China beer market loses fizz as spendthrift drinkers opt for cheaper brews
- An upmarket strategy has gone flat amid a decline in spending, while long-term demographic trends are shrinking the population of fans
For years, beer brands have been pushing premium products in China, thirsty to tap the consumption power of the growing middle class. But the effort seems to have hit a bottleneck as the world’s second-largest economy grapples with a nationwide spending decline and the number of beer fans shrinks.
State-backed China Resources Beer (CR Beer) said on Monday that its overall sales volume declined 3.4 per cent year on year in the first half of 2024 amid a “significant contraction in consumer goods”, even as the company, holding the largest market share in China, eked out a 1.2 per cent gain in profit to 4.7 billion yuan (US$658.5 million).
The APAC subsidiary of Belgian-Brazilian brewing giant AB InBev, known for Budweiser and Corona, also reported a 13 per cent decline in net revenue and an 8.5 per cent decline in volume in China in the first six months amid a “soft industry”.
Premiumisation was once a sure-fire way for brewers to boost profit margins and gain market share, especially amid a decline in consumption that began in 2013. By last year, production had shrunk to just 35.6 billion litres, down 30 per cent from its peak a decade earlier.
But the upmarket strategy has hit a snag in recent years as consumers tighten their wallets in search of products that offer greater value for money.
“When the economy was strong and salaries were rising, people were more inclined to spend on more expensive, higher-quality beer,” said Richard Lin, chief consumer analyst at SPDB International. “However, in the current situation – where growth and jobs are uncertain – consumers are becoming more cautious, and the confidence companies once had in premiumisation can no longer be taken for granted.”
The trend is moving beyond its initial phase of raising prices and enhancing product quality towards a “new phase” that is characterised by a focus on “value, experience, and personalisation”, CR Beer chairman Hou Xiaohai said during a press conference on Monday.