China's leading brewers face a tough year because of the Sars crisis

China's leading brewery firms face a tough market this year as consumers lay low and avoid restaurants because of the Sars outbreak.

Following a prosperous year, they say business is now suffering from slow growth.

Beijing-based Yanjing Brewery - China's second-largest brewer - saw a double-digit drop in beer sales last month compared with April last year. However, executives at the firm - which is controlled by red chip Beijing Enterprises Holdings - said it was still early days, with the peak season for beer sales traditionally starting next month.

Tsingtao Brewery on Wednesday announced a modest 7.44 per cent year-on-year rise in first-quarter profit to 59.71 million yuan (about HK$55.97 million). It had achieved a 166 per cent rise in net profit to 222.55 million yuan for last year, helped mainly by improved sales volume.

Tsingtao said the Sars outbreak had started hitting the company's business, with sales in some locations slowing. It said the market would be even tougher in the second quarter due to remaining uncertainty over Sars.

Analysts said more than 30 per cent of Tsingtao's sales were consumed in hotels, restaurants and public places.

As a result, its businesses were hit as the number of visitors to China was declining. Exports to Hong Kong were also expected to drop, they said.

Core Pacific-Yamaichi analyst Wendy Huang said in a research report that Tsingtao was unlikely to meet its sales target of 3.6 million tonnes of beer this year.

Shares of Tsingtao finished last week 3.12 per cent firmer at HK$4.95.

'The outbreak must bring a negative impact on brewers.' said Kenneth Wu, of Harbin Brewery Group, the mainland's fourth largest beer maker.

However, the impact on brewers would vary because of different investment strategies and distribution networks.

He said 95 per cent of Harbin Brewery's beer was sold in northern China, where business was less affected by Sars compared to Beijing and southern China.

'So far we do not see our business in northern China significantly hit by the virus,' Mr Wu said. But the remaining 5 per cent of beer, which was sold in Beijing, Tianjin, Hong Kong and overseas, was badly affected.

Last month, Harbin posted a 33.6 per cent rise in profit to HK$108.76 million for last year.

The mainland's leading beer makers were originally expected to benefit from the growing beer market in China, with output increasing 5 per cent to 23.87 million tonnes last year.