China’s vast consumer classes are restocking their store cupboards. For the urbanites of Beijing and Shanghai, cheap booze no longer appeals. Beermaking behemoths are starting to feel the effects.
A profit warning from Tsingtao Brewery, China’s leading brewer by market share, illustrates the trend. The Hong Kong and Shanghai-listed company says 2016 net profits, due for release at the end of the month, fell nearly two-fifths versus the prior year and has blamed a one-off tax hit as the culprit. Tsingtao must pay back tax for an expired preferential rate, but this accounts for only half of the drop. Other factors are at play.
Tsingtao commands 30 per cent of the market in China for packaged take-home beer, according to Kantar Worldpanel. The market has been maturing even as consumer tastes become more sophisticated. For three years overall volumes have fallen about 5 per cent annually. The market value, meanwhile, has risen as premium products win favour. Incumbents such as Tsingtao have lost market share.