Millennials’ taste for designer beer adds fresh fizz to China’s boutique and old breweries

China’s beer sales, deluged by a glut of brands and production capacity, is showing few signs of recovering, exerting pressure on brewers to find new customers.

PUBLISHED : Wednesday, 14 June, 2017, 8:33am
UPDATED : Wednesday, 14 June, 2017, 8:33am

Chinese millennials are reaching deep into their pockets for a taste of the exotic, adding new fizz to the designer beers brewed by some of the country’s boutique and microbreweries.

The excitement is not limited to imports or premium beers. Even a century-old brew like Harbin Beer -- produced by China’s oldest surviving brewery -- has found a new lease of life as one of China’s top 10 alcoholic beverages, and as one of the brands owned by the world’s largest beer producer Anheuser-Busch InBev.

“Harbin Beer’s recent rise tells us that Chinese millennial consumers are opened to old Chinese brands, as long as these brands can connect with them,” said Wendy Wang, managing director of Kantar TNS, a consumer brand consultancy, in Beijing. “Let it be hip or cool, fun or wacky, classic or tasteful, brewery brands need to cut through with a distinct image and message.”

The millennials -- the generation born in 1980 who come of age at the turn of the third millennium -- are the most important drivers of consumer behaviour in China, as rising income and increasing contact with global trends upend age-old habits in the world’s largest consumer market.

In leisurely dining and drinking, the millennials are ditching their forebears’ favourite rice liquor for whiskies, wine and beer, picking out the exotic, the rare and the quirky as extensions of their personality.

“Our main customers are younger Chinese aged between 25 and 35 who can afford a discerning taste for something exotic or different beyond the ones available at mass supermarkets,” said Marcia Li, owner of the 145-square-metre Papa’s Beer, which serves up to 400 different brews on Wuding Road West in downtown Shanghai. “Their taste is so differentiated as everyone is seeking a flavour that meets their personal taste.”

Mass market beers like Tsingtao sell for 3.75 yuan for a 330 millilitre can, while imports can cost anywhere between 28 yuan to 68 yuan for a similar serving, and microbreweries sell home-brewed pours at the top of that price range.

Business at Papa’s Beer, which opened in mid-May, is already better-than-expected, as customers pour in with the onset of Shanghai’s sweltering summer, Li said.

Laura Cui is one such customer, spending up to 500 yuan (US$74) every month on average on beer, including imports like Belgium’s Hoegaarden, and the locally brewed Tsingtao Craft Beer. Hoegaarden costs 18 yuan a pour at Papa’s Beer.

“I’d like to try some new flavour at those beer shops,” she said.

China’s beer sales, deluged by a glut of brands and production capacity, is showing few signs of recovering, exerting pressure on brewers to find new customers, and pitch their beers to the generation with the longest spending lifetime.

“China’s beer market is saturated, as the weakness in sales volume has been consistent in the past three years,” said Jason Yu, general manager of Kantar WorldPanel China. “Average volume consumption won’t grow anymore.”

Sales volume fell 2.7 per cent last year, following a 3.5 per cent decline in 2015, according to Kantar’s data.

“With ageing population and change of consumer habits, the growth of beer market will be driven more by going premium, as consumers trading up to more premium brands, imported beer, craft beer and more,” Yu said.

Harbin Beer, founded in northeastern China’s largest city near the Russian border, was set up in 1900 by a German of Polish origin to supply Russian labourers working on the trans-Manchurian railway project. The brewery went through several hands -- including the former Soviet Union after the end of the Second World War -- until it was nationalised by the Chinese government in 1950 when Joseph Stalin ordered the return of Chinese assets.

SABMiller bought 29.6 per cent of Harbin Brewery in 2003, until a bitter takeover battle landed it in the laps of Anheuser-Busch in 2004.

Harbin Beer is the sole brand among the top 10-selling brands in China that enjoys the strongest following and increase in loyalty among the millennial generation, according to Kantar’s BrandZ study. The beer retails for 3.92 a can, a slight premium to other mass-market Chinese beers.

The winning recipe was its “Happy Together” sales and marketing campaign -- a play on the brewery’s Chinese short name Hapi (哈啤) -- to reflect friendship, a value very important to millennials. What also helped was the partnership with NBA and hip-hop musicians that all resonate with the young, said Anheuser-Busch’s Asia-Pacific North marketing vice president Bruno Cosentino.

“Connecting with young consumers in more disruptive ways through digital channels is another winning strategy,” he said, noting that evolving digital channels also helps meet consumers’ buying need in every touch point.

Three kilometres from Papa’s Beer is Beer Lady, another purveyor of premium and craft beers in Changning district. The owner Zhang Yindi has established a reputation for herself as the Beer Auntie among Shanghai’s aficionados.

It’s all about the personalty, said Matt Nolan, planner at advertising agency BBH China, whose clients include Harbin Beer. Consumers love brands that can project their personality, he said.

“As consumers evolve, so must the brand,” said Nolan.” We are constantly ensuring that we are keeping up with new needs and desires.”