Tsingtao net up 53.8pc on active marketing

PUBLISHED : Thursday, 30 April, 2009, 12:00am
UPDATED : Thursday, 30 April, 2009, 12:00am

Tsingtao Brewery, one of the nation's biggest beer producers, said first-quarter profit rose 53.8 per cent as it stepped up marketing and promotion and cut tax expenses.

Profit rose to 199.42 million yuan (HK$226.71 million) in the first three months from 129.64 million yuan a year ago, based on mainland accounting rules, it said. Sales rose 5.89 per cent to 3.75 billion yuan.

'The company had to face the lower demand in the domestic beer market resulting from the financial crisis,' Tsingtao said in a statement. 'However, it kept the continuous growth of sales volume and optimisation of the product mix through active marketing and promotional activities.'

Tsingtao sold 12.1 million hectolitres of beer in the quarter, up 5.2 per cent from a year earlier, of which about half came from its namesake brand, up 22 per cent.

The 106-year-old brewery, which trails Snow in market share, has slashed capital expenditure to boost a higher profitability this year amid slowing demand.

President Sun Mingbo said earlier the company would allocate more resources to promote the Tsingtao brand at a time when competitors were unable or reluctant to pour money into marketing.

'Gross margin [should] improve in the first quarter as maltering barley spot prices tumbled and futures prices did not pick up,' said analyst Paul Yuan Feiyang at China International Capital Corp.

Tsingtao's first-quarter earnings was also boosted by a 36.9 per cent decrease, or 43.6 million yuan, in tax expenses, more than offsetting a 25 million yuan increase in financial expenses and a 10 million yuan decline in non-operating income.

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.

However, Tsingtao enjoys the highest brand recognition because of its long history.

According to figures from HSBC Global Research, total beer sales volume of the nation in the first quarter grew 5.3 per cent, which is lower than the 8 per cent year-on-year growth in the first three months of last year.

Tsingtao Brewery said earlier this month its goal was for sales growth to be 2 percentage points higher than the industry average this year.

'Market share [for Tsingtao] is a priority in the medium term, we expect selling expenses will continue to pick up [this year],' said analyst Jiang Leah at Macquarie Research in Hong Kong.

Strong brew

Tsingtao saw sales of its namesake beer rise by 22 per cent

The mainland beer giant sold 12.1 million hectolitres, a rise of: 5.2%