China’s beer market accounts for 12% of global sales. Beer enthusiasts across the country are now starting to experiment with new trends including premium and craft products, presenting excellent new opportunities for foreign investors interested in entering the market
China has been the world’s largest beer market since 2002. The country’s beer industry is also the fastest growing in the world, with total revenue projected to reach US$131.5 billion (£106.7 billion) by the end of 2023. However, the market is facing some challenges, such as the overcapacity of mass beer production and decreasing domestic beer consumption. That said, the value of beer sales in the country continues to grow thanks to rising demand for premium and flavoured beers, which foreign brands dominate.
Market consolidation and key players
China’s beer market is highly consolidated. The five top businesses — CR Snow, Tsingtao Brewery, Anheuser-Busch InBev, Yanjing Beer and Carlsberg — account for the bulk of sales volume and continue to hold a reasonably consistent share of the market. The industry is dominated by domestic companies (with a couple of exceptions for foreign brands who had an early entry in the market) making it challenging for international brands to join and take market share away from well-established competitors.
In 2021, the combined market share of the top five brands reached more than 70%. Small and medium-sized brands carve up the remaining market share. Among the key players, CR Snow holds the largest market share (23.2%), followed by Tsingtao Brewery (16.4%), Budweiser Asia Pacific (16.2%), Yanjing Beer (8.5%), and Carlsberg (6.1%).
Domestic Chinese beer brands benefit from superior base markets, geographically distinct branding and better local consumer loyalty. For example, CR Beer Snow clearly outsells its competition in Sichuan, the northeast and eastern China, while Tsingtao Beer is the preferred choice in its home province of Shandong. Successful foreign brands have had to rely on international endorsements and effective marketing.
Budweiser and Carlsberg have both built a solid brand reputation and loyal consumer base by engaging in activities such as the promotion of important music festivals in China. In addition, the two brands gained an edge by entering the market between 2010 and 2012 — that is, significantly earlier than domestic companies that only started debuting a series of high-end beers in 2015. This is mainly because the Chinese beer industry has been progressively shifting towards a higher-end segmentation.
Major trends in China’s beer market
A taste for craft beer
In recent years, the sales of high-end products have increased significantly. The implementation of this “high-end strategy” and improvement of product quality will likely become the new ground for competition between beer companies. Craft beer production, for example, began in China in the late 2000s against a backdrop of increased competition and shifting customer tastes. As regional brewers experimented with making their own beer, microbreweries sprang up across the country — something that won’t be a surprise to anyone who has visited one of the many, many craft breweries in cities like Beijing and Shanghai. Rapid urbanisation also brought about a shift in lifestyle, particularly among the younger population, and made it possible for people to purchase speciality beers. By 2025, it is predicted that 50% of all beer drunk in China and 72% of all beer spending will occur outside the house, such as at bars and restaurants. Additionally, Chinese consumers have started to choose premium beer over mass-produced, less expensive options.
E-commerce as a key distribution channel
During Covid-19, businesses had to rely more on e-commerce for product distribution due to the unpredictability of lockdowns and social distancing measures. On the Tmall platform, beer sales income and volume rose by 48.2% and 42.5% year-on-year in 2020, respectively, while the average online price of beer climbed by 4% over the same period.
Flourishing themed bars
Beer-themed pubs and bars have been flourishing across China. The total revenue of the domestic pub industry rose at a compound annual growth rate (CAGR) of 8.7% between 2015 and 2019 and is expected to reach 18.8% by 2025. Although the number of bars continues to increase, the penetration rate and concentration are still low, indicating that the entry threshold of the industry is low, which will lead to fierce market competition. By creating a good atmosphere for consumers and providing high-quality and relatively affordable beers, pubs can further attract the interest of consumers and enhance the competitiveness of their own brands.
Sustainability and carbon neutrality
As new and cleaner technologies have continued to emerge and even subvert the entire industry in recent years, more and more consumer brands are attempting to achieve carbon neutrality. By optimising packaging and increasing the use of renewable energy in production, they convey the brand’s commitment to sustainable development to consumers. From the perspective of beer products, optimising packaging is the first step to promoting recycling, which requires the active participation of production enterprises.
Challenges and opportunities for British beer brands
By 2026, the China beer market is expected to reach US$151 billion (£122.8 billion), growing at a CAGR of 5.07%. The industry is likely to continue its growth as a result of factors like increasing barley imports, China’s cheap average retail price (ARP) for beer, rising beer consumption among millennials, and fast-paced urbanisation. However, the long-term health concerns of excessive beer drinking, the damaging effects of beer manufacturing on the environment, and strict government controls are possible challenges that the market may have to face during future expansion.
Nevertheless, some noteworthy positive trends will emerge, including growing consumer preferences for craft beers, a boom in online beer sales, a growing taste for premium beers and an increase in the consumption of non-alcoholic beers. Moreover, the return to pre-pandemic levels of travel and international exchange is likely to stimulate a growing appetite for imported goods, which has already emerged in a growing preference for imported beers in China.
Chinese customers are eager to treat themselves to pricier international beer brands over local ones, in their perceived choice of quality over quantity. As such, premium beer consumption will continue to grow in popularity, contributing to the expansion of the beer industry. Precisely due to this increased propensity of young consumers toward premiumisation, foreign brands are advised to focus more on the mid market and premium segments.
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A version of this article was first published as ‘China’s Beer Market: Outlook and Opportunities’ by Dezan Shira & Associates’ China Briefing.