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Zebra Consumption Yang Wei

The beer industry has entered a plateau period.

Since the second half of last year, the recovery of beer sales has come to an abrupt halt, and the momentum of high-endization has also weakened. The industry's profits are mainly due to the sharp drop in the prices of major raw materials. However, how long can this momentum last?

The characteristics of the beer stock era cannot be changed for the time being. As the high-end trend enters the second half, and the comprehensive, top-down high-end trend is coming to an end, how can the beer industry perform the second half of the high-end trend? It can only be achieved by optimizing the market structure through bottom-up value enhancement.

After the quiet rise of craft beer and the pressure on industrial beer, beer giants have gradually learned to return to the past and better meet consumer demand with craft beer. Not only the products are crafted, but also the channels and marketing models are younger.

The development of industrial beer once deviated from the essence of beer. When industrial beer and craft beer complement each other, the beer industry returns to products, channels and brands, and returns to consumer service as the core. Then, the end of the second half of the high-end development must be another golden age for the beer industry.

Craft beer in-depth

There was no road on the ground, but when more people walked on it, it became a road.

Originally, there is no distinction between industrial beer and craft beer, there is only one concept, beer.

But when consumers got tired of the blandness of "water beer" and industrial beer could no longer meet consumers' growing demands, craft beer came into being.

The early definition of craft beer was aimed at industrial beer, with small production, autonomy, and tradition: annual production was less than 6 million barrels (953,880 tons); non-craft beer companies’ institutional holdings did not exceed 25%; most beer flavors should be obtained from traditional or innovative raw materials and fermentation processes.

After entering the Chinese market, craft beer has also gained a more localized nickname that better represents this characteristic - craft beer.

Craft beer was born in the United States in the 1970s and 1980s, and began to sprout in the Chinese market in the 1990s. It was named craft beer at the first Master Cup Home Brewing Competition in Nanjing in 2012. This year is also known as the first year of Chinese craft beer.

With the pub-like nature of craft beer, Beijing's Beiping Machine, Wuhan's No. 18, Nanjing Ai Beer, etc. have become the spiritual homes of craft beer lovers, and craft beer has gradually spread from the regional market to the national market.

After more than a decade of development, craft beer has become a force that cannot be underestimated in the beer market. Especially in recent years, with the advancement of high-end beer, the overall price of industrial beer has increased, and the biggest obstacle for craft beer in the market has gradually been eliminated. Some strong craft beer brands have even begun to enter the traditional circulation market.

At present, there are more than 5,000 companies in the market whose main business is craft beer, and there are at least 100 well-known craft beer brands.

Shanxi Securities Research Report shows that in 2022, the consumption of craft beer in my country has exceeded 1.4 million tons, with a year-on-year growth rate of nearly 20%. It is expected to increase from 1.69 million tons to 2.29 million tons from 2023 to 2025, with a compound annual growth rate of more than 17%, which is much higher than the overall beer industry.

Currently, craft beer sales account for less than 5% of the entire beer market. Compared with the penetration rate in the United States and other markets, there is still a lot of room for improvement.

The five major industrial beer giants in the Chinese market, China Resources Beer (00291.HK), Tsingtao Brewery, Anheuser-Busch InBev, Yanjing Beer, and Carlsberg, have long occupied more than 90% of the market share. In recent years, this airtight sense of oppression seems to have loosened. In 2021, the CR5 of the beer market reached 92.9%, and fell to 92.0% in 2022; in 2023, the revenue growth rate of several major beer giants will be lower than that of the industry as a whole, and the CR5 is expected to decline further.

A large part of this may be due to the rise of craft beer.

Pushing industrial beer

The development of craft beer has reached a point where industrial beer giants have to pay attention.

It is not realistic for the big beer companies to continue to use low-quality "water beer" to maintain their market position. Various new players are eroding their base with craft beer, imported beer and other products. The young people's market captured by the new forces is even more fearful for industrial beer companies.

In traditional channels such as KA where industrial beer is relatively strong, craft beer has not been deeply deployed. However, in channels such as bars, pubs, nightclubs, and restaurants where young people gather, craft beer is growing rapidly.

In addition, craft beer, a new channel commonly used by some young people, is rapidly rising through the supply chain model, undermining the traditional beer market.

In addition to retail channels such as Pangdonglai, Hema, and Meituan, even food companies such as Guoquan and Juewei are now planning to develop craft beer. If you want to eat supper after watching the game at night, Meituan will take away barbecue + craft beer; if you go to Juewei to buy crayfish, you can also pair it with craft beer.

With the continuous penetration of scenario-based channels, craft beer will be available wherever there is demand. These surprise forces have made the big beer companies, who are used to fighting on the battlefield, feel at a loss.

Fortunately, after learning from their mistakes, the beer giants are quickly adjusting their positions and breaking through with craft beer. The most direct way is through mergers and acquisitions.

Through a series of self-construction and mergers and acquisitions, AB InBev owns dozens of craft beer brands, including Goose Island, Blue Point, 10 Barrel, Elysian, Platform, etc. After acquiring the craft beer giant CBA (which owns brands such as WIDMER BROTHERS and Kona Brewing) a few years ago, the world's largest beer company also became the largest craft beer company in the United States. In the Chinese market, AB InBev focuses on operating Goose Island and China's local craft beer brand Boxing Cat.

In 2023, Carlsberg Chongqing Brewery (600132.SH) acquired "China's No. 1 craft beer brand" Beijing A, which was considered a landmark event for the Chinese beer giant to embrace craft beer.

Local beer giants, such as China Resources Beer, Tsingtao Brewery and Yanjing Beer (000729.SZ), are more cautious about mergers and acquisitions in the craft beer market. They have their own paths to craft beer.

In terms of products, Tsingtao Brewery (600600.SH) has IPA craft beer and Pilsner craft beer; Yanjing Beer has launched V10 craft white beer and Lion craft beer in addition to its big single product U8; Zhujiang Beer (002461.SZ) also has Snow Castle craft beer. The leading industrial beer companies are basically stepping up the construction of craft beer production lines.

In order to promote the craft beer business, beer giants have unanimously chosen the pub as a scene-based channel. Anheuser-Busch InBev operates Goose Island Craft Beer House and Boxing Cat Bar in various places, China Resources Beer has JOY BREW Pub and Beer Town, Tsingtao Beer's 1903 Bar and Time Coast Bar are already quite large, and Yanjing Beer's Yanjing No. 9 and Lion Bar are following closely. Carlsberg has the most diverse formats, not only Jing A, but also Wusu Dadada Kao and Hou Hotpot.

The beer industry returns to its roots

It is impossible to understand industrial beer or craft beer in isolation from the general trend of beer.

The high-endization of beer in recent years is not just the high-endization of industrial beer alone. The rise of craft beer and imported beer is also an important part. You can think of craft or imported beer as a type of high-end beer.

The overall improvement of the beer market is first of all the improvement of industrial beer product strength under the influence of craft beer and imported beer. The direction of optimization is to return to the essence of beer.

Brewing beer requires four core raw materials: malt, hops, water and yeast. In the past few years, industrial beer has added beer syrup, hop extract and other technologies to reduce costs and improve flavor.

The beer industry does not need to compete on price, but it can compete on products and quality-price ratio. In recent years, the single products that have rapidly risen in the beer market by virtue of their product strength, such as Yanjing U8 and Snow Classic, all follow the principle of "returning to basics".

Based on a clean ingredient list, the fermentation time of beer is increased. Previously, the fermentation time of industrial beer was generally 3-7 days, while that of craft beer was mostly half a month to 2 months. At the same time, the turnover time is shortened to allow users to drink fresher, mellower and more refreshing beer as much as possible.

Finding popular celebrities to endorse products is a pioneering move in the beer industry; using scene-based channels such as pubs to fully embrace young people and lock in the future mainstream beer consumer group.

Craft beer-like products + diversified channels + changes in marketing models have allowed major industrial beer companies to find the key to entering a new beer cycle.

In addition to large industrial beer factories, some new forces in the beer industry are exploring new paths for the beer industry with the model of industrial beer + craft beer.

In recent years, new breweries, led by Zebra Craft Beer, have used the industrial beer model to produce high-quality craft beer, entered new channels such as Guoquan and Juewei through the supply chain model, and then cultivated craft beer brands that young people prefer in the form of taverns, new e-commerce, and music festivals.

At present, the comprehensive and top-down high-end development of China's beer industry has basically ended. The value enhancement of the beer market has entered the second half of structural optimization and refined operation.

Beer is delivered wherever the users are, and the products are supplied according to the beer the users need. Under the influence of craft beer, the industrial beer manufacturers have found a way out.

Perhaps in a few years, the beer industry will no longer emphasize industrial beer and craft beer, but will return to the essence of the market - beer.

This bottom-up, user-oriented beer innovation is the prerequisite for the arrival of the next golden age of the beer industry.