BMI's Executive Summary

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The now ferocious battle for leadership of China's dynamic and high-growth beer sector showed no signs of abating during the second half of 2007, with expansion by new market leader China Resources Snow Breweries (CR Snow) immediately followed by an investment from Tsingtao, and vice versa. In this report we assess the impact that this battle is having on sector growth, as well as the business strategies of other expansionary multinational breweries in the country. We also look beyond China to the impact that experience of competition in the market is having on the strategy and ambitions of leading Chinese players elsewhere in the world.

Key events from the last few months of 2007 include Tsingtao – which is 27%-owned by US giant Anheuser-Busch, its largest non-governmental shareholder – opening three new breweries and boosting its production capacity by some 20% in the process. The investment was part of a broader aim of achieving sales growth of 20% annually to 2013, although following so closely on from CR Snow's own expansionary investments, Tsingtao's move can also be viewed as highly competitive. CR Snow, the local joint venture of Anglo-South African major SABMiller and domestic major China Resources Enterprises, acquired stakes in four regional breweries across China just months before Tsingtao came forward with its own expansion plans. In the province of Liaoning, CR Snow acquired 80% stakes in two brewers to consolidate its existing leadership position in the region, while in Anhui the company also furthered its market leadership via an acquisition. Most notably, however, CR Snow took total ownership of a brewery in Hunan province, marking its first foray into this high growth region.

Both Tsingtao and CR Snow, along with their global competitors including InBev and Heineken, are seeking to capitalise on an industry which BMI predicts will grow by 30.6% in volume terms to 2012. Value sales growth is set to be higher still as foreign investors increasingly look to capitalise on high demand at the premium end of the market; demand fuelled by China's fast-emerging middle classes and an economy that is forecast to experience annual average growth of 9.4% to 2012. The neck-and-neck market leaders are not only interested in Chinese growth, however; they are also looking to build leading global brands on the back of the establishment of a nationwide Chinese presence. Both have sought to abandon the traditional regionality of Chinese brewing to build national brands and both have proved successful, but in largely different ways. CR Snow's SNOW brand is now the world's second-highest selling beer, yet this is based on the sheer size of the Chinese market alone. Meanwhile Tsingtao has proved less successful at penetrating the whole of China and yet has become synonymous with the notion of Chinese beer globally and thus accounts for 50% of total beer exports from China.

Throughout 2008 it will be fascinating to see how both firms chose to prioritise their domestic and global aspirations, but with just one percentage point of market share between them domestically it seems certain that neither brewer will be taking its eyes off China for the time-being.

Contents

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Chapter 1 – Business Environment

Retail Business Environment Rankings

Table: Asia Pacific Business Environment Rankings

SWOTs

China Food & Drink SWOT

Macroeconomic Outlook

Table: Macroeconomic Data & Forecasts

Chapter 2 – Retail

Regional Overview – Private Labelling In Asia Pacific

Table: Assessment Of Private Label Qualities – By Region

Table: Leading Private Label Categories By Market Share & Annual Growth Rate

Industry Forecast Scenario

Table: China MGR Retail Indicators - Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Table: Structure Of China’s MGR Market By Number Of Outlets

Table: Structure Of China’s MGR Market – Sales By Format (US$bn)

Chapter 3 – Food & Drink

Regional Overview – Dairy In Asia

Table: Per-Capita Dairy Consumption (kg) & Consumption Growth In Selected Asian Markets

Table: Milk Production (000 tonnes) & Production Growth In Selected Asian Markets

Table: Dairy Production (000 tonnes) Forecasts In Selected Asian Markets

Industry Forecast Scenario

Table: Food & Drink Indicators

Industry Developments

Company Developments

Market Overview

Table: China Agricultural Sub-Sector Production – Historical Data

Chapter 4 – Tobacco

Industry Forecast Scenario

Table: Cigarette Volume/Value Sales – Historical Data & Forecasts

Industry Developments

Company Developments

Market Overview

Chapter 5 – Company Monitor

Key Players

Table: Key International Players In China’s MGR Sector – 2005

Table: Key Players In China Food & Drink Sector – 2005

Regional Company Case Studies

AEON In Asia Pacific

Table: AEON Five-Year Financials (JPYmn)

Table: Speciality Store Network (as at February 20 2006)

Coca-Cola Amatil In Asia Pacific

Table: Coca-Cola Amatil Five-Year Financials

Table: Coca-Cola Amatil Market Share By Country And By Beverage Sub-sector – As At Year-End 2005

Table: SPC Ardmona Market Share By Product Category

Heineken In Asia Pacific

Table: Heineken – Brands Distributed In The Asia Pacific Region

Table: Contribution Of Asia Pacific Region To Heineken 2005 Financial Performance

Kraft In Asia Pacific

Table: 2005 Kraft Global Facts

Company Analysis

BMI Forecast Modelling

How We Generate Our Industry Forecasts

Retail Industry

Sources

Competitive Landscape for Asia Food & Drink Reports: Sample of  
Companies Ranked

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At-a-glance perspective on the strengths, weaknesses, opportunities and threats facing each market’s food & drink industry. BMI also provides similar economic and business environment studies. Company SWOTs (Strengths, Weaknesses, Opportunities, Threats) covering all leading food and drink companies operating in each market, including competitive intelligence on geographic presence and competitive positioning of multinationals against local companies; leading products, services and brands; sales and local market share; foreign direct investment, projects, partners and acquisition strategy. Illustration of the industry via rankings tables comparing revenues, number of outlets, number of employees and registration dates. BMI analyses each company’s performance, market position, strategy and investment potential.

Network of Asain Food Sources

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BMI's Asian Food Reports are based on an extensive network of multilateral organisations, government departments, food industry associations, chambers of commerce and company reports. Information sources include: