Click the image for more details Summer has arrived. In previous years, beer manufacturers would be gearing up to sprint toward sales targets during these golden months. But this year, the dark clouds over the beer sector during the annual report season have yet to dissipate, and this pessimism may persist through the summer. In 2016, China's beer production reached 45.064 million kiloliters, a year-on-year decrease of 4.4%, with the decline accelerating compared to the previous two years. Yanjing Beer's 2016 revenue fell 7.70%, and net profit nearly halved. Tsingtao Beer, Huiquan Beer, and Tibet Development (000752.SZ) all saw significant performance declines, while Lanzhou Yellow River (000929.SZ) reported losses. Even Snow, the industry leader, could not escape shrinking profits. China's beer market has shifted from the "Five Strong Contenders" (Snow, Tsingtao, Budweiser, Yanjing, Carlsberg) to a "Duel of Titans" (Snow, Budweiser). It is possible that in the end, all will be disheartened heroes. Domestic Beer Manufacturers Suffer Comprehensive Defeat The good times for most Chinese beer manufacturers ended in 2014. By 2016, this "defeat" became more pronounced and widespread. In 2016, Yanjing Beer (000729.SZ) sold 4.5036 million kiloliters, down 7.25% year-on-year; revenue was 11.573 billion yuan, down 7.70%; net profit was 312 million yuan, down 46.90%. Huiquan Beer (600573.SH), controlled by Yanjing, saw an even steeper decline. In 2016, Huiquan's revenue was 618 million yuan, down 17.83% year-on-year; net profit fell 92.70% to only 1.6795 million yuan, with non-recurring losses of 10.696 million yuan. No wonder, with three consecutive years of declining performance and the exit of key figure Li Fucheng, the perception of Yanjing has become "revenue and profit less than half of competitors." The new leader, Zhao Xiaodong, born in the 1970s, faces even greater pressure. In 2016, Yanjing's production and sales declined, inventory rose, and 2017 promises even more challenges. In reality, how well could competitor Tsingtao Beer be doing? In 2016, Tsingtao Beer (600600.SH) sold 7.92 million kiloliters, down 7.07% year-on-year; revenue fell 5.53%; net profit dropped 39.09%. Moreover, if it weren't for some overseas channels through its second-largest shareholder, Asahi Beer, Tsingtao's performance would have been even worse. China Resources Snow, which has held the top spot in China's beer market for 12 consecutive years, saw a slight revenue increase in 2016, but net profit of 626 million yuan was down 6.04% year-on-year. More alarmingly, China Resources Beer's net margin in 2016 was only 2.19%, far below its biggest competitor Tsingtao's 4.00%. Additionally, Zebra Consumption found that China Resources Snow's Central Region contributed 23% of the company's revenue but only 4% of its profits. May we ask the leaders in the Central Region: are your bonuses still intact? If the giants are struggling, regional brands are crying out even louder. The only company with positive profit growth, Zhujiang Beer (002461.SZ), did not achieve it through beer sales. The Road to Premiumization and Capacity Reduction Is Long The entire beer industry has seen significant declines, and none of the eight listed companies have impressive financial reports, so there's no need for embarrassment. However, amid this "gloom," a clear stream can still be seen: Chongqing Brewery (600132.SH). Chongqing Brewery is not large in scale. In 2016, it sold 950,000 kiloliters of beer, with revenue of 3.196 billion yuan. Although this was down 3.85% from 2015, net profit of 181 million yuan represented a 375.57% increase over 2015. The primary reason is premiumization. In 2016, sales revenue from high-end products (above 8 yuan) and mid-range products (4-8 yuan) increased by 2% each, while low-end products (below 4 yuan) saw a 24% decrease in sales revenue. In terms of brand strategy, the company "suppressed Chongqing and Shancheng brands while promoting Lebao and Carlsberg." In 2016, sales of Shancheng Beer decreased by 42%, while Lebao Beer sales increased by 20%. In the past two years, discussions about the future of China's beer market have centered on "premiumization." However, products like Snow's Face and Tsingtao's Pilsner have not performed well. Taking advantage of the popularity of imported beers in China, Carlsberg directly introduced Lebao to the Chinese market—a well-executed surprise attack. Following this trend, Chongqing Brewery seems poised to be the first to break through the industry's gloom. Another commendable move by Chongqing Brewery is capacity reduction. China's beer industry does not lack capacity; it has too much. In 2015, Chongqing Brewery shut down four subsidiaries, and in 2016, it closed three more. Despite this, its capacity utilization rate in 2016 was only 70.76%, indicating significant room for further reduction. Chongqing Brewery is not alone in needing capacity reduction. Tsingtao and Huiquan had capacity utilization rates of 72.72% and 75% in 2016, respectively, showing widespread overcapacity. China Resources Beer (00291.HK) has a capacity of 22 million kiloliters but sold only 11.7 million kiloliters in 2016. Other companies have not disclosed their capacity utilization. When Carlsberg closed breweries in China, there was widespread criticism. Perhaps in a few years, Carlsberg will be the first to reverse the downturn in China, and those critics will be proven wrong. It's worth noting that China's per capita beer consumption has already exceeded the world average. In those years, manufacturers like Snow aggressively captured market share with products priced around 2 yuan. Earning such small profits not only harms the market but also damages their own brands, as it's hard for a large ship to turn around. China Resources Beer has maintained its position as the domestic market leader through low-end, high-volume sales. In 2016, the average selling price of China Resources Snow Beer was 2,499 yuan per kiloliter, or 2.5 yuan per liter. A typical bottle is about 500ml, averaging 1.25 yuan per bottle. A couple of days ago, my family bought a bottle of Snow Chunshuang for 2.5 yuan from the corner store to cook crayfish. I took a small sip—at this taste and price, it's only fit for cooking shrimp. Source: Zebra Consumption (ID: banmaxiaofei) New Distribution's 7th B-end E-commerce Study Tour is now recruiting! Event schedule:

June 19-23, Suzhou · Shanghai · Hangzhou 19th: Check in at designated hotel in Suzhou; 20th: Visit Suzhou Maidlin; 21st: Visit Shanghai Hd; 22nd: Visit Hangzhou Wangcang; 23rd: Return or free time for sightseeing; Distributors interested in transformation are welcome to join us for learning and on-site visits: Organization format

  1. Company visits
  2. Real market case visits
  3. On-site explanations
  4. One-on-one exchanges Participating distributors only need to pay a registration fee of 200 yuan. Other expenses are self-covered. Long press this QR code or click "Read Original" to register. Long press the QR code to add WeChat for registration Group photos from previous tours: 6th B-end E-commerce tour group photo, from top to bottom: Zhongke Shangruan, Shuhai Supply Chain, Yunmei Shares, Yishang Logistics. 5th B-end E-commerce tour group photo, from top to bottom: Huiwangxing, Beiquan, Tongying Tianxia, Quanshihui, Zhongke Shangruan. 4th B-end E-commerce tour group photo, from top to bottom: Alibaba Retail Link, Qianmi Network. 3rd B-end E-commerce tour group photo, from top to bottom: Yunbao Shangmeng, Weijie City Distribution, Wanshang Yizhan. 2nd B-end E-commerce tour group photo, from top to bottom: Jinhuobao, Caiba, Yishang. 1st B-end E-commerce tour group photo, from top to bottom: Piduoduo, Beiquan, Yishang. Click "Read Original" to register -END-