Manufacturing News

Beer prices rise on higher costs

Mid - & high-end products will likely gain more market share.

The average price of beer in China has gone up sharply as consumers demand higher-quality products, boosting sales for medium - and high-end beers, according to industry observers.

Anheuser Busch, the producer of Budweiser, raised its wholesale price by nearly 50 percent from March 10. Harbin Beer is also planning to raise prices in April.

Zhu Danpeng, an independent food and beverage analyst, said: "As consumers are seeking good beer, it is inevitable for beer brands to adjust their portfolio and raise prices for their mainstream products, mainly medium-end beers."

The cost of raw material is a major driver for the price surge. According to a statement from Tsingtao Beer, packaging material costs have gone up, pushing up production costs. Snow Beer also blamed increases in raw materials, packing and labor costs.

In 2017, the sales revenue of major beer producers in China rose 2.3 percent to 176.6 billion yuan ($28 billion), but their production volume was down 0.66 percent to 44.01 million kiloliters, declining for the fifth consecutive year.

Pearl River Beer's annual report showed that its net profit surged 64.15 percent year-on-year to 187 million yuan last year, with its revenue up 6.23 percent to 3.76 billion yuan.

According to Shenzhen-based research company CIConsulting, profit in the beer industry in China will reach 16.8 billion yuan in 2018 and grow further by 6.61 percent annually in the next five years to reach 21.7 billion yuan by 2022.

Zhu said medium - and high-end beer will account for more than 30 percent of the Chinese beer market by 2020. Though low-end beer consumption is shrinking, it currently still takes up about 80 percent of the market share.

The 2018 World Cup will be particularly good news for beer producers, Zhu added.

An increasing number of beer manufacturers in China have rolled out medium - and high-end products such as Tsingtao Beer IPA and Yanjing White Beer.

There are 460 beer manufacturers in China. The top five - China Resources Holdings Co Ltd, Tsingtao Brewery Co Ltd, Beijing Yanjing Brewery Co Ltd, Anheuser Busch Inbev NV and Carlsberg - take up about 73.7 percent of the market, according to China Alcoholic Drinks Association.

Imported beer brands have also been moving to cash in on the Chinese market.

In January 2018, imported beer sales grew 83.9 percent year-on-year, partly because of the Chinese New Year in February.

In 2017, the volume of imported beer reached a historic high of 716,200 kiloliters and is expected to grow further this year, but most of the consumption growth will come from second and third-tier cities where imported beers are still not very common, according to Zhu.

Early this year, Scottish craft beer maker BrewDog announced that it was planning to open a brewery in China, its second-largest international market. In 2016, BrewDog's exports to China grew by 117 percent.

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