Founding Member of the Craft Beer
Total Page:16
File Type:pdf, Size:1020Kb
Title: Craft Beer In China Speaker: Carl Setzer from Great Leap Brewing About Carl Setzer • Born and raised in Cleveland, Ohio • Founded Great Leap Brewing in October of 2010 with Liu Fang • Authoritarian Brewmaster and CEO of Great Leap Brewing • Founding member of the Craft Beer Association of China (CBAC) • Member of the Technical Scientific Committee of the Berlin Institute for Fermentation and Biotechnology (VLB) Great Leap Brewing Experience in Beijing Brewing Philosophy The goal of Great Leap Brewing is to brew a series of craft beers that represent the unique tastes of Chinese cuisine. We source the finest raw materials both domestically and internationally, and seek to incorporate high-quality teas, spices, honeys, fruits, and vegetables into our beer menu. Original #6 Doujiao Hutong Location In 2010, we found the 100 year old Qing Dynasty official’s former library that would become the home of Great Leap Brewing. Great Leap Pilot Brewery In 2011, we outgrew our humble brewery in the hutongs and established a production brewing facility in the Tian Xian Yu, nestled under the Mu Tian Yu section of the Great Wall. Nowadays, it houses our Barrel Aging program and Mixed Fermentation program as we seek to continue to expand our creativity and brewing portfolio. #12 Flagship Location-Brewpub Model Great Leap Brewing #12 was opened in June 2013 to meet the high demand for our beer and was the first Great Leap location to include a full service kitchen. The locations features a 715 square meter brewpub featuring an on-site brewing facility. #45 Xinyuanjie Location-Brewpub Model In March 2015, Great Leap Brewpub #45 opened for business. This brewery produces our three best- selling beers: the Honey Ma Gold, Pale Ale #6, and Banana Wheat. Great Leap Brewing-Brewpub Model Annually, Great Leap serves over 60 unique brands from grain to glass in our own locations and production volumes reached 4,500 HL last year. GLB currently enjoys a customer base of 70% Chinese and 30% Expats. Tianjin Production Brewery • Initial construction began April 2018 and will house a brewery capable producing 450,000 BBL at maximum capacity. • 175,000 square feet of total space, 100BBL brewhouse with canning and one way keg filling • Capable of reaching a water usage capacity of 3.5-1 Current State of Chinese Craft Beer Development Beer Industry Overview in China The national production volume of beer has been decreasing for the past 4 years. The volume of 2017 is 4401.5 (Unit: million kiloliter) Beer Industry Overview in China The utilization ratio of production capacity of core commercial beer brands are all less than 100%. Beer Industry Overview in China Premium / Imported Beers instead have been showing a significantly growing trend over the last 4 years. China’s Craft Beer Past China’s First Craft Beer Development 1988-1997 Beijing first saw a small brewpub economy develop in the late 1980s with a chain that had two locations in the city. • Popular with college students and young professionals • Opened by a Hong Kong restauranteur • Closed Abruptly after rumors of the ownership having failed business dealings in North Korea China’s Craft Beer Past China’s German Beer Fantasy Throughout the 90s and 00s, Beijing was also home to numerous Bavarian concepts of traditional German style beer in both Beijing and Shanghai. Led by Paulaner, Beijing was also home to Chinese concepts like Gold Hansen as well as other Bavarian brands that lacked the corporate infrastructure of companies like Hofbrauhaus and Paulaner, namely Drei Kronen 1308, Hopfenstube/Furst Carl, and Erlinger. Definition of Craft Beer USA Definition China Definition Small: Small: Only produce and sell up to 200,000HL of beer Annual Production of 6 million barrels or per year. less Independent: Independent: Less than 25% owned or controlled by 0% of the business can have investments from alcohol industry member that is not itself a other large alcoholic beverage companies. craft brewer Operation: Traditional: 1.Produces beer in a brewery or factory A brewer that has a majority of its beers 2.Sell beer in brewpubs, restaurants, other whose flavor derives from traditional or bars, etc. innovative brewing ingredients and their 3. Must have your own personal brand and fermentation company name 4. Must be officially registered with the government, be able to issue receipts Implementation Methods in China 1. Brewpub Model 2. Contract Brewing 3. Self-Owned Production Facility Top 10 Chinese Craft Brewery Today GREAT LEAP BREWING MASTER GAO JING A BREWING CO. HARVEST SLOW BOAT BREWERY ANT BREW PANDA BREWERY SHANGRI-LA REBERG 18 BEER Current State of Craft Beer in China CONTRACT BREWING This is the most common model utilized by the current craft breweries in China. (9 of the top 10 Chinese craft breweries use this method. Due to regulations and legal restraints in China, many breweries all contract their beer via third party commercial breweries or contract breweries.) Picture of Ürbrau Handan Current State of Craft Beer in China CONTRACT BREWING – Negative Effects on Market Price • Base COGS influenced by non transparent services and pricing structure, i.e., contract brewing leverages the temporary vacuum LF viable options by extorting those seeking to use it as a route to market • Results in burden on the on and off trade channels • Gets passed on to the consumer in the assumption that craft beer, regardless of point of origin, is overpriced • Average cost to offtake is $2.75-3.50 per 330ml small pack Current State of Craft Beer in China Most craft beer is priced out of consumption for the average consumer. This has directly affected the Chinese consumer’s opinion of the value equation for purchasing craft beer: Consumer comments on social media: “Craft beer’s price is too high, not every beer lover can afford it!” Media & Beer Blog articles discussing why craft beer is so expensive. Current State of Craft Beer in China Anheuser Busch InBev’s ZX Ventures China “To disrupt the market” China’s Craft Beer Development Facts • China’s first craft brewery opened in 2008 with the founding of Boxing Cat Brewery in Shanghai. • In 2010, Beijing saw its first craft brewery open – Great Leap Brewing. • In the last seven years, over 200 craft breweries have opened up all across China. Some have already grown quite large, but the majority still remain nano-breweries and brewpubs. • The CBAC boasts a membership of over 40 craft breweries • The growth of the Chinese craft beer industry has been significant, but it is too early to call it a revolution. • Currently, China looks to follow the same path as America in the late 1990s. Chinese craft brewers need to get into the business for the correct reasons. Future Potential Strengths Weaknesses • China’s unique culinary traditions provide access to • Lack of an educated market numerous flavors, additives, and other ingredients • Craft brewery owners entering the business for the to create a truly special style of craft beer. wrong reasons. • Growing middle class • Regulatory loopholes and lack of infrastructure • Stagnate commercial brewing industry • Leased locations for retail operations without the option or financial mechanisms to buy Opportunities Threats China, with its population and one of the world’s richest • The Chinese craft beer industry itself culinary and cultural histories, has a huge potential to • Poor product quality at both the contract not only make great craft beer, but make and define new brewing level and the brewpub level create a categories of craft beer that other countries and lag between the consumer expectation and breweries had never even considered. the consumer experience. Will China have a bigger premium/ultra premium/craft market than America? YES! • No religious stigma • No cultural inhibitions to drunkenness • Historical connection between business and alcohol • Rising middle class • Connection to local What’s the next steps? • Continued interaction and participation with the Chinese alcohol association and regulatory officials • Continued education of both consumers and industry • Clearer definitions of what is and what isn’t craft beer in China • Exposure and collaboration with international craft beer brands • Attendance and participation in international conferences and technological discussions Carl Setzer Contact Information • Email: [email protected] • Company Website: www.greatleapbrewing.com.