China’s beer market, which has seen three straight years of declines, shows slight signs of recovery. The major Chinese breweries, including China Resources Beer (CRB), Tsingtao Brewery and Beijing Yanjing Brewery, have recorded higher sales and profits for the first half of 2017.
At an earlier press conference in Hong Kong, CRB’s CEO Hou Xiaohai expressed confidence that the company could continue to outperform the market.
In the first six months of 2017, CRB boosted sales by 4% and profit by 93% on a year-on-year basis. The corresponding figures were +2% and +7% for Tsingtao and +1% and +9% for Yanjing respectively. Full year’s profit result trend for 2016 was negative for all three brewers.
Beer sales in China peaked in 2013, when 502.9 million hectoliters of beer were sold. Since then, beer sales declined steadily before slightly rebounding 0.8 per cent in the first seven months of this year, according to recent data from the National Bureau of Statistics (NBS).
“Beer demand is sluggish as China’s population continues ageing. Cheap lagers, which account for more than 70 per cent of total sales, are becoming less popular,” said Iris Zhang, an analyst for Guotai Junan Securities. As with most other developing beer markets, sales of cheap beer is very much dependent on available income. While the Chinese economy was cooling down in recent years, also beer sales have slowed down.
Additionally the Chinese beer market shows signs of maturation with consumers asking for higher priced premium and specialty beers at the expense of mainstream lager beers, which also means a decline in volume sales.
The recent reverse of the trend can be mainly attributed to Chinese government, which has boosted public investment, especially on infrastructure projects, temporarily lifting economic activity in view of Communist Party's national congress, which began on Oct. 18.
However, many observers believe that the recovery might just be a flash in the pan as the government cannot continue to push the economy forever. A first warning signal came in August, when China's beer production volume declined 2.5% from a year earlier, right in the middle of peak demand season.