Chinese Craft Beer Market: Still In Fermentation Stage

A tourist to a foreign country is often described as having just the pack on his or her back, a pocket with some local bills, and only knowing one word in the local tongue, “beer.”  This isn’t because every tourist is a drinker or would prefer to explore the underside of a bar to cultural spots, but because across the globe, beer is a common pleasure for all people.  In China, beer has been part of the history for thousands of years with little changes in taste and style, but recently craft beer has started to change that.  

According to CNBC, the Chinese beer industry is the largest beer industry in terms of volume in the world and is on pace to become the country with the most sales in the coming years.  According to IBISWorld, four of the top five brewers in China are Chinese firms, with InBev being the fifth.  Most beer currently being brewed in China is the cheap, low alcohol, low taste variety.  This could contribute to China consuming one-fifth of the beer in the United States and half that in Korea.  As mentioned, InBev, which controls Budweiser and recently purchased the largest brewer in China, is one of the most popular brewers in China and sells its own Budweiser brand beer, along with other imported beers like Corona and Carlsberg.  Slowly, Chinese tastes have been influenced by western beers as the “premium” beer segment drew approximately 30% of InBev’s sales.  It is this “premiumization” that has helped the craft beer market grow over the past decade.

In the early 2000’s, the craft beer industry relied on expats drinking the imported supply to be successful.  Often the imported beer was expensive, plus the flavors were so different the new beers were not appealing to locals.  As the years went on, however, and the Chinese economy expanded, more people had money in their pockets and are willing to pay for something better.  More people could afford to travel around the world and take in different cultures, and when Chinese tourists returned home, one of the few reminders of their travels was the beer they drank.  According to the New York Times, sales from imports in China grew from 335 million renminbi in 2009 to 1.4 billion renminbi in 2013, a compound annual growth of 43%.  

While the trend in drinking microbreweries has seen success, the growth of microbreweries and home brewing is still catching up.  As of 2015, there are six microbreweries in China’s second largest city, Beijing.  In comparison, according to beeradvocate.com, there are about 35 breweries in New York City, a city less than 40% the size of Beijing.  This could be due to the fact that craft beer brewing has been growing since the 1980’s in the United States whereas craft brewing was really only introduced to China since the boom in other countries.  However, likely the biggest hurdle in China are the rules and regulations regarding food safety at a microbrewery.   According to Gao Yan, the brewmaster who wrote the book on beer in China, “the crazy red tape and import restrictions make brewing here frustrating at best.” One story he tell is of a Chinese brewer that bottles it’s beer in the US and ships it back to China to sell.  

There is hope, however for the industry and there is no better way to explain that than highlighting the number of beer festivals in China each year.  The Shanghai International Beer Festival is having it’s seventh exposition this May, and from the looks of past years, the turnout from local brewers like Panda Brew, Master Gao, or Slow Boat, and locals has been huge.  According to the festival’s facebook page, they have also expanded to Guangzhou.  Relatedly, in an article published by The Atlantic, second and third-tier cities are starting to up their game in the craft beer market, and impressive brewpubs are popping up all over China, not just the biggest markets.  A Tulane MBA even commented that he does not drink the big popular brands, but prefers the beer made in his hometown, a trend many in China follow.

In conclusion, while the beer industry in China is arguably the largest in the world, the microbrew and craft beer industry is still being developed.  There is clearly a taste for imports and beers that taste better than scummy water as evidenced by the growth of imports.  There is also evidence that microbrewing is finding its foothold in the country in spite of the bureaucracy to get one set up.  With steady growth in the market and a growing taste, the industry could be attractive to enter into, but just like doing any business in China, knowing the law and being able to protect one’s self is vital to success.         

Dan Brownfield
LinkedIn