the conference. It has been organized and published with authorization. Organized by Chen Siting and Kang Zhiqiang.

**01 Why Does Snow Beer Need to Transform?**
Over the past six years, Snow Beer has undergone two major transformations. From 2017 to 2019, in three years, Snow Beer completed a self-revolutionary transformation, including optimization of factories and teams, brand reshaping, and information technology upgrades. We launched ten major strategies and proposed strategic goals of quality growth and innovative development. After three years of transformation, Snow Beer changed significantly: the team was streamlined by 55%, inefficient capacity was optimized by one-third, China Resources Beer's market value tripled, and profits doubled. From 2020 to 2022, in the second three-year period, we clearly proposed to focus on high-end beer and expand the high-end segment. In the past, Snow Beer's high-end market was not strong, so in the second three years, we first built high-end around Heineken, then launched the "1+1" and "4+4" high-end strategies, and the "five points one line" high-end market operation method. During this process, we encountered the pandemic, and we initially thought it would be very difficult. People couldn't go out, restaurants closed, nightlife venues shut down, and there were no places for high-end beer consumption. Of the three elements of people, goods, and places, only goods remained; people and places were gone. But the opposite happened: the past three years were actually very good for Snow Beer's high-end development. Why did Snow Beer implement such resolute transformation? Since 2016, we have felt that the beer industry was very different from the past. The beer industry had little room for growth, and growth peaked. At that time, Snow Beer had many factories and many employees, low efficiency, outdated equipment, complex production and sales, and brands mainly competed in the mainstream price range. So, at that time, we felt that Snow Beer must change; without change, there would be no future.

**02 The "New World" is the Direction of Snow Beer's Transformation**
Today, everyone talks about great changes, great uncertainty, confusion, and passivity. We should reflect: why are we always changing? Has the world already changed without us realizing it? If we still use past logic, past experience, past habits, past methods, and past cognition, we will only get lost and sink in constant change. The reason Snow Beer's transformation achieved good results is primarily that we stepped outside the company to look at the industry, the country, and the world. Only by stepping out can your thinking and cognition undergo tremendous change. Otherwise, with one thing today, another situation tomorrow, and new terms and phrases suddenly appearing, you can only be overwhelmed. Therefore, at the end of 2021, we proposed a new term: "New World." Why propose the "New World"? Today's world is changing greatly; it is becoming increasingly unfamiliar, no longer the world we knew over the past 20 years. How can we highly summarize and accurately describe all the changes we face today? I thought of two things. First, the wine industry: traditional wine centered on France is called the "Old World"; industrial mass-produced wine represented by Latin America is called the "New World." Why did the concept of old and new worlds emerge in wine? I think it's because only the concept of "New World" can accurately express the fundamental difference between industrially mass-produced wine and traditional wine. Second, the founders of our republic once said, "We are not only good at destroying an old world, we are also good at creating a new world." For these two reasons, we were the first in the industry to propose the concept of "New World of Beer" and put forward the new corporate vision of "Becoming the Leader of the New World of Beer." The "New World of Beer" was not proposed casually. On one hand, we use it to highly summarize all the changes we face today; on the other hand, it is our accurate judgment of the current era of "great transformation." "Great transformation" is an objective reality we face today, just like the theme of this conference. At the same time, "great transformation" is the foundation of the "New World" concept; without "great transformation," there would be no "New World."

**03 To Understand the "New World," We Must Understand the "Great Transformation"**
Why did we propose the concept of "New World of Beer"? What is its background? To see the world clearly, we must see what our country is looking at and saying. I found that our leaders mention the phrase "great transformation" most often. Why do leaders keep talking about great transformation? At first, we didn't quite understand; the transformation didn't seem that big; the world is always changing, isn't it? After two years, we felt the transformation was really big; today, when we look back, we realize the great transformation is unimaginably huge. After in-depth study and reflection, we discovered that the proposal of "great transformation" has a very grand historical background and origins.

**1) The First "Great Transformation" in Chinese History**
The first proposer of the great transformation was Li Hongzhang during the Tongzhi period of the Qing Dynasty. He called it "a great transformation unseen in three thousand years." What did this great transformation mean? It meant the challenge of constitutional monarchy to thousands of years of dynastic rule; the challenge of maritime civilization to continental civilization; the challenge of Western industrial revolution to thousands of years of agrarian economy; and the challenge of cold weapons to the powerful ships and cannons of hot weapons. Li Hongzhang called this tremendous change "a great transformation unseen in three thousand years." This minister of the old dynasty was very wise, able to deeply see the great changes China faced. He was telling everyone in the Qing Dynasty what changes the country was facing; the magnitude of change was unseen in thousands of years. Some understood Li Hongzhang's great transformation, some did not; some made many reforms and responses. But in reality, whether it was the Hundred Days' Reform, the Westernization Movement, the Xinhai Revolution, or the Northern Expedition, none succeeded. In 1949, with the founding of New China, the Chinese nation was truly liberated. This was our first successful response to the world's great transformation, but the country was still very poor. Before Li Hongzhang proposed the great transformation, China was at the center of the world. Because the great transformation was not clearly understood and not well responded to, the Chinese nation fell into a dark period of over 100 years.

**2) Today's "Great Transformation Unseen in a Century"**
In 2017, our leader proposed: "Looking at the world, we face a great transformation unseen in a century. The Chinese nation has achieved a great leap from standing up, to becoming prosperous, to becoming strong, and the great rejuvenation of the Chinese nation shows unprecedented bright prospects." Why must we "become strong"? Isn't "becoming prosperous" enough? Why is this a "great leap"? What does "unprecedented" mean? If we do not seek and think from the historical origins of the Chinese nation, we cannot truly understand or resonate strongly. The rise and fall of every industry is entirely based on the fate of our country. I have always believed that to do business well, you must deeply understand the world and national trends.

The great transformation we face is manifested in the following six "centennial changes": the centennial change in the globalization process, the centennial change in the world economic landscape, the centennial change in the international power structure, the centennial change in global governance systems and rules, China's rise under technological revolution and institutional innovation, and Sino-US relations and the pandemic.

Let me briefly share my understanding of these centennial changes; for deeper content, you need to explore and learn on your own.

The globalization process is now facing the challenge of deglobalization. Previously, everyone made money together; now some people's primary concern is not whether they make money, but that you don't continue to make money.

The world economic landscape has undergone major changes. What changes? Since the Qing Dynasty, we have been poor and backward for a long time, a very weak economy in the world economic landscape. Today, our economic scale has reached 70% of the United States, and in a dozen years we will surpass the US. This has never happened before. Under technological revolution and institutional innovation, China's rise is very rapid; we are the best-performing economy globally. The international power structure is changing over a century, and then there has been a huge reversal in Sino-US relations. We have entered an era of great transformation.

**04 Characteristics of Change in the New World of Beer**
Knowing what great transformation we face today, Snow Beer is in the midst of it, and we must see what changes will occur in China's beer industry. We cannot be changing every day; without top-level design, we will be at a loss in the face of daily changes. We can no longer solve problems as they arise; we should look at our industry from a higher level, and once we see clearly, we can plan our future and implement strategies with ease.

**First, the consumer base is changing.** This should be put first: when people change, everything changes. The current consumer base is dominated by Generation Z; Generation Y still has some presence, but it is decreasing year by year. Generation X basically can't drink mainstream beer anymore, but specialty beer still has some appeal. Female consumers are also starting to drink beer, which is good news. The biggest changes are in Generation Z and female consumers, which determine the most important direction for our beer. Previously, we mainly did TV advertising; now we need to do street dance, electronic music, and esports. Generation Z has changed a lot; their consumption scenarios, consumption methods, communication platforms, brand connotation needs, and product design preferences are all different. So, you need to think clearly: who are you targeting? Who is Snow Beer for? For the new generation, for the new era. Generation X people shouldn't be discouraged; there will be beer you like too.

**Second, consumption venues have undergone fundamental changes.** This change is fundamental; it is not a simple iteration but a complete reversal. Look at online: e-commerce has evolved from scale development to quality development. Various online models rise and die quickly, but the overall direction is toward higher quality and better experience. Nightlife venues were once very important, but they have also changed significantly. Under the impact of the pandemic and the rise of Generation Z, business KTVs are declining, bulk-buying KTVs are declining, while music bars and small pubs are growing rapidly. Some say nightlife venues closed due to the pandemic, but even without the pandemic, they would have declined; this business model does not conform to future trends. We see new types of dining streets, new restaurants, and internet-famous restaurants emerging endlessly, and new consumption venues and scenarios are constantly appearing.

**Third, beer products have undergone major changes.** You will find that new products are of higher quality and in large quantities. Over the past five years, most products launched by beer companies, including Snow Beer, are mostly higher in concentration, with excellent ingredients, many are all-malt brews, completely different from the previous concept of beer. Some say the future of Chinese beer taste and products is craft beer. I have long asserted that it is absolutely not, and never will be. Why? I've said it before: China's high-end liquor is leapfrogging, not American-style. Because China is too fast, the craft beer trend collides with the high-end trend of lagers; craft beer doesn't have much space and won't become a big platform.

Beer products have fundamentally changed in raw materials, packaging, and quality. In fact, it's not just beer; look at other FMCG products, they are the same. Doing products the old way definitely won't work.

So, I want to say: quality is the bottom line of the New World.

**Fourth, prices and tiers have undergone fundamental changes.**
Consumption upgrades have caused fundamental changes in the price and tier of our beer; everything is moving high-end. We believe the tier structure is spindle-shaped, whereas in the past it was a pyramid. The middle class is developing rapidly. Where does the driving force for China's consumption upgrade come from? It comes from the rapid growth of the middle class, from China's urbanization, and from China's major economic zones. For example, the Chengdu-Chongqing economic belt is driving consumption upgrades in the southwest, with per capita income continuously rising. This is the long-term driving force for high-endization. Some say high-endization has declined after the pandemic; indeed, there has been some decline, but the decline is not in beer, not in water, and not in your beverages; the decline is in LV, Chanel, luxury goods are selling less. But can you say that 10-yuan beer and 5-yuan beer have declined to what extent? This clearly does not conform to basic consumption logic.

A few days ago, we were discussing baijiu. They said Moutai is no longer raising prices; is the high-endization of baijiu over?

Actually, it's not. "High-endization" is a progressive relationship, reflected in the character "化" (ization). Through prices rising from low to high, from 3 yuan to 5 yuan, 5 yuan to 8 yuan, 30 yuan to 50 yuan, it is a process of gradual high-endization.

You only think of Moutai's 3500 yuan, but you don't think of Chinese baijiu going from 10 yuan to 30 yuan, 30 yuan to 50 yuan, 50 yuan to 100 yuan, 100 yuan to 200 yuan. This wave-like high-endization is far greater than Moutai's 3000 yuan high-end. You cannot simply equate high-endization with high-end liquor.

**05 Two Worlds, Two Main Themes**
Snow Beer proposed the New World of Beer, and we clearly defined the difference between the New World and the Old World. What is the Old World of beer? We call the period before 2014 the Old World.

What happened in China's beer industry in 2014? Starting in 2014, the volume of China's beer industry began to decline, and it is still declining today. Before 2014, China's beer capacity was growing; everyone was frantically acquiring, integrating national brands, making mainstream big single products, and advertising heavily on CCTV and the World Cup.

This is the Old World model, which is about building teams, serving terminals, and driving with price promotions.

What does that mean? No promotion, no sales; with promotion, sales; more promotion, more sales; but if you keep promoting, eventually there are no sales. Basically, that's the pattern. Rapid development, rapid death, start over again, many repetitive, low-level product-driven models. No need to list them here.

The main theme of the Old World is "getting bigger." Price wars, selling only one product, not selling many, only selling products that are easy to sell, not selling those that are hard to sell; anyway, everyone looks the same, no one is better than another. After 2014, we call it the New World of Beer, and its theme is "getting stronger." What does getting stronger mean? Quality development first. Beer sales have peaked. Previously, many people told me, "Mr. Hou, has your beer industry reached its end?" The pandemic has been hard for everyone for three years, but looking back at the changes in China's beer industry over these three years, except for a slight decline in volume, the revenue and profits of the five major beer companies have hit record highs, growing every year. So, if we do well in the New World, the results will indeed be different. From a product strategy perspective, the New World requires the simultaneous development of big single products and personalized products. I once shared with brother companies that competition in the New World of Beer must be competition among brand groups, not individual brands. A company's future is not about operating one brand, but having the capability to operate five or six or even more brands with different personalities. The reason we proposed the New World is to clearly describe the New World and the Old World, to differentiate them. Then, let our organization and our team move from the Old World to the New World; let our thinking, our methods, and our practices move from the Old World to the New World; let our strategies and strategic initiatives, including our diversification into baijiu, enter the New World. Methodology guides practice; using the concepts of New World and Old World helps us see more clearly whether we are doing right or wrong. After a year of effort, the concept of "New World" has taken root in our organization, our team, and our channel partners. "New World" more clearly points to the direction of our future development. With the New World of Beer, there is also a New World for baijiu. If we only see famous liquors like Moutai and Wuliangye, we won't know that there may be a newer New World of baijiu in the future. But what we currently know may all be in the Old World, and a larger, more possible future New World is slowly unfolding.

_PS: Friends interested in the live speech content can follow the recent posts on the WeChat official account of New Distribution. We will organize and publish all guests' speeches for readers._
_Click **Read Original** to see more highlights of the 7th China FMCG Channel Innovation Conference..._


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