China's Beer Boom 31/12/02

HONG KONG, China (CNN) -- Battling the beer bulge has taken on a new meaning in China where international brewers, facing saturated markets at home, are racing to tap into a booming yet glutted market.

China's beer market is the world's second largest after the United States, and is already the number one market in Asia for international brands.

"It's grown very fast over the past few years. A lot of that has to do with consumer spending, greater demand for the product," says Mark Michelson of Apco Asia.

"But a lot of it has to do with marketing and distribution as well. And you've also started to see the beginning of a consolidation in the Chinese beer market," he adds.

In the 1990s, though, foreign investments in China's beer sector went flat -- startups left drowning in a sea of cheap local brew.

These days overseas beer giants, unable to beat domestic brewers' vast sales networks and low production costs, are buying into some of the largest local players.

Beer deal

Most notably, the world's biggest beer producer, Anheuser Busch, which has just signed a deal to increase its stake in China's biggest brewer, Tsingtao, from 4.5 percent to 27 percent .

Others now looking to pour money into the China beer market are: South African breweries, Belgium based Interbrew, and Japan's number two brewer Kirin.

"We've been advising brewers since 1994 in China. We used to spend so much of our time trying to help brewers lose less money," comments says Glen Steinman of Seema International.

"And in fact now brewers are able to start making money. The two most active brewers in China, AB and Sab Miller, are both profitable in China today,"

Still, competition remains stiff.

"Very, very competitive, especially if you look at the urban markets, generally there are two or three entrenched state owned breweries already in place and now you have national brands like Tsingtao trying to make inroads," says Henry Lee of Hendale Asia.

But high risks reap high rewards -- China is expected to overtake the U.S. as the leading beer market in the world within the next few years.


 Image © Lee Ka Sing | Design by Rachel Wong