Battle brews for $14b territory beer market

Keith Wallis

YOUNG, skimpily dressed promotions girls are at the forefront of a beer war being waged in the territory by some of the world's largest and some not so big brewers.

But tight tops and mini-skirts are not enough to win the hearts and minds of the drinking public, as brewing companies have found to their cost.

Firms have to spend an increasing portion of their revenue on marketing and promotions to lure fickle drinkers, as more brands start to enter the market.

Over the past two years, the beer-drinking public has become even more capricious, enjoying a wider range of beers as more and more brewers, particularly from Europe, see the growing market potential.

At stake is a market worth more than HK$14 billion a year in sales, although in terms of growth the market has remained virtually static for the past 10 years.

Surveys carried out by the Trade Development Council and by research organisations show that the annual level of consumption has stayed the same, at about 1.6 million hectolitres.

James Rowell, sales and marketing executive with Young's Brewery, said: 'If you want to introduce a new beer, you have to get somebody else's customers.

'But customer loyalty is not that strong. You can have the promotion girls going round the bars, but you can't afford to do that all the time.

We are trying to build customer loyalty, particularly by marketing and labelling.' Young's had its best two months in May and June since it entered the Hong Kong market about 18 months ago.

Its growth was spurred by the Government's change in duty regulations, which made foreign imports more competitive.

Interlopers like Young's, Boddingtons, Corona, Tuborg and Grolsch have badly dented the hold the territory's two long established breweries, San Miguel and Carlsberg, have had on Hong Kong's beer drinkers.

Ten years ago San Miguel's market share was about 90 per cent.

Now it is about 35 per cent and falling, as young Chinese desert what has traditionally been a working man's beer in favour of foreign brews.

It is no surprise that foreign companies entered the Hong Kong market at a time when many 20-to 35-year-olds were returning to the territory having worked or been educated overseas.

This desire to attract a younger, wealthy and style-conscious clientele is reflected in brewers' marketing campaigns.

Foreign brewers target the trendy bars of Lan Kwai Fong, Causeway Bay and Tsim Sha Tsui, rather than dai pai dongs in Tuen Mun.

Fighting back, San Miguel has re-launched the Samuel Adams Boston lager - voted the Best Beer of the decade by US news magazine Time - through a fully-owned subsidiary, Beer World (HK).

It also said it would use non-returnable bottles for its traditional beers, saying this was because customers were put off by scuffed and chipped reused bottles.

Carlsberg has recently revamped the look of its cans to reflect a cleaner image.

The worldwide phenomenon of microbreweries - small, self-contained and relatively cheap plants - has fuelled this shift in taste.

The Aberdeen-based South China Brewing Company, set up in December 1994 by David Haines and two partners with US$1 million, aims to create microbreweries in Shanghai, Singapore and Thailand.

Two weeks ago Mr Haines announced plans for a public share offering when it lists on New York's Nasdaq exchange.

A promotional roadshow will be held to encourage small investors, and trading in the shares is to start in two or three months, Mr Haines said.

The growth of the territory's new generation of young beer drinkers is mirrored in China, particularly in Beijing, Shanghai and Guangzhou.

This in turn has attracted mounting interest from foreign brewers keen to tap into what has been a relatively unsophisticated market.

Lion Nathan, one of New Zealand's biggest brewers, is well advanced with plans for a US$170 million brewery at Suzhou, in the Yangtze River basin.

James Tsao, the firm's general manager for Asia, said it initially would produce 200 million litres of beer when it came on stream in 1998.

'This will rapidly increase to 400 million litres when the second stage comes on line about two years later. We feel the way to make money is to establish a large market share in a small area rather than getting a small share everywhere,' he said.

Young's is also keen to enter China's foreign beers market, dominated by Pabst Blue Ribbon, and is looking at buying a brewery in Shenzhen that will serve Guangzhou.

The Manila-based San Miguel Corp has spent US$260 million setting up four brewing joint ventures on the mainland.