Tsingtao Brewery loses top spot despite 16.9pc turnover climb

Tsingtao Brewery, the mainland's second-largest beer producer, yesterday posted 63.4 per cent earnings growth to 348 million yuan in the first half on strong demand. Turnover reached 6.74 billion yuan, up 16.9 per cent year on year.

The company said it sold 18.71 million hectolitres, up 16.2 per cent from a year earlier with Qingdao - where the company is based - being the largest market on sales of 2.69 billion yuan.

Tsingtao beer also has a strong presence in other domestic markets, including the rest of Shandong and large parts of the southern region.

Snow, a Tsingtao competitor jointly run by China Resources Enterprises (CRE) and South Africa-based SABMiller, has overtaken Tsingtao Brewery as the No1 beer producer in the mainland.

At the end of last year, Tsingtao Brewery held 13 per cent of the domestic market, while Snow accounted for 15 per cent.

CRE and SABMiller last week said they had acquired four breweries in Liaoning, Anhui and Hunan provinces for US$79 million to increase the presence of Snow across the country.

To raise market penetration, the joint venture has been used to buy a number of small breweries, generally at low prices.

Analysts said since global players such as Heineken, Anheuser Busch and SABMiller had already entered the country, the next round of consolidations in the beer market would also include marketing efforts, such as building brand awareness.

Tsingtao Brewery, a partner of the Beijing Olympic Games next year, is restructuring its production chain to combat rising costs.

The company also is trying to maintain its image as the 'national beer' through its Olympic marketing programmes.

In addition to the campaign, chairman Li Guirong said Tsingtao was gaining technical skills by co-operating with Anheuser Busch to internationalise the Tsingtao brand and raise domestic awareness of its products.

According to China Industry Research Net, the mainland's average beer consumption last year was 25 litres per person, one litre less than the average worldwide consumption.

The report estimated that in the next 10 years, the annual growth in beer consumption would be 10 per cent or more. The nation's 11th five-year plan is expected to boost the incomes of people living in villages, an important driver of the mainland's consumer market.