Mainland brewers to pass on rising costs to drinkers

PUBLISHED : Thursday, 08 April, 2004, 12:00am
UPDATED : Thursday, 08 April, 2004, 12:00am

Tsingtao Brewery, the mainland's largest brewer, is planning to increase prices to help offset rising production costs.

Chairman Li Guirong said the company would have to raise the price of beer by 5 per cent if production costs kept growing at the present rate, unless productivity could be improved.

'The surge in raw material, fuel and transport costs has been exerting severe pressure on the bottom line of the whole beer industry,' he said.

Mr Li said Tsingtao would try to improve the efficiency of its operations to keep the price increase as small as possible.

Rice, coal and fuel prices have risen sharply over the past year, with rice up 70 per cent compared with last April. To absorb the impact, the mainland's 22 largest breweries have reportedly agreed to increase beer prices.

However, intense competition in the country's fragmented beer market could prevent a significant price increase, according to a UBS research report.

'Since there are 200-plus breweries in China, we do not expect a uniform stance,' the report said.

Beijing Yanjing Brewery, the country's third-largest brewer, had denied it had agreed to price increases.

The UBS report forecast a 3 per cent beer price increase for Tsingtao this year.

Chinese breweries' raw materials and equipment are increasingly sourced from the international market, but their beer prices are often half of the international level.

Mr Li said Tsingtao would increase selling prices of premium products more steeply than those of low-end products.


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