Tsingtao to use more funds for promoting brand

PUBLISHED : Wednesday, 15 April, 2009, 12:00am
UPDATED : Wednesday, 15 April, 2009, 12:00am

Tsingtao Brewery, one of the nation's top beer producers, has said it will slash capital expenditure by more than half this year to preserve resources so it can promote its eponymous beer amid slack demand.

Chairman Jin Zhiguo said the brewer would spend less than 900 million yuan (HK$1.02 billion) this year on capital expenditure, down from 2 billion yuan a year earlier when it expanded capacity by 1 million kilolitres to 7.7 million kilolitres.

'This [sharp cut in capital expenditure] is an effective way to fight the financial crisis, and we hope to lift the manufacturing utilisation rate to improve output this year,' he said.

Mr Jin (right) appeared yesterday in Hong Kong for the first time since he became chairman of the Qingdao-based brewer last year.

President Sun Mingbo said Tsingtao would improve the utilisation rate of production facilities by five to 10 percentage points from last year's 70 per cent rate.

The 106-year-old company would also allocate more resources to promote its principal brand, Tsingtao beer, at a time when competitors were unable or reluctant to pour money into marketing, Mr Jin said.

He said the brewer's goal was 20 per cent growth in sales of the Tsingtao brand beer this year, compared with a 25.4 per cent increase to 2.4 million kilolitres last year. The entire beer market would experience slower growth as consumers cut their spending on dining out, he said.

Sales in the mainland beer market, the world's largest, grew an average 5.4 per cent last year, the slowest pace in three years.

Tsingtao, partly owned by Asahi Breweries of Japan and owner of four major brands, sold 5.38 million kilolitres of beer last year, up 6.6 per cent year on year.

Last week, it reported a 29.8 per cent rise in 2008 net profit to 7 million yuan, under Hong Kong accounting standards.

The company had said its goal was for sales growth to be 2 percentage points higher than the industry average this year.

The mainland beer market is highly fragmented, with the top 10 brewers holding about a 60 per cent share. Snow, a joint venture between China Resources Enterprise and SABMiller, holds the top spot with a market share of 17.7 per cent. But Tsingtao enjoys the highest brand recognition on the mainland.

'The domestic brands are still not strong in high-end segments, so we hope Tsingtao beer can maintain its competitive edge,' said Mr Jin, adding it would not raise or lower the price of this brand this year.