CR Beer toasts financial turnaround but sales still being affected by slower economy, health concerns

China Resources Beer, the country’s biggest brewer, is toasting a turnaround in fortunes, after reporting a net profit last year, from a hefty loss in 2015.

But its outlook still looks likely to be affected by less of a Chinese thirst for “liquid bread”, by growing health awareness and a slower economy.

Net profit last year stood at 629 million yuan (US$91 million) compared with a net loss of 4.1 billion yuan in 2015, when it posted 4.8 billion yuan in costs due to a business structuring, which saw it selling all its non-beer businesses to its parent.

Excluding the one-off item, net profit last year on the continuing business still fell 5.7 per from 667 million yuan in 2015 while revenue edged up 2.6 per cent year on year to 28.7 billion yuan, according to the company’s filing to the Hong Kong stock exchange.

The revenue figure was in line with analyst consensus estimates, according to a Reuters poll.

The board recommend to pay a final dividend of RMB0.08 per share.

The state-owned beer maker, which brews the world’s largest selling Snow beer brand, blamed the slowing economy for dwindling consumption.

CR Beer’s shares still rose 5 per cent to close at HK$18.66 after the result announcement at the lunch break.

“In 2016, overall beer market capacity was dampened by the sluggish macro-economic growth

and the decline in consumer spending appetite,” company chairman Chen Lang said in the result statement.

“The market demand was affected by flooding in the cities along the Yangtze River and parts of southern China in the first half, but benefited from a warmer-than-usual summer in the third quarter,”

Chinese consumption of beer has been declining over the past two years and is tipped to continue its downward spiral for the next five years, according to BMI Research.

Faced with more options, including wine, health conscious consumers have been less inclined to choose beer as their preferred alcoholic drink during their leisure time. CR Beer is now pinning its hopes on the premium segment to boost sales.

“Despite the expected fluctuation in future China beer sales volume, the group believes that there is still room for growth in the sales volume of mid- to high-end beer in view of progressive consumption upgrades in the medium-to-long term, as compared to other mature countries,” Chen said.

Snow beer continues to face growing competition from other local brand such as Tsingtao Brewery, other foreign beer brands as well as other local alcohol liquor makers such as Moutai, according to Louis Tse Ming-kwong, a director of VC Brokerage.

“CR Beer now focuses completely on its beer business. It however would need to spend a lot of money and effort in advertisement and marketing to promote its brands to compete with its many rivals,” Tse said.

“Unlike westerners, many Chinese prefer local wine such as Moutai or other local white wine. It needs time and promotion to establish a beer culture in China.”