THE BEER MARKET IN CHINA IS GOING PREMIUM

by A Mac

 

As the most populous country in the world, China and its 1.4 billion netizens consume more and more beer every year. While in many western countries, there are downward trends in the consumption of alcohol, in China it is the opposite. Even though liquor is not the favorite beverage of Chinese people, beer is more adapted to their taste and takes a great role in social relationships.

Like everywhere else in the world, when going out with friends, Chinese people drink beer.

INTRODUCTION TO THE CHINESE BEER MARKET

In the USA, beer consumption is plunging. While beer represented over 60% of alcohol consumption in the 90s, it only represents now a bit less than 50%. A consumption decrease that could be linked with the rise of a healthy lifestyle within society.

In western countries, people try to drink less alcohol, eat less meat and sugar but more veggies instead. The opposite is true in China – people tend to consume more meat than before and more alcohol.

In fact, Chinese people are not necessarily drinking more beer but rather more expensive beer. They try to emphasize the quality rather than the quantity. Last year, the beer market followed a positive evolution of 7%. Based on 5 years, the beer market increased by +42%. So even if the volume sold in China is slightly decreasing, its value is increasing.

INTERESTING FIGURES ABOUT THE CHINESE MARKET

  • In 2020, the purchasing power per habitant increased to $24 trillion
  • China’s GDP (Purchasing Power Parity) increased from $20 trillion in 2015 to over $23 trillion in 2017 and 101.6 trillion yuan in 2020.
  • In 2018, the purchasing power per habitant increased by +6.6%
  • Development of the middle class: 350-400 million peoples (corresponding to six times the population of France and all population of the USA)

Due to the rise of Millennials and the constant increase in wealth, the Chinese consumer has a more nuanced view of brands. In the previous year, a foreign brand name would have been enough to suggest a “high-quality product”. But from now on, expectations for products are increasing in terms of quality, value, and service. Being a foreign brand is not enough anymore.

THE BEER MARKET IN CHINA IN COUPLE OF WORDS:

Market size evaluated to $85 billion by Euromonitor

  • China represents 12% of beer global sales
  • In 5 years, the market value increase of +42%
  • Compared to last year, the market value increased by +7%
  • Annual consumption of 45.7 billion liters
  • The average per capita consumption stands at 29.6L in 2019
  • The average per capita money spent on beer is $980
  • The proportion of high-end and ultra-high-end beer is expected to increase to 20% in the next 5 years (as of 2020)

ACTUALLY, CHINA IS CONSUMING TWICE AS MUCH BEER AS THE US, AND MORE THAN FIVE TIMES WHAT GERMANY (THE LARGEST BEER MARKET IN THE EU) CONSUMES. THE BEER MARKET HAS MATURED OVER THE YEARS AND ITS IMPORTATION HAS BEEN GROWING BY DOUBLE DIGITS OVER THE LAST 5 YEARS. IN 2019, CHINA IMPORTED OVER $821 MILLION OF BEER, DOMINATED BY EU PRODUCERS (REPRESENTING AROUND THREE-QUARTERS OF IMPORTATIONS).

THE MAIN IMPORTERS OF BEER IN CHINA:

  • GERMANY
  • USA
  • BELGIUM
  • NETHERLANDS
  • PORTUGAL

THIS MEANS THAT 4 OUT OF THE 5 MAIN IMPORTERS OF BEER IN CHINA ARE FROM THE EUROPEAN UNION. EUROPEAN BREWERIES HAVE THEREFORE AN EXCELLENT OPPORTUNITY TO TAP INTO THIS PREMIUM MARKET.

MAIN COMPANIES IMPORTING OR PRODUCING BEERS IN CHINA:

  • ANHEUSER-BUSH INBEV
  • HEINEKEN
  • CHINA RESOURCES
  • TSINGTAO BREWERY
  • CARLSBERG
  • MOLSON COORS

BEER CONSUMPTION TREND IN CHINA

THE DEVELOPMENT OF ARTISANAL BEERS IN CHINA.

Even the Belgium company “AB InBev”, number 3 in the Chinese market is buying local artisanal brasseries. Last year, they bought “Boxing Cat” in Shanghai. Chinese people love quality products. And an artisanal product will be highly competitive compared to an industrial one. Some companies as the Belgium one understood it, and therefore they are trying to surf on this new wave and level up their product range.

CHINA AND ALCOHOL

Beer in China is a valuable market, but it tends to be more and more competitive. Indeed, many new companies are taking their chance in the middle-kingdom. However, according to forecasts, beer will represent only 25% of alcohol consumption by 2022, while in 2015 it was over 30% (in value).

Not to worry about this consumption drop as it is in part due to a new way to consume beer: quality over quantity. This new purchasing behavior is influencing both prices and companies’ margins.

HOW TO DISTRIBUTE YOUR BEER IN CHINA?

As you may imagine, there are many ways to sell your products and make money in China. To perform in this highly competitive market, full of barriers, you will have to follow some simple steps. Whether you choose to distribute your beer offline or through an online e-commerce platform, you will not be able to skip your branding moment. 

In China, for the exact same product, people would be ready to pay ten times the price if something is branded.

China has suffered for a long time with its poor-quality reputation – and not only on the foreign market. In the domestic market, this reputation sticks to most local brands. In the last decades, many regulations have been implemented to fight this issue, but it will take some time for Chinese consumers to trust local brands more. However, the trust issue is very real for Foreign companies that wished to succeed in China. Local scandals have affected heavily how people consume here. For instance, when purchasing online, brand reputation is the most common factors considered with +72% of consumers saying that it is decisive (In comparison, less than 55% of consumers say that price influence them when purchasing online).

WHAT DOES THAT MEAN FOR YOUR BEER BRAND WHEN LOOKING FOR CHINESE SELLERS?

  • Who are you? What do you want?
  • What value can you bring me?
  • What can you do for me?
  • What guarantee of success do I have to cooperate with you?
  • Can we be friends?
  • Do people know you and do they love you?

China’s distributors and consumers will do extended research on a brand before taking any action. The above list of questions is a good summary of the type of info distributors are looking for. They want a trustful business relationship. They do not want to deal with someone and realize later that it was a fake company or that the products itself were low-quality.

Understand that for Chinese distributors, it is relatively common to be contacted by an “American” company, and 2 weeks later discover that it was in fact 3 guys trying to do some business in their garage in China’s countryside.

With this context in mind, I am sure you now understand why your future consumers and partners will care about comments and online reviews of your company and products. You can pretend to have the best beer in the world if there isn’t any review or article talking about it, it won’t work.

If you made it until here, bear with us, it is time for some tips to understand how to build up your strategy and conquer the Chinese Beer market.

ESTABLISHING YOUR BRAND IN CHINA

Imagine, a Chinese netizen contacts you. He tells you that his company is super famous in China, and he wants you to distribute his product. I guess without recommendation it is going to be complicated, right? Especially considering that his company is probably not referenced on Google.

In China, it is the same. They do not have access to our occidental mainstream media and social network. Therefore, they do not have Google, Facebook, Instagram, YouTube, Video, and others.

YOUR VISIBILITY IN CHINA: BRAND AWARENESS

  • DEVELOP A WEBSITE (IN CHINESE) 

Pit Caribou – Website in Chinese

It needs to be in Chinese (yes, it is still their mother tongue), with a Chinese domain name. Plus, we recommend you adapt your website features to the local market. Due to cultural differences, their design is usually different than ours.

  • OPEN A WEIBO ACCOUNT (OFFICIAL) 

It is like the Chinese Twitter. The most popular social media in China, it’s also an excellent platform to develop a KOL strategy. If you plan to target a large audience and engage with your customers, Weibo is a must-do.

  1. Open a certified account
  2. Communicate with your community
  3. Advertise your brand through sponsored ads
  4. Engage your customers (with games and contest for example)
  • BAIDU: THE CHINESE GOOGLE

Having a Chinese website is good, but not enough. They do not trust companies… If they want to drink a good beer, Chinese people will check for information on Baidu, their Chinese google. Before buying anything, they will search for information about the product or the brand. It can be reviews, comments about something specific, forums, or general research to solve a problem they may have such as: “what’s the best beer for a Friday night? Or What’s the most favorite beer in China?”

 

Before purchasing a product, they will compare different brands and will be influenced by comments and reviews. Here is how to optimize your online reputation:

  1. Baidu Zhidao & Zhihu:a good way to deliver information.
  2. Baidu Baike: it is kind of the Chinese Wikipedia. And they trust it a lot here. So, we advise you to make up your own page.
  3. Forums:it is important to develop your online presence. The more people talk about you, the better.
  4. PR: if you are a good beer, high quality, valuable price, and consumed by lot of people, then there should be articles about you. If not, it means you are not worth it.
  5. Comments/reviews: Chinese people are always giving a comment or review about what they bought/consume. And you will need plenty of positive comments to convince distributors to distribute your product.

SHOW ME YOUR LOVE: CHINESE SOCIAL MEDIA ENGAGEMENT

Once you are visible, a first step will be done. If you followed our previous advice, customers will be able to find the minimum information certifying you are trustable.

It is a first step, but not enough.

In China, importers/distributors will not cooperate with you if you are not able to show them that your beer will work in their market. They receive hundreds of demands a day. So, to get their attention you’d better develop a strong fan base and show that people love your products.

As for customers, it is similar. Keep in mind that Chinese people tend to be suggestible and “act like sheep” … We mean here that they will not buy something that nobody bought before. They do not like to be the first to buy. On the other hand, they will be glad to buy something that everybody is buying. The reason behind all this, is that a famous product can be trusted. While if they are the first ones to buy it, they have no guarantee of the product quality. And they do not want to be cheated.

Therefore, building a strong e-reputation and a strong brand image is the best solution for you to gain the trust of Chinese consumers and future partners.

WECHAT: A CHINESE MARKETER’S BEST FRIEND

WeChat is like the Chinese Facebook. Everybody uses it in China. A great messenger APP that also gets a “moment” system allowing people to share content (messages, pictures, videos) and personal feedback. Through this app, people use “Wechat groups” to communicate solutions about their problems and therefore recommending brands or products. Not very efficient for direct advertisement but a super tool for community management and building engagement. You can also create your own groups through the APP.

OUR WECHAT RECOMMENDATIONS:

  1. Open an official account
  2. Create an e-brochures
  3. Community management
  4. Engage with your followers
  5. Use mini programs

DOUYIN: THE ENTERTAINMENT PLATFORM 

A short video sharing app growing extremely fast among young generations. It is the perfect app to generate content and spread it to a wild audience. More intuitive and fun than WeChat and Weibo, this app is also an amazing tool for KOL strategy.

 

THE TWO FIRST STEPS BEFORE CONQUERING THE CHINESE BEER MARKET:

  1. Make Yourself Visible
  2. Develop an amazing e-reputation

TIME TO MAKE MONEY.

  • You are visible in China. Good.
  • You have a good reputation in China. Good.

But now, how do we make money? Without sales there is no business, we will outline for you here the best ways to sell your beer in China.

HOW TO DEVELOP YOUR ONLINE SALES IN CHINA?

It’s probably the easiest way to make money in China. In western countries people are more accustomed to buying food and beverage in physical shops, in China people are constantly focused on their phones. E-commerce online platforms are THE place to sell your product.

Just look at the 2019 Double 11 Day: $38 billion in a day. And most of the products have been bought through mobile phones.

ONLINE PURCHASING BEHAVIOUR IN CHINA:

  • People are always looking for a product to buy online.
  • Your potential clients can buy your products from anywhere. They will just need access to a phone or computer.
  • If they are satisfied, they will buy from you again.
  • If you are turning out to sell a lot of products on E-commerce Platform, offline distributors will contact you by themselves.

CHINA’S ECOMMERCE TREND FOR THE BEER MARKET

  • The growth rate of online beer channels is close to 50%
  • Lager, Wheat & stout beer account for +80% of beer sold online in China
  • Canned Beer represents 70% of beer sold Online in China
  • Bottled Beer represents 20% of beer sold Online in China

TO OPERATE ONLINE, HERE’S WHAT YOU CAN DO:

  • Cross-border E-commerce (Tmall Global, JD Global, etc.)
  • Chinese E-commerce platforms (Taobao, Tmall, JD.com, Pinduoduo, etc.)

WHAT IS CROSS-BORDER IN CHINA?

Cross-border is about the importation of goods through sellers from foreign countries.

Let us see how to sell your product through this model.

As an online e-commerce business model, you will need to have a platform. The main ones in China are currently Tmall Global and JD Global. Once you decide which platform you want to operate with, you will just need to set it up. Here is the process:

HERE’S THE PROCESS TO DO CBEC IN CHINA:

  1. Pay a deposit
  2. Build a nice store
  3. Advertise a lot (at the beginning)
  4. Pay commission per sales
  5. Pay daily operation management (high cost)
  6. Need active marketing campaign

The good part of cross-border e-commerce is that you do not need to have a Chinese business license or any certification. The bad part is that it is expensive.

WHAT ABOUT SELLING BEER DIRECTLY ON CHINESE ECOMMERCE PLATFORMS?

If you have the possibility to establish your business directly into China (with a W.O.F.E. for example), and therefore get a Chinese business license and the required certifications, you can use Chinese e-commerce platforms such as Taobao, Tmall, JD.com, etc.

It is cheaper than cross-border and the time to deliver your product is faster. The main problem is that you will need to understand Chinese or to hire someone that can deal with it on your behalf. Because all the stores will be in Chinese. Otherwise, the process to open your store is like the one for a cross-border platform.

  1. Deposit
  2. Build store, design pages
  3. Advertise it
  4. Participate to special events (double 11, 618, 12/12, etc.)
  5. Manage daily operations
  6. Store supported by your branding

IF YOU STILL HAVE DOUBTS ABOUT SELLING PREMIUM BEER IN CHINA:

  • Corona, the famous Mexican brand owned by the Belgium group: AB inBev, decided to start local production in China due to the need of satisfying a high demand and in the same way solving supply problems.
  • There is such a high potential of development in the Chinese Beer market that Heineken decided to buy 40% stake in China’s largest beer company, just to challenge its rival “AB inBev”

 

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