Seeking perfection: lab researchers at A-B InBev’s Double Deer brewery
THE CHINESE BEER MARKET:
CONSOLIDATION CONTINUES
From a distance the Chinese beer market looks a puzzle with hundreds of brewers fighting for profitable market share. But as Glen Steinman of Seema International explains, a closer look reveals a top four echelon of players poised to consolidate the market and, perhaps, start making returns that will interest shareholders
S
ince our last look in Brewers’ Guardian at Chinese market trends in Q4 2009, the focus then on industry consolidation led by China’s top four brewers –
CR Snow, Tsingtao, Yanjing and Anheuser-Busch
InBev – remains as relevant today.
As anticipated, industry consolidation, particularly by this ‘Gang of Four’, has accelerated and deepened in the last eighteen months via a powerful combination of acquisitions and greenfield breweries. The top four have also grabbed share and volume with good old-fashioned competition, albeit China-style, which entails an inordinate amount of hand-to-hand combat, account-byaccount, in market.
According to Seema International estimates, which vary substantially versus officially reported
China beer industry volumes, the top four brewers accounted for more than 100% of total industry growth in 2010 – meaning all others shrank
16
Brew Mar_Apr 2011.indd 16
as a category. They increased their aggregate market share to 61.6%, from 59.6% in 2009 and just 44.3% in 2006.
Looking further back in time, the top four brewers in 1999 only accounted for a slim
18.5% of industry volume and, for even further context, the top 10 had an aggregate 14% share in 1992. When I first started drinking beer in China in 1982, total market volume was well below 10 million hectolitres and Tsingtao, the leading brewer at the time, sold less than one million hectoliters. That’s a total which is border line at best for survival today and less than
1/60th of Tsingtao’s 2010 volume!
This is all textbook consolidation in a market that has grown at a historically unprecedented rate. Yet, despite all its recent speed, China beer industry consolidation still has a long way to go.
Consistent with the global beer industry consolidation presentations that brewer executives
and analysts have heard ad infinitum over the last decade, conditions in virtually all developed beer markets suggest that in future China’s top two to three brewers will someday account for over
80% and, perhaps, over 90% of industry volume.
This means those brewers, quite staggeringly, will likely have combined domestic China volume of more than 400mhl. For those with staying power, it is obviously worth fighting for a piece of that end game.
Hence, today’s top four are engaged in a progressively more fierce competitive battle to win share now and be among the market’s major winners long-term. This battle is expanding and intensifying throughout the country to the point where no geographic boundaries or traditional market strongholds are sacred.
The top four are buying and building breweries to aggressively expand and solidify their footprints. Indeed, their national brands already
“Strong cases can be made for the future potential in
China of each of CR Snow, Tsingtao, Yanjing and AB InBev” compete head-to-head in countless primary and secondary markets. Moreover, local markets that have heretofore been dominated by a top four brewer are now under growing attack from others among that group, each much better equipped and capitalised to capture share than the weaker, local competitors originally faced on their home turfs. If that sounds like an alarm for a possible, borderless bloodbath near-term, it should.
The big questions
This overall dynamic begs several key, albeit obvious, questions: which of China’s market leaders will thrive long-term and which will
