of the world’s population, as AB InBev and SABMiller have done, Boston Beer focused on driving existing drinkers toward more upmarket brews. Compared to the massive volume increases achieved by bigger competitors over the past decade, its output has barely moved but they have investors tapping into their keg for a unquenchable thirst for the results. That helps explain the interest China Resources Beer is said to be showing in SABMiller’s central and eastern European assets, which include labels such as Pilsner Urquell and Tyskie. China Resources Beer, whose Snow brand is the world’s biggest-selling beer by volume, is considering an offer for assets valued at as much as $6 billion. The key for China Resources Beer to take on this deal would be to treat the assets as import brands, rather than a foothold in a new country. Japan’s beer market is rela- tively mature, but China’s growing incomes are increasing their thirst for products from afar as consumers take on more cosmopolitan like tastes. Industry numbers in China show that beer imports have risen over 350 percent and show little to no sign of leveling off any time soon so there is money to be made in this taste for trendier foreign drinks in the market place. Premium brands make up about 6 percent of China’s beer volumes but 32.5 percent of profits; Super-premium ones have 27 percent of profits despite only having 3 percent of volumes, with domestic mainstream and discount brands with just 40.5 percent of profits from a 91 percent market share. China Resources Beer got SABMiller’s 49 percent stake in Snow for just $1.6 billion, and Asahi bought its Peroni and Grolsch brands in Western Europe for $2.9 billion. Sapporo,
By Jamie Barrie C hina’s brewers have a major problem and that is that consumers are losing their appetite for domestic beer. Since reaching its peak in 2013 the volume of beer has poured off 12 percent but with low prices and fierce competition brewers abroad it does not look good for the industry. It might not look good but it does not mean that the industry is dead as you only have to look at the U.S. beer industry where beer consumption levels have never recov- ered what it achieved back in 2002 and that industry is far from dead, in fact it is thriving. Look at Samuel Adams brewer Boston Beer whose shares have climbed more than 1,000 percent since the industry peak. Instead of broadening its market to encompass an ever larger share
Denmark’s Royal Unibrew and Boston Beer itself could all be had for far less than the $6 billion SABMiller wants for its European assets and simply going after distribution and licens- ing deals would cost even less and give greater results.
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SPOTLIGHT ON BUSINESS • OCTOBER 2016
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