China breweries angle for more premium, high-quality beer
Chinese consumer preference for higher-quality beer is an opportunity for breweries in the country.
- Increasing awareness of health and well-being among consumers in China could lead to a shift towards milder and lower-alcohol beverages such as beer.
- There is a move towards premium beer consumption patterns driven by purchasing power, changing consumer behavior and a growing middle-class.
- Over the coming years, sales volume of premium beers may continue to outperform the overall beer segment.
China’s beer industry will continue to be shaped by consumers increasingly opting for high-quality, premium beers. This presents significant growth potential for the premium segment, which has a relatively lower market share of 12.6% in China compared with other major countries, according to 2022 data from Euromonitor.
Over the coming years, sales volume of premium beers may continue to outperform the overall sector, leading to a further increase in average selling price (ASP). Despite market concerns that macro factors may impact the pace of premiumization, Nomura analysis suggests overall direction of premiumization will likely continue, owing to the affordability of beer and a shift in demand from other alcohol types towards beer.
A similar story unfolded in Japan during 2008 to 2019, when premium beer outperformed the overall market while overall beer sales volume declined. In the same vein, the Chinese beer market will likely continue to promote premiumization, which presents a lucrative opportunity for beer manufacturers.
The major shift towards premium beer consumption patterns in China is being driven by factors such as increasing purchasing power, changing consumer behavior and the growing middle-class population.
Consumers have grown to value quality, convenience and uniqueness when purchasing food and beverage products, which translates to an increasing preference for premium alcoholic beverages. To meet customer demand, manufacturers are now focusing more on value sales growth over volume growth by increasing premium offerings in its product mix.
According to the United Nations, China’s population aged 25 to 49 reached its peak around 2012 to 2016 before declining in the following years. Since adults aged 25 to 34 account for more than one-third of total beer consumption, according to Nomura estimates, the growth of beer sales will continue to be affected by demographic changes.
There is also a shift of customers in China pursuing quality beer vs quantity, as indicated by the gradual decline of per capita beer consumption from 2013 to 2019, according to Euromonitor. China’s per capita beer consumption is inching close to that of Japan and South Korea, showing that there is probably limited room for beer consumption growth. However, increasing awareness of health and well-being among consumers in China could lead to a shift towards moderate alcohol consumption, driving the popularity of milder and lower-alcohol beverages such as beer.
Most China breweries have adopted premiumization as a key growth strategy in the long term. Such breweries will continue to raise their ASP and expand profit margins.
Though we expect the competitive landscape for the premium beer market in China to be fierce, leading Chinese breweries are in a good position for improved profitability, in our view, driven by three factors: enhancing the product mix, improving factory capacity utilization, and optimizing expenses. The input cost pressure may also ease in 2023-2024, which would help improve profit margins for most Chinese breweries.
For an in-depth view into China breweries, read our full report.
Contributor
Cathy Xiao
China Consumer analyst
Jizhou Dong
Head of China Property and Consumer Research
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