Chinese beer market laps up heady times as industry consolidates

Mergers and acquisitions are commonplace in China's beer market as large brewers from home and abroad step up efforts to vie for the low-end market. Dong Naide / for China Daily

Last month, beer industry giants Anheuser-Busch InBev and China Resources Snow Breweries (CRB) moved to tighten their grip on the market. AB InBev purchased Dalian Daxue Brewery, one of the top three players in Northeast China's Liaoning province, and CRB, in which London-based SABMiller has a stake, said it had obtained Jiangsu Santai Beer's trademark and marketing channels. But in a bubbling industry aiming to become one of the world's biggest beer markets, the news caused no ripples. China's beer industry has recorded profit growth of up to 494 percent in the past five years, figures from the China Alcoholic Drinks Industry Association (CADA) show, and the booming market is attracting huge attention and investment from foreign breweries.

New projects and market consolidation have helped form the sector's 8 billion-liter production capability every year on average in the past three to five years alone, says He Yong, secretary-general of CADA's beer branch.

Total sales in China's beer market hit 44.29 billion liters in 2010, about 24 percent of the world's total volume, according to global market research firm Euromonitor International.

China is considered the world's biggest beer consumption market, with sales nearly double that of the United States, the second biggest beer market.

"Still, beer consumption per person per year in China is about 33 liters, which is far from that of the US and Europe," He says.

"The amount is more than 100 liters in the US and even hit 180 liters in northern Europe.

"Because of cultural differences, China may not be able to reach the consumption levels of the West, but the market potential is still very large."

China's beer market will continue to increase by 6 to 7 percent in the next five years, Euromonitor forecast.

In contrast, the Western beer market has been shrinking after the financial crisis.

CRB, Tsingtao and Yanjing Beer used to be three biggest players in the Chinese market, whose main companies are either wholly domestic or have domestic stock holders with controlling shares. Foreign brewers in China are only considered to hold an advantage in premium beers.

But foreign breweries such as AB InBev are starting to make headway. Last year, AB InBev's market share grew to 11 percent, surpassing Yanjing's 9.7 percent.

Guo Enya, corporate affairs director of AB InBev China, says the acquisition of Dalian Daxue Brewery is part of AB InBev's strategy to increase its footprint in China and will support "continued, sustainable growth with an optimized brand portfolio".

Miguel Patricio, president of AB InBev Asia Pacific, says: "It is a symbol of our long-term commitment to China, the world's largest volume and fastest-growing beer market. This acquisition will complement our existing presence in China and bolster our position in Liaoning province, China's fourth-largest province in terms of beer consumption."