4/1/2010 Economic Overview Economic Overview Gan Bei to 1.3 Billion World’s Second Largest Economy (PPP) GDP Growth 2007: 11.9% People 2008: 9.8% (estimate) 2009: 757.5-9% (forecast) The Chi na Mar ke t 2010: 8- 8-10%10% (forecast) 2008 GDP per capita (PPP): World Bank estimates $6,020 (PPP), CIA estimates $6,000, IMF estimates $5,970 Presented by William W. Westman Unemployment: 4% officially in urban areas, but including Craft Brewers Conference Chicago migrants may be as high as 9% April 8, 2010 Source: CIA World Fact Book, EIU, 2009, USB Economic Overview Slightly Smaller Area than the United States China's Expanding Total: 9,596,960 sq km Middle Class s 250 200 r 00/y 150 /realincome PPP 0 w WTO Access ion 100 over $20, 50 Million households 0 0 6 8 0 2 8 2 4 99 92 94 9 9 00 0 04 06 0 1 1 16 18 1 2 2010 2020 Source: www.flora.huh.harvard.edu/china/images/floramap.gif Source: Global Insight’s Global Consumer Markets Service & FAS China Forecast China’s Beer Industry So…… The largest in the world in terms of production What is this important to volume the Average per capita beer consumption is 5.25kg (or 5. 19 liters; this is the official Chinese U.S. Craft Brewer? estimate but….) Beer production increased 4.9% in 2009, over 2008, to 43 billion litres (33 liters per capita) Imported beer sales are very small compared to domestic beer sales, at less than 22 million liters in 2008. 1 4/1/2010 Opportunities for Imported Beers Favorable Environment Rising disposable incomes and a developing taste Accession to the WTO has benefited Chinese Imported, specialty items will spur demand industries across the board Gradual removal of market barriers and trade Increase in fore ign commun ity i n Chi na and Chi na ’s emergence restrictions creating increased competition in the world economy among domestic and foreign operators Opportunity to introduce high-value, imported American Craft Beers The Saddle Restaurant Looking Ahead Beijing China’’ s huge population, coupled with the market’’ s immaturity and sound long-long-termterm economic structure, all serve to create a very appealing market. China’’ s economic recovery remains firmly on track Craft Brew Market in China Expat community is well established and growing in China Many more int’l students studying Chinese as interns then seeking work in China Increase in international restaurants Sports bars open 24-24-hourshours per day, 7 days/week English Premier League, Cricket, Australian Rules Football, World Cup, ATP Tennis Circuit, NFL and MLB (esp. the Yankees on Chinese channels) 2 4/1/2010 International Influence Solana’s Tsingtao Brew Pub The NBA and CBA – Yao Ming in the USA; Stephan Marbury in China. Chinese students studying abroad, in the USA! IidiillIncreasing destination malls: The Village in Sanlitun (Addidas, Blue Frog, Union Grill, Element Fresh, Apple Store) Lufthansa Center (high end designer stores + Paulaner Brew Pub) Solana Mall (Tsingtao brewery, All American Sports Bar, Bling, ice skating rink) The Night Life Night clubs and bars open all night International DJs and theme nights Fashion and Style—Style—TheThe World of Suzie Wong, Apartment 8iCh8 in Chaoyang, Clb/BiFiSClubs/Bars in Five Star Hotels Chinese culture and KTV. 1308 Beijing German Brew Pub 3 4/1/2010 Retail Market Increasing incomes – consumers shop in Carrefour, WalWal--Mart,Mart, City Shop, and Jenny Lou’sLou’s——opportunitiesopportunities of imported craft beers. Emphasis on food safety, packaging, international selection of beverages and food products. Wine market expanding very fast. Cheeses and yogurt. 4 4/1/2010 Market Development Strategies Emphasis on the Expat community More sophisticated and wealthy Chinese consumers who travel frequently EiCiMkEmerging City Markets – Distr ibut ion Networ ks Rising incomes have driven the consumer foodservice market, and also the development of pubs and bars FoodFood--beveragebeverage pairing promotions for five-five-starstar chefs in hotels and international restaurants Educational seminars on U.S. craft beers 5 4/1/2010 Techniques Effective promotion tools: ----SimpleSimple promotional items in popular expat locations plus developing relationships with key Additional Market Information F&B managers and bartenders . ----SalesSales girls hired by beer manufacturers in bars and restaurants are effective tools to push sales, and to introduce new or premium imported American Craft Beer and Ale to Chinese consumers. Beer Sales Regional Differences OffOff--tradetrade accounts for 68% of total volume Consumer preferences sales in 2008/2009, which includes domestic and vary in different regions in China. imported beer. PPeopleeople in Northwest On-trade channel sales is growing faster, d ue to China tend to prefer the strong development of the consumer stronger tasting and highhigh--strengthstrength beersbeers.. foodservice market. TThehe majority of Chinese consumers prefer lighter tasting and lowerlower-- strength beers. Growth of Imported Premium Lager Pricing (>Y20 ($2.93) per bottle) Sector Pricing 2008/2009 2004- 2004-20092009 CAGR Premium Above RMB20 per liter Growth of 36%3.6% -46%4.6% Standard RMB7- RMB7-2020 per liter sales volume Economy Below RMB7 per liter Growth of 5.75.7%%--2.02.0%% Value Source: Official statistics, Trade associations, Trade press, Company research, Store checks 6 4/1/2010 Pricing Pricing SStandardtandard lager brands (RMB7-(RMB7-2020 per litre) Demand for premium lager brands (> RMB20 recorded the strongest growth during 2009. per litre) remains limited in China, with such The leading standard lager brand in China is products recording a total volume share of just Tsingtao, which recorded a volu me share of 2% in 2009. 32% in 2009, with demand being fuelled by Premium lager sales are dominated by rising demand for higher quality amongst multinational brands like Budweiser, Heineken, increasingly sophisticated consumers. Tiger, and Carlsberg, with the majority of sales being made onon--trade.trade. Brand Shares of Top Ten Domestic Brand Domestic Competition Beer 20062006--20092009 Brand Company 2006 2007 2008 2009 Top Six Domestic companies in beer sector Snow China Resources 8.8% 13.3% 15% 17% China Resources Enterprise Co., Ltd with production Tsingtao Tsingtao Brewery 4.5% 4.8% 5.8% 6.1% capacity of around 10 billion liters. Yanjing Beijing Yanjing Brewery 4.5% 4.6% 4.9% 5.2% Tsingtao Brewery Co., Ltd Harbin (Anheuser(Anheuser-- Harbin Brewery Group Ltd 00 0 0 4.5% 4.7% Busch InBev NV) Beijing Yanjing Brewing Corp Zhujiang Guangzhou Zhujiang 3.8% 3.5% 3.0% 2.9% Brewery Co. ltd Harbin Brewery Group Co., Ltd Hans Tsingtao Brewery 1.7%2.0% 2.6% 2.8% Henan Jinxing Brewery Group Jinxing Henan Xinxing Brewery 2.9% 2.8% 2.7% 2.7% Guangzhou Zhujiang Brewery Co. Ltd Group Liquan Beijing Yanjing Brewery 1.6% 1.9% 2.2% 2.6% No official micro brewers in China. There is a China Sedrin (Anheruser(Anheruser-- Inbev Sedrin Brewery Co. -- - - 3.1% 2.6% Food Industry Association’s Beer Chapter. The Busch InBev NV) official website is http://www.haicent.com/ Laoshan Tsingtao Brewery Co. Ltd 1.5% 1.7% 2.2% 2.4% Others 51.1% Source: Official Statistics, Company Research Company Shares of Top Ten Global Beer Beer Imports by Country/RCountry/Regioegionn of Origin (Liter) Brands 22006006--20092009 Country 2007 2008 2009 % Change 43.96 % total Volume 2005 2006 2007 2008 2009 World 21,828,148 28,132,881 40,501,332 50.69 China Resources enterprise 13.1 15.4 17.9 17.9 19.2 Germany 7,325,490 8,238,110 12,414,016 13.58 Tsingtao Brewery 13.4 12.9 12.9 13 13.4 Mexico 7,924,683 9,012,035 10,235,487 1,715.70 Taiwan 1,783 255,511 4,639,305 AnheuserAnheuser--BuschBusch InBev NV ------ 12.1 10.8 South Korea 6.37 Beijing Yanjing Brewery Co. 10.2 10.2 10.4 10.4 10.7 2,112,223 3,678,992 3,913,456 118.12 Belgium 433,535 680,667 1,484,690 Henan Jinxing Brewery 4.2 4.6 4.3 4.2 4.1 61.42 Group France 191,465 875,230 1,412,790 -6.07 Guangzhou Zhujiang 4.0 3.8 3.5 3.0 2.9 Malaysia 1,303,114 1,352,099 1,269,969 Brewery Co. -15.62 Suntory Holdings Ltd 2.4 2.8 2.6 2.4 2.5 Russia 282,684 1,341,810 1,132,262 5.88 Carlsberg A/S 1.8 1.9 1.9 1.8 1.8 Netherlands 632,584 840,707 890,100 390,240 499,448 515,917 3.3 Kingway Brewery Holdings 1.4 1.4 1.4 1.5 1.6 Ireland Ltd Asahi Breweries Ltd 1.7 1.9 1.9 1.6 1.4 Source: Official Statistics, Company research Source: World Trade Atlas, Beer made from Malt. 7 4/1/2010 Beer Sales Volume through Beer Production, Imports and Exports OnOn--tradetrade and OffOff--tradetrade Channel Million 2004 2005 2006 2007 2008 Liters Million 2004 2005 2006 2007 2008 2009 Production 29,100.5 30,620 35,151.5 38,905.7 41,030.9 liters RilRetail 18, 834 20, 711 23, 484 26, 179 27, 509 29, 050 Apparent 28,986.1 30,494.2 34,995.3 38,721.9 40,817.4 Consumpti Food 8,765 9,726 11,110 12,462 13,165 13,952 on Service Exports 141.3 147 177.5 205.7 241.6 Total 27,599 30,437 34,594 38,641 40,674 43,002 Imports 26.8 21.1 21.3 21.8 28.1 Source: Global Trade Information Service (GTIS) Source: Official statistics, trade associations, trade interviews and estimates Competition Example of Acquisition Domestic beer manufacturers dominate beer Snow is a 51:49 joint venture between Hong Kong’s China Resources Enterprises and AngloAnglo--SouthSouth African Brewing sales in China, with the top six domestic SABMiller.