Latest China Resources Beer News
Sep 28, 2021
China's top brewer extends reach beyond shrinking beer market CR Beer's forays into baijiu and nonalcoholic brew target consumer shifts China Resources Beer is pursuing consumers with growing incomes and a taste for premium beer. © Reuters SHIN WATANABE, Nikkei staff writer September 28, 2021 10:00 JST DALIAN, China -- As changing consumer tastes threaten to erode China's beer sales, the nation's top brewer is rushing to diversify its product lineup, by branching out into traditional liquor and developing non-alcoholic offerings. China Resources Beer (Holdings) will take a 40% stake in Shandong Jingzhi Baijiu through a subsidiary, according to plans released this month by China's market regulator. Jingzhi is a producer of baijiu, a traditional sorghum-based liquor, with brands including Yipin Jingzhi. "We will diversify our alcohol business" by 2025, CR Beer CEO Hou Xiaohai said during an earnings briefing in which the deal was announced. "Baijiu will be an area of focused investment." Baijiu and nonalcoholic beer are among the alternatives being pursued by the brewer as demand for its mainstay products shrinks. Beer sales in China fell about 11% by volume in the five years through 2020, according to Euromonitor, with drinks such as wine claiming more market share. Though CR Beer bought an 11% stake in a Shanxi Province-based baijiu company in 2018, the Jingzhi deal marks its first baijiu business tie-up. CR Beer will market Jingzhi liquor through its network of retailers and restaurants. Baijiu tends to sell well in winter when beer sales typically slow. The Jingzhi deal followed the top brewer's first foray into nonalcoholic beer in March with the launch of Xiao Pi Qi, a beverage featuring lychee and rose flavors, aimed at young, health-conscious consumers. As consumption trends shift, the brewer has scrambled to move production toward midrange and high-end beers that have gained more of a following thanks to rising consumer incomes. This effort centers on the Chinese operations of Heineken that CR Beer acquired in 2019, with plans to build two more breweries serving the business for a total of five. The company is reducing capacity for cheaper products, mainly among local beverage makers bought during a flurry of acquisitions in the 2000s. China Resources held a total of 68 breweries at the end of June, down from 98 at the end of 2016, and plans to shut 10 more. The workforce also has been cut by half. The restructuring has contributed to solid earnings. CR Beer's net profit doubled on the year to 4.2 billion yuan ($649 million) in the first six months of 2021, on a 13% rise in sales to 19.6 billion yuan, the best showing in comparable data going back to 2016. The company looks to capitalize on this strong position by diversifying while it still can. China's overall demand for alcohol, however, looks certain to shrink as the country's working-age population -- the biggest drinkers -- decline in number. In Japan, which confronted this issue sooner, Asahi Group Holdings seeks new opportunities through overseas acquisitions. But "Chinese brewers don't have the strength to operate overseas," analyst Zhu Danpeng said. China Resources brands such as Snow are all but unknown outside China. This leaves little choice for now but to focus on success domestically, where competition looks likely to grow even more intense. China has a plethora of specialized brewers, foremost among them Kweichow Moutai, the country's top baijiu distiller. Tsingtao Brewery, the nation's No. 2 beer company behind China Resources, started a new production facility in Xi'an in April, and third-place Anheuser Busch InBev in June announced the construction of a new brewery in Fujian Province. The cutthroat race for a slice of this shrinking pie will demand strong product development capabilities and the ability to cultivate new markets. Stay ahead with our exclusives on Asia Sign up to our newsletters to get our best stories delivered straight to your inbox.