SPECIAL NOTE: WITH NEW WEALTH IN MANY urban areas in China, drinking wine is essentially trying to imitate the western style of living…there is something about Chinese imitating the west…so while Wine sales are down in some parts of Europe, they blame it on modern technology taking time away time from relaxing with a class of wine…the sales of wine are on the rise in modern China…the article seems to blame it on the aging Chinese population implying older folks are less interested in beers!!!!!!!!! Steve, USA, peace october 27, 2018 wechat 1962816801 email@example.com blog: https://getting2knowyou-china.com
Beer or baijiu? China’s drinkers become more quality conscious
Experts say the domestic beer market has dropped significantly by volume. But higher-quality brands and sales of traditional Chinese clear liquor, or baijiu, are bubbling away nicely
UPDATED : Friday, 13 October, 2017 Laura He scmp
Asahi Group, Japan’s largest beer producer, is considering bailing out of its share in Tsingtao, one of China’s largest beer makers, in another clear sign that Chinese drinkers are moving upmarket.
Experts say the domestic beer market has dropped significantly by volume, as buyers opting to cut back on cheaper products. But higher-quality beer brands and sales of traditional Chinese clear liquor, or baijiu, are bubbling away nicely.
Total national beer production has seen three straight years of declines, before slightly rebounding 0.8 per cent in the first seven months of this year, according to recent data from the National Bureau of Statistics (NBS).
As those overall sales fall, however, demand for quality lager (imported and local), and traditional liquor such as Moutai, have continued strong.
Kweichow Moutai, the country’s biggest premium baijiuproducer, toasted first-half gross profit margins of 90 per cent giving it a market value of nearly 700 billion yuan (US$106.4 billion).
Asahi, Tsingtao’s second largest shareholder with a 19.99 stake, is considering the transfer of all or part of its 270 million H shares, the Chinese brewer said in an exchange filing Thursday night.
Asahi’s holding was worth about US$1.2 billion by Friday’s market close. In 2009, the company spent US$667 million acquiring the stock.
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In a Bloomberg interview earlier this year, Asahi President Akiyoshi Koji noted Tsingtao’s “worsened” earnings result and said “ownership without control doesn’t make much sense”.
The Post asked both parties for further comment on the reason for the sale, but neither offered anything more than what was in the filing, that Asahi was looking at its “own business arrangement consideration”.
Tsingtao share price has fallen 4 per cent in the past six months – as the Hang Seng jumped 17 per cent in the same period – and has halved compared with the beginning of 2014.
Shares in Kweichow Moutai, meanwhile, hit a new all-time high close of 556.49 yuan on Friday in Shanghai, pushing its yearly gains to 70 per cent, making it among the world’s most valuable liquor brands. The stock has increased more than fourfold in value compared since the beginning of 2014.
“Beer demand is sluggish as China’s population continues ageing. Cheap lagers, which account for more than 70 per cent of total sales, are becoming less popular,” said Iris Zhang, an analyst for Guotai Junan Securities.
Tsingtao reported 30 and 14 per cent declines in net profits, respectively in 2016 and 2015. For the first half of this year, however, net income grew 7 per cent as the company shifted to selling more premium products, inside and outside the country.
Beer demand is sluggish as China’s population continues ageing. Cheap lagers, which account for more than 70 per cent of total sales, are becoming less popular
IRIS ZHANG, AN ANALYST FOR GUOTAI JUNAN SECURITIES
“Growth potential is limited for the beer market in future,” Zhang said. “Companies can no longer expand by offering just low prices.”
At the same time the higher-margin liquor market is raking in the profits, growing those as a grouping by 9.2 per cent, according to the NBS.
Kweichow Moutai’s interim net profit jumped 28 per cent to 11.3 billion yuan, with gross profit margin at 90 per cent.
Earlier this year, Nielsen China’s Minnie Yu said in a report that “consumption upgrade” has become the major driving force for China’s liquor market.
“As consumption becomes the main driver of the economy, competition among FMCG (fast-moving consumer goods) brands is also intensifying, much like the liquor market.”