China has always been a huge consumer of beer (it is the world’s largest consumer and producer of beer), but tastes have recently been shifting away from masse produced beers, such as Snow, Qingdao and Budweiser to more premium and craft flavors. Sales volumes of cheaper Chinese beers have been falling—both Tsingtao and Yanjing posted losses in sales in 2016. However, demand for high-end beers is growing, and China’s market is ripe with opportunities for both domestic and foreign craft brewers.
China’s craft beer market
During the Olympics, in 2008, there was virtually no craft beer available in China: the industry can thank millennials and a growing middle class for its rise. According to McKinsey & Company, Chinese consumers are maturing and more willing to spend more on premier products, such as alcohol. Although the overall volume has decreased, the overall value of Chinese beer sales has actually risen slightly. Chinese millennial consumers are increasingly attracted to premium products and services, and are more and more likely to buy from local brands: consumers want to try something good, or better and are willing to pay a premium for such.
Crafting opportunities in China
Although China only comprises 2.5 percent of American craft beer exports in 2017 it has a burgeoning domestic craft beer industry, China—and the Asia-Pacific region, in general—is one of the fastest growing regions for craft beer. According to the Financial Times, 40 percent of all beer consumed in China was imported, which means that there is substantial room for growth for international brewers, particularly in the premium alcohol segment. Even Anheuser-Busch InBev (AB InBev), the maker of America’s top-selling beer Budweiser, has aggressively been expanding into China to capitalize on the market: The company purchased a stake in popular Shanghai-based craft brewer, Boxing Cat, which introduced Chicago-based Goose Island (which AB InBev bought in 2011) into China, and plans to launch a Goose Island brewery in the country.
China’s craft beer culture is still young and has primarily been driven by foreigners living and working abroad, which makes them the perfect target demographic for craft brewers first entering the Chinese market. However, craft beer is becoming increasingly popular among locals, particularly the worldly younger generations who seek out “trendy and high-quality” products.
Despite the influx of foreign and domestic brewers, competition is still relatively low. Ninety percent of consumers are still drinking mass produced industrial beer. Most consumers don’t know what craft beer is and haven’t tried it before; hence a lot of resources are spent an education and marketing.
Appealing to Chinese taste buds
For drinkers that are not as familiar with the bitter beers [like IPAs], Chinese consumers exhibit a preference for slightly fruitier, sweeter beers, like wheat beers and hefeweizens. It’s an easier transition for first time drinkers, especially for a country of consumers that’s used to drinking beers that are much lower in alcohol content and have a whole lot less flavor.
Although flavor is perhaps the most important part of craft beer, the packaging is also important in appealing to Chinese consumers: Craft brewers often have creative and illustrative designs that stand out on store shelves, especially when compared to their domestic mass produced counterparts.
Challenges of the Chinese market
Because craft beer is relatively new and consumption is concentrated among foreigners, not many people outside of Tier 1 cities understand what it is, although the trend is starting to spread. There are also logistical challenges to consider when exporting to China. Craft beer is best served as fresh as possible to get the full impact of the flavor, which means that overseas brewers trying to export to China have to contend with the additional costs of shipping long distances, as well as the extended shipping time and lack of proper storage facilities. However China has seen improvements in storage and handling over the years, so a growing number of importers are investing in upgraded infrastructure that maintains cold-chain throughout the beer’s life cycle: being kept cold from when it leaves the brewery, to when it gets to the customers’ hands.
The future of craft beer in China
As consumer tastes mature and become more diverse, so will the number of local breweries that operate in China. As local craft beer becomes adopted by local consumers, there will be more options and opportunities to sample such beer—or create that desire to experiment with more than the domestic mass produced beer on offer in supermarkets.
For those wishing to conduct a little further research in this field, this list contains China’s top breweries.