China: beer goes upmarket

First there was the Bordeaux bubble. Then came Moutai mania. What drink will next take China’s nouveau riche by storm?

Perhaps nothing more exotic than a good pint of beer. But there is one caveat – it will help to have snob appeal, according to a study published this week by market research group Mintel.

Beer is hardly new to China. It already consumes more beer than any other country in the world. The global brewing goliaths, SABMiller and Anheuser-Busch InBev, have long been on the ground fighting for – and winning – market share. And China has plenty of its own established brands such as Tsingtao and Snow.

However, Mintel says that two new trends make China positively yeasty with potential for high-end international brewers.

“Consumers are not only drinking more beer, but are also beginning to drink more expensive beers,” says Matthew Crabbe, director of China research at Mintel.

China’s burgeoning taste for wine has dominated the headlines, but beer may be a safer bet for investors in the Chinese drink market. Mintel notes that the Chinese wine market grew 52 per cent in 2010 but slowed to 12 per cent last year, while spirit sales decelerated from 24 per cent to 16 percent. Beer, though less fizzy to begin with, has been steadily creeping upward – sales growth went from 7 per cent in 2010 to 13 per cent last year.

The numbers also reveal a drift into premium territory. In the five years to 2011, the Chinese beer market grew by 29 per cent in volume terms to 50bn litres, but by 63 per cent in value terms, making for a market value of Rmb454bn ($71bn). In other words, the average value per litre of beer sold in China has risen 27 per cent since 2007.

So is it time for Chateau Lafite to shove over and make room for Trappist monks? Crabbe thinks so:

The recent drop in growth of wine and spirits sales could leave room open for high-end ‘snob-brews’ to find new interest. Indeed, the fact that wine and spirit sales have dropped, despite having enjoyed really strong recent growth, makes it the perfect time for premium beers to press the right kind of new interest buttons of the ever-fickle Chinese brand- and image-conscious consumers.

Not one to flinch in the face of dangerous assignments, beyondbrics has ventured on multiple occasions to Great Leap Brewing, a charming craft brewery in the heart of old Beijing, to see if Mintel’s market research matches the reality on the ground.

Great Leap bar, Beijing. A tough BB assignment.

Carl Setzer, a burly American beer aficionado, founded Great Leap three years ago and says that he’s seen a clear increase in Chinese drinkers during that time. Locals now account for about 40 per cent of his client base, though just a quarter of sales (expats, it seems, are bigger lushes).

Great Leap produces ales with flavours far stronger than the watery lagers that are most popular in China. So the beer is not instantly accessible to Chinese drinkers – but ultimately it is far more accessible to them than wine.

Chinese drinkers are infamous for cutting their wine with Sprite. Setzer says that has only happened twice with his beer over the past two years:

Airplane magazines tell Chinese people that they need to buy wine, so they buy it but they don’t like it. We’ve been seeing a lot of enthusiastic customers who want to get away from wine…. Beer, they understand. They don’t need a sommelier to explain it. Beer is a drink they already get. This is just a high-end version.