Chinese beer case study

Question 1

How big is the Chinese beer market

Answer 1

• 47 billion litres

- bigger than US beer market and twice as big as the UK beer market

Question 2

How much growth is there i the chinese market?

Answer 2

• It is both growing and declining
• VOLUME: the market is forecast to keep on DECLINING
• VALUE:the market is GROWING
• Drinking more premium beers compared to cheaper beers.
• Per capita consumption is a lot lower in the Chinese markets compared to UK and USA.
• Relative to the USA and the UK the average price must be a lot cheaper.

Question 3

Beer on-trade vs off-trade?

Answer 3

on-trade: i.e. restaurant, karaoke bars etc.

off- trade: i.e. buy from supermarket

distribution and market segments are different

-similar segments to the uk and USA which is good

Question 4

Euro monitor China Beer report

Answer 4

• Low average price; sales might be good, but average margins are thin
• Segmented market. Economy dominates (75% vol), but mid-priced and premium more profitable. Inked to geographic, demographic, psychographic and behaviourial variables. Eg geographically premium drinkers found in geographic segments eg Tier 1 cities (Beijing, Shanghai).
• Mid-price and premium beers growing (by value and volume), especially on-trade. Including imported beers.
• Interested in ‘exotic beer’, flavoured beers, craft beers.
• Trend towards can and PET rather than glass bottles
• Alliances between western and Chinese brew (JV)

Question 5

Nexis

Why do we retrieve such old data on Nexis?

Answer 5

An interesting HISTORY o western entry into the Chinese beer market. The Chinese market is attractive, but tough to entry – accessibility.

-Success requires resources, resolve, the right strategy

-Second wave: mergers, takeovers, partnerships
Chinese brewers stregtthening and expanding

-tough market to enter

Question 6

Reccommended strategies:

-

Answer 6

• Avoid China, look elsewhere
• Don’t target the whole Chinese market
• Low volume/ high margin niching? Target premium segment, affluent urban Chinese markets? On or off trade (is it consumed straight away)
• International strategy, cooperation with Chinese brewers?
• Other flavoured beers? Low alcohol beers.

Question 7

Spirits

Answer 7

• Value and Volume data in comparison to UK and US markets.
  -Volume a lot higher, but value not so great, must be a cheaper spirit price.
• Spike 2: the stopped use of corrupt public money.
  ANTI-EXTRAVEGANCE
• The vast majority of Chinese spirits is Baijiu – shows that market is so small, as this takes up almost 98.5% of volume.
• Single malt Scotch Whisky very small but growing rapidly, join this market?

Question 8

spirit sum up

Answer 8

• Surprisingly small!
• On/off trade?
• Single malt growing, blended whisky declining
• Demographics: young, wealthy, urban from Chinese ‘first tier’ cities for western spirits. Aspiration to ‘western’ lifestyles
• Hit by “anti-extravagance” measures that caused a slight decline
• V competitive
• On trade – social consumption
• Womans market
• Off trade demand  gifts

Question 9

strategies

Answer 9

• Look elsewhere
• Low volume, high margin western niches single malt scotch whisky
• International strategy, cooperation
• On trade: geographic, demosgrpahic. TMS: urban, young, wealthy, label-concious, western aspiring
• Focus on single malt scotch?

Question 10

overall conclusions

Answer 10

• Big growing markets look attractive but must consider other things too like profitability etc
• Up-to-date information is important, but so is the history
• Notice the issues with average national statistics.