State-owned Yanjing Brewery is seeking a strategic investor, according to Gordon Orr, Asia Chairman of consulting company McKinsey. The company is having trouble since the traditional Chinese consumer turns away from volume beer brands and is increasingly looking for premium brands.
“Yanjing in particular is financially stressed: In their most recent half year results, sales fell over 10% and profits were down by a quarter from the year earlier. Their balance sheet is heavily indebted and the market believes they are looking for a strategic investor to bail them out,” writes Gordon Orr in a recent blog.
The brewery was founded in 1980 in the Chinese capital of Beijing and its name is derived from Beijing’s former name. In 2015 Yanjing Beer was designated as the official beer served at state banquets in the Great Hall of the People.
But Yanjing is not the only brewery having trouble. The leading beer brand Snow (21% market share in 2015) contracted 3% in sales volume last year. Even worse was the performance of the number two brand in the market, Tsingtao (11% market share), with a decline of 7%. In this respect, Yanjing with 8% market share in 2015 the number three beer brand in China, is just in line with a decline of 8%.
“The consumer goes more and more for premium instead of value,” says Antoine Bolly, who is selling Belgium specialty beers in China. While sales volume of beer in China is falling for three years in a row, the overall sales value of beer has been rising continuously. “Chinese consumers see imported premium beers as part of a modern lifestyle and an adventurous experience, in which they can try new flavours and brands,” says also Rabobank Food & Agribusiness Analyst Katherine Song.
To most industry observers these developments do not come as a surprise. The Chinese beer market is currently coming into a mature phase, just the same way many other beer markets of industrialized countries have gone through in the past.