China Resources Beer, beer market leader in China, is going to permanently shut down up to 25 of its 74 breweries by end of 2024. In a move to cut back on low-cost beer volumes and to upgrade its portfolio the maker of brands like Snow and Heineken will shut down three to five plants every year over the next five years, CEO XiaohaiHou said in an earnings call.
In recent years the Chinese beer market has experienced a trend away from high-volume low-cost beer to premium brands like Heineken. While in the five years to 2018 overall volume beer sales in China declined by about 10% to 455 million hectoliters, value beer sales increased by about 37% to roughly USD 93 billion, the Nikkei Asian Review reported.
In November 2018 CR Beer signed a binding agreement to acquire Heineken’s Chinese operations including its three breweries and a license for the Heineken brand in China on a long-term basis. In turn Heineken acquired a 40% stake of China Resources Beer Holding which controls CR Beer (inside.beer, 5.11.2018). The Group completed the acquisition of Heineken China on 29 April 2019 and formed a long-term strategic partnership with the Heineken Group. Before, CR Beer was lacking premium brands in its portfolio and lost market share to its competitors. Next to promoting import and premium brands of the Heineken portfolio, the group has now developed and markets own premium brands like SuperX, Marrs Green, Löwen White Beer and Craftsmanship.
While overall volume sales of CR Beer increased by 1.3% in 2019, sales volume of the mid- to high-end beer market expanded by 8.8%. The overall average selling price of the group increased by 2.8% year-on-year, as reported in the company’s recently published annual report.
Since 2016, CR Beer has reduced annual production capacity by 7% to 205 million hectoliters by closing 24 plants. With annual sales totaling about 114 million hectoliters, the group has still an excess capacity of 91 million hectoliters, which corresponds to about the whole production of a country like Germany.
The current situation after the coronavirus outbreak has worsened the situation. CR Beer’s sales have declined by 26% in January and February but CEO Hou is optimistic about the outlook. "If the current situation continues, restaurants will likely resume business in April and can be expected to return to normal by May," Hou said.