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2013 was the peak year for Yanjing Beer, with revenue of 13.7 billion yuan and net profit of 680 million yuan. Since then, performance has declined, and Yanjing now lags significantly behind the top three.

On Valentine's Day 2012, a long-rumored "romance" in the beer circle surfaced.

Kingway Beer, listed in Hong Kong, fittingly announced in a "shy" statement that it had "begun negotiations with an independent third party."

News of Kingway selling off assets had already spread, with many suitors. It was an open secret that the so-called "third party" was none other than the number one beer maker in the capital.

In early 2013, a dramatic outcome emerged: the most favored Yanjing and Kingway did not end up together, while China Resources Snow's parent company secured the deal with a "bride price" of nearly 5.4 billion yuan.

Years later, Yanjing might regret this outcome.

Because, at the same time it "broke up" with Kingway, it also said goodbye to rapid growth. 2013 was a turning point for Yanjing Beer, with revenue, net profit, and other indicators peaking, then declining ever since.

In 2018, among the five largest beer companies in China, Yanjing ranked fourth, but the industry believes this is actually a "3+2" lineup, with Yanjing having fallen behind the top three.

Why is Yanjing no longer as formidable as before?

01 The Turning Point

Southern fans should be familiar with Kingway.

At its peak, out of every 10 bottles of beer consumed in Shenzhen, seven or eight were from Kingway. Unfortunately, starting in 2006, Kingway's glory faded, and by 2012 when it sold off assets, it had lost over HK$100 million in half a year.

In a beer circle where a stumble could mean elimination, Kingway's performance essentially put itself on competitors' acquisition lists.

▵ Kingway Beer

Winning Kingway was a major event in the beer circle in 2012.

China Resources, Tsingtao, AB InBev, and other domestic beer giants were veterans of the beer "enclosure movement." At that time, the "big fish eat small fish" game had been ongoing for years, reducing the number of companies from over 600 to just over 100. On the acquisition list, it was rare to encounter a "big fish" like Kingway.

The rumors of Yanjing and Kingway's mutual interest were not baseless.

At the time, there were reports that Beijing Enterprises, Yanjing's parent, had "reached an agreement" with Guangdong Holdings (Kingway's major shareholder) before the Spring Festival, and Yanjing had enough sincerity to turn the rumor into reality. Because before announcing the sale of assets, Kingway had just built six factories in Tianjin, Xi'an, Chengdu, and its home base in Guangdong.

For Yanjing, which was rapidly developing and urgently needing to expand capacity, not only were the brand-new production lines attractive, but winning Kingway would also allow Yanjing to connect the Fujian, Guangxi, and Guangdong markets, expand its territory in the northwest, southwest, and Guangdong, and quickly narrow the gap with Tsingtao Beer.

▵ Beer fermentation tanks at Kingway Brewery

The situation was also very favorable for Yanjing.

The first round of bidding exceeded 5 billion yuan. Tsingtao Beer felt the price was too high and withdrew; AB InBev, aiming for the high end, seemed less enthusiastic. From a competitive standpoint, China Resources Snow, as the industry leader, had a relatively stable position, and Yanjing's sales volume was only half of theirs, not yet a substantial challenge.

However, the climate and huge market in South China have always been a battleground for beer companies. No matter who Kingway married, the landscape of the domestic beer industry would be shaken.

02 Famous in the Capital

Yanjing Beer was born in Shunyi in 1980.

At that time, Beijing residents only recognized Five Star and Beijing beer. Five Star was located in the west of the city, and Beijing Beer in the east. They divided the Beijing market at the flagpole of Tiananmen, each minding their own business.

The capital's residents, who were ahead of the trend, loved beer too much, but production was too low. The daily beer production in Beijing was only enough to sell for two or three hours. Some restaurants forced bundling, "If you don't order two dishes, we won't sell you beer."

On August 3, 1980, the Beijing Daily published a reader's letter: hoping to approve the construction of a brewery in Shunyi County. A month later, the predecessor of Yanjing Brewery, Shunyi Brewery, broke ground amid the eager expectations of citizens.

▵ Yanjing Brewery

The newly launched Yanjing Beer did not attract the attention of peers in the city. At that time, the Second Ring Road was only half open, and Yanjing Beer produced in Shunyi, 30 kilometers away, was seen as "farmer's beer" by distribution units in the imperial city.

Peers could not imagine that many successful business cases started from surrounding the city from the countryside.

Two years after production began, Yanjing Beer's output reached 20,000 tons. The Shunyi county government at the time was quite reform-minded, not only reducing taxes to help Yanjing expand production but also having flexible policies: all cadres below deputy factory director were appointed by the top leader.

After Yanjing's rapid start, domestic beer consumption had already exploded. Not only Beijingers wanted to drink beer, but the whole country did.

In 1984, the state formulated the "1982-2000 National Food Industry Development Outline," requiring beer output in 2000 to increase by more than 15 times compared to 1980. A project called the "Beer Special Project" was quickly launched, and more than 800 breweries sprang up across the country. Every province and city had its own local brand, and Beijing alone had a dozen or so.

In the second half of 1988, domestic beer suddenly became "tired beer," and the situation where the emperor's daughter didn't have to worry about marriage disappeared. It was at this time that Yanjing's most important figure, Li Fucheng, appeared.

Li Fucheng, a junior high school graduate, had served as a village propaganda committee member in Dasungezhuang Town, Shunyi, for two years, then went to the Shunyi Fertilizer Plant and rose to deputy secretary of the party general branch. When transferred to Shunyi Brewery in 1983, Li Fucheng's position remained unchanged, still deputy secretary. With beer sales in a grim situation, in March 1989, the 35-year-old Li Fucheng was appointed factory director at a critical moment.

Before that, like other enterprises, Yanjing operated under the planned economy model—only responsible for production, not sales, with products exclusively sold by the sugar, tobacco, and liquor company. "You keep an eye on production; I'll go out and run the market," Li Fucheng said to his predecessor, Jiang Geng, upon becoming factory director.

▵ Li Fucheng

Yanjing was the first to break the monopoly, organizing fleets to deliver goods directly to dealers in Beijing city every day. At the same time, factory leaders and salespeople went into the streets and alleys, opening up individual wholesale outlets. Based on this, they deployed 2,600 flatbed tricycles, letting small vendors pedal through the streets hawking beer, so residents could buy beer at their doorstep.

At that time, "Every household drinks Yanjing" became the "Ninth Scenery of Beijing."

The "Hutong Strategy" accelerated Yanjing's production and sales. In 1993, Yanjing's output reached 185,000 tons, ranking third nationally; two years later, Yanjing tied with the "most famous" Tsingtao Beer for first place; in 1996, Yanjing was the first in the country to exceed 500,000 tons, winning its first single championship.

Beijingers love to drink Yanjing, and Yanjing is proud to be in Beijing.

In 1997, Beijing Yanjing Beer Group, Xidan Shopping Mall, and Niulanshan Distillery jointly initiated Beijing Yanjing Beer Co., Ltd., listing on the Hong Kong and A-share markets. Just three years later, Yanjing's output reached 1 million tons. From a small brewery, it leaped to become a large beer group.

03 Capital Pressure

When Yanjing Beer was listed, there were over 600 breweries nationwide.

It can be said that the national "Beer Special Action" worked, but it was more the result of a huge surge in market demand. Those countless breweries contributed many memories for the younger generation and set the theme for the next 20 years of China's beer industry: acquisition and consolidation.

Acquisition not only meant the fastest way to obtain production lines and resources, shortening the time cost of building factories, but also meant seizing vast regional markets.

Almost all large breweries realized the importance of the "enclosure movement," and capital played the most important role behind the scenes.

▵ Tsingtao Beer

Tsingtao Beer felt this deeply. In 1993, after listing in Shanghai and Hong Kong, Tsingtao raised 1.6 billion yuan. Suddenly having so much money and not knowing where to spend it, they simply deposited it in the bank.

Hong Kong shareholders said: "We bought Tsingtao's stock for you to develop, not to deposit in the bank. If you're going to deposit it, we could do that ourselves."

Under shareholder pressure, in 1994, Tsingtao Beer first spent 80 million yuan to acquire Yangzhou Brewery, which ended in failure. However, failure did not stop Tsingtao. Subsequently, Tsingtao acquired more than 30 beer companies nationwide, continuing its leading advantage from the 1970s and 1980s.

How could Yanjing be absent from this feast?

With its previous rapid expansion, refreshing Yanjing had already made a name for itself. After listing in Hong Kong and Shenzhen, Yanjing raised 1.3 billion yuan, providing relatively ample capital for its expansion.

While domestic large breweries like Yanjing were preparing funds and supplies, more experienced international beer brands were quietly stationing troops with huge capital, with various forces pressing in.

China's beer market was so large that international beer giants had long coveted it. Between 1992 and 1998, more than 60 foreign beer brands entered China in force. The domestic beer industry, led by Tsingtao, had barely repelled the first round of international capital through the Beer Defense War.

If they didn't quickly grow bigger and stronger through acquisitions, there was only one fate. What lay before Li Fucheng was a life-or-death battle against the current.

Unlike Tsingtao's "catching small mice" expansion model in Shandong, Yanjing chose the path of strong-strong alliances.

In 2000, Yanjing began by acquiring Xuelu Brewery, occupying the Inner Mongolia beer market; in 2001, it took control of Shandong's Wuming and Sankong breweries, plus the previously controlled Laizhou Brewery. Yanjing used 295 million yuan to integrate 850,000 tons of beer production capacity and 500,000 tons of market share in Shandong, about a quarter of the Shandong market; in 2002, Yanjing acquired Guilin Liiquan, establishing a foothold in Guangxi; in 2003, it partnered with listed company Huiqian Beer.

Li Fucheng loved watching "Animal World" and often drew inspiration from it. A rabbit trembles with fear at the sight of an eagle, so it is easily caught. "If anyone trembles or fears first in the market, they will be defeated by others."

Yanjing always benchmarked against Tsingtao, and the two were locked in fierce competition. At this time, China Resources, which had never drunk beer, also arrived. This new force, emerging from an unexpected angle, started its national expansion from Shenyang. The industry once thought it "would never grow big," but this newcomer, entering in late 1993, had begun to lay out a national strategy by 2002, setting the stage for a significant acquisition failure for Yanjing in the future.

Who decides the status in the beer world? China Resources Snow gave the best answer: capital is king. China Resources chose to form a joint venture with international beer giant SAB from the start, then began aggressive expansion. During those years, capital surged in the international beer market. SAB acquired Miller to form SABMiller; InBev acquired A-B to create AB InBev. At that time, these were the two super beer giants globally.

The international beer giants that failed in their first round of entry into China had also changed their strategies: entering the domestic market through gentle, covert joint ventures.

When all domestic listed beer companies had foreign investment, only Yanjing was an exception. It wasn't that foreign capital didn't want to enter Yanjing, but that Li Fucheng refused. According to statistics, Li Fucheng turned away more than 30 waves of foreign capital.

A New Zealand brewery owner found Li Fucheng and said, "Foreigners will soon carve up the Chinese market. You should cooperate with us!" Li Fucheng smiled faintly: "I wish you success."

Regarding the widely circulated claim that "Yanjing resolutely refuses joint ventures," Li Fucheng later explained: Yanjing has never refused joint ventures, but they must meet our principles: joint ventures without losing control, and without losing the market.

Li Fucheng had always been quietly competing with foreign capital. "Yanjing Beer already has its own flagship products, a broad market, and good economic benefits. In terms of invested capital, the banks support us. Why not strive to create a famous brand instead of giving the brand to others?"

▵ China Resources Snow

"No domestic alliances, no foreign joint ventures, go our own way, develop national industry." Li Fucheng's sentiment is admirable, but some analysts see it as a mistake.

Some industry analysis suggests that compared to other listed beer companies, Yanjing is the only listed beer giant that has not introduced foreign capital. The lack of internal vitality has, to a large extent, constrained Yanjing's development pace.

In 2006, China Resources Snow surpassed Tsingtao to become the sales champion.

04 Yanjing Falls Behind

In early 2013, when China Resources Snow announced it would acquire Kingway for 5.384 billion yuan, Yanjing was at the peak of its glory. After that, Yanjing made no major expansion moves.

The year it lost Kingway also became a turning point for Yanjing.

According to statistics from Shijie, in 2013, Yanjing's revenue was 13.7 billion yuan, its highlight moment. After that, performance began to decline. In 2014, revenue was 13.504 billion yuan, down 1.78% year-on-year; in 2015, down 7.15%; in 2016, down 7.70%; in 2017, down 3.26% to 11.186 billion yuan.

In 2014, Yanjing's net profit was 726 million yuan, up 6.68% year-on-year; in 2015, net profit was 588 million yuan, down 19.07%; in 2016, net profit fell 46.90%; in 2017, net profit fell 48.30% to 161 million yuan, and non-recurring net profit even showed a loss for the first time, at -37.16 million yuan.

An industry analyst pointed out that because Yanjing has not made major integrations or mergers for years, it remains positioned in regional markets such as Beijing, Inner Mongolia, Guangxi, and Fujian. As the beer market is carved up, expanding against the trend becomes more difficult, and its own strong markets are being eroded by other giants, so performance naturally declines.

In 2016, the market share of the top five companies reached over 73%, but the differentiation was obvious. Among them, China Resources accounted for 25.6%, Tsingtao 17.2%, AB InBev 16.2%, Yanjing 9.3%, Carlsberg 5.0%, and other brands accounted for the remaining 26.7%. Yanjing's market share was nearly half that of the third place.

For years, Yanjing has adopted a "1+3" brand strategy, with "Yanjing" as the main brand and "Liiquan," "Huiqian," and "Xuelu" as regional brands. The annual report shows that in 2016, the main brand Yanjing sold 3,330.3 million liters, down 6.2% year-on-year; in 2017, the main brand sold 3,129.3 million liters, down 6.0%.

If you stretch the timeline, the company's net profit in 2017 was 161 million yuan, a figure that returned to 20 years ago—in 1997, the first year of listing, Yanjing's net profit reached 187 million yuan, which was also the lowest after listing.

2018 was a World Cup year, a carnival for fans, and supposed to be a hot sales season for beer, but Yanjing's sales were very cold.

Yanjing's third-quarter report showed operating revenue of 3.858 billion yuan, a slight increase of 0.10% year-on-year; net profit attributable to shareholders of the listed company was 104 million yuan, down 12.21%. Although it still ranked fourth among the top five breweries, compared to the top three, Yanjing's revenue growth was at the bottom.

China Resources Beer's third-quarter report has not yet been published, but its first-half revenue growth had already reached 11.4%. In the first three quarters, second-tier Chongqing Brewery and Zhujiang Brewery grew 8.81% and 6.91%, respectively; second-ranked Tsingtao's first three-quarter revenue grew 1.09% year-on-year, which was poor; but Yanjing was even worse, with only 0.39% growth.

05 Crisis Everywhere

Yanjing Beer must be more anxious than its fans.

In May 2015, Yanjing changed its leader, with Guo Zhenjiang succeeding Li Fucheng, who had led Yanjing for nearly 30 years. Two years later, on May 16, 2017, the 14th Shunyi District Government Executive Meeting decided: Guo Zhenjiang was removed from the position of chairman of Beijing Yanjing Beer Group, and Zhao Xiaodong was appointed chairman.

Immediately upon taking office, Zhao Xiaodong issued an announcement: globally selecting a general manager.

▵ Zhao Xiaodong

Some industry observers pointed out that Yanjing's "decline" from its peak to today has gradually revealed deep-seated problems. Yanjing's "slow transformation and bloated organization" is mainly reflected in conservative and passive execution, slow marketing strategy changes, redundant personnel with low efficiency, and weak R&D capabilities.

Observers provided a bunch of data.

Shijie compared the 2017 annual reports of Yanjing and Tsingtao and found that Yanjing had 37,003 employees, while Tsingtao had 40,810, but the per capita operating revenue of Yanjing and Tsingtao was 302,700 yuan and 693,000 yuan, respectively.

Also in 2017, Yanjing's management expenses were 1.269 billion yuan, while Tsingtao's were 1.244 billion yuan. Although Yanjing's management expenses were not much higher than Tsingtao's, Yanjing's total assets were 12.9 billion yuan less than Tsingtao's.

Yanjing also lags far behind Tsingtao in R&D investment and output efficiency.

From 2015 to 2017, Yanjing's R&D investment was 299 million, 299 million, and 252 million yuan, with personnel numbers of 1,221, 1,228, and 1,369, respectively. In contrast, Tsingtao's R&D investment in these three years was 12.879 million, 14.613 million, and 18.689 million yuan, with personnel numbers of 49, 48, and 51. During these three years, Tsingtao applied for 45 patents, while Yanjing only obtained 19.

Yanjing's efficiency is not on the same level as the first tier. As of press time, Yanjing had not responded to Shijie's inquiries.

In the past two years, the beer market has undergone another transformation: low-end beer has hit the ceiling, and all beer companies are moving toward the high end. The battlefield situation has changed. According to the 2017 annual report, Yanjing's front lines are also in urgent trouble, with North China, East China, South China, and Central China all facing losses, with Central China declining by as much as 10.37%. Even its most important home base, North China, declined by 0.58%.

China Resources, Tsingtao, and AB InBev have begun a "Romance of the Three Kingdoms." Whether Yanjing, which once sponsored Chinese football and table tennis and even contributed to lunar exploration and Shenzhou launches, can keep up is worrying.

In "Animal World," fast running and courage are survival skills, and the treacherous beer circle is the same. On Valentine's Day 2012, when Yanjing was about to acquire Kingway, some industry analysts predicted that the small and medium fish in the market had basically been eaten, and the beer market would enter an era of eating big fish.

Who is the chopper, and who is the fish?

Source: Shijie (ID: sparklelive) References: "Yanjing Beer Chronicle" and "Yanjing Beer News Documentary"

10th B-end E-commerce Inspection--"From Product to Scene"

Event time: December 10-13 Event location: Wuhu, Nanjing, Changsha Event schedule:

Morning of Dec 10: Visit Three Squirrels headquarters + snack store

Afternoon of Dec 10: Visit Nanjing Squirrel small store

Evening of Dec 10: Visit Nanjing Master Gao Beer Workshop

All day Dec 11: Nanjing-Changsha, or free arrangement

Morning of Dec 12: Community group buying exchange salon

Afternoon of Dec 12: Kaola Select Heroes League launch event

Night of Dec 12 to early morning of Dec 13: Field visit to Kaola Select logistics center——This time is the peak sorting period in the warehouse, allowing direct observation and learning of the backend operation process of community group buying e-commerce Welcome interested distributor friends to join us for understanding and field inspection :

Organization format 1. Big-name exchange salon2. Company visit 3. On-site explanation 4. One-on-one communication5. Actual market case visit

Friends who want to participate If you are interested in a specific day's content, you can register separately Long press this QR code or click "Read Original" to register in one click! Add friend and note your intention -END-