Demand for valves in the beer industry slows

Behind China Resources and Heineken's marriage: domestic beer industry production and sales fell for many years

On the morning of August 3, China Resources Beer (00291, HK) and Heineken both disclosed their cooperation. Specific cooperation includes China Resources Group's controlling shareholder China Resources Group (Beer) Co., Ltd. (hereinafter referred to as China Resources Beer Group) intending to sell 40% of the shares to Heineken for a consideration of HK$24.35 billion. China Resources Enterprise, a shareholder of China Resources Beer Group, plans to purchase 0.9% of Heineken shares for a total cash consideration of 460 million euros. In addition, China Resources Beer will merge Heineken China business.

The marriage of the two major beer giants will undoubtedly further affect the industry structure. How will the domestic beer industry structure evolve in the future? In addition, behind the cooperation between the two giants is the industry status of China's beer industry production and sales decline for many years, so what is the trend of the beer industry in the future?

Production and sales are still in a downward trend

Hong Kong stocks China Resources Beer owns the Snow Beer brand. China Resources Beer Group holds a 51.67% stake in the listed company.

“Xi Li’s brand is very loud, but it lacks the channels and the ability to land in China. In this respect, China Resources can just complement it. The strong combination of the two means that the middle and high-end market of Chinese beer will form a 'three-legged’ The pattern of China Food Industry analyst Zhu Danpeng told the reporter of "Daily Economic News" that "three pillars" are China Resources, Anheuser-Busch InBev and Carlsberg.

In Zhu Danpeng's view: "Because the three giants of China Resources, Anheuser-Busch InBev and Carlsberg will start to stifle in the mid- to high-end market, accelerate the market layout and further squeeze the market space."

According to data from the Development Research Center of GF Securities, in 2017, China Resources and Tsingtao Brewery formed a duopoly in mid-range wines, accounting for 20% and 30% respectively of the market share; Budweiser is one of the top brands in the high-end wine market, with market share. About 40%.

In fact, the concentration of the entire beer industry in China has been increasing in recent years. According to the "2018-2023 China Beer Industry Brand Competition and Consumer Demand Investment Forecast Analysis Report" by the Prospective Industry Research Institute, the domestic beer industry CR5 (the market share of the top five beer manufacturers) is less than 50% in 2015, and the industry CR5 in 2016. The growth rate was 74.7%. As of 2017, the top five domestic beer industry companies were China Resources Snow (27.8%), Tsingtao Brewery (20.0%), Budweiser InBev (16.7%), Yanjing Beer (12.0%), Carlsberg (5.7%), CR5. It is 82.2%.

Despite this, the industry concentration of China's beer industry is still not high compared with the more mature beer market in other countries, and industry leaders have not yet appeared. The GF Securities Research Institute pointed out that in the next 10 years, China's beer industry is expected to form a duopoly. The competition pattern of more than 70% of the provinces has been set, the competition has been easing, and the leaders have begun to adopt strategies to increase their market share and abandon the disadvantaged market.

The industry leader is in the middle of the race, but the overall production and sales volume of China's beer industry in recent years is still in a slow downward trend.

According to a research report of GF Securities, the annual compound growth rate of China's beer industry sales in the next 10 years is about -1%. According to the United Nations' forecast, the proportion of beer consumption mains (25 to 44 years old) in China from 2015 to 2030 will continue to decline, with an average annual decline of 0.35 percentage points. In addition, the future health appeals will continue to increase and the total population growth will be slow. In view, China's beer consumption will show a downward trend, but the decline is relatively slow.

The output of China's beer industry has been declining since 2013. The data shows that before 2008, China's beer industry can maintain an overall growth of more than 10%. From 2009 to 2013, the overall growth rate will remain 5% to 10%. In 2013, China's beer market output reached 50.515 million kiloliters. Historical high point.

From 2014 to 2017, the overall beer market in China continued to be sluggish, and the output continued to decline for four consecutive years. In 2016, it was 45.06 million kiloliters. By 2017, China's beer production was only 44.02 million kiloliters.

In January-February, March, April, and May of 2018, domestic beer production increased by 0.7%, 2.5%, 6.1%, and 1.5%, respectively. In June, beer production fell by 2.3% year-on-year.

Affected by imported beer and substitutes

In explaining why the beer production and sales in June this year fell year-on-year, Zhu Danpeng said that the decline in domestic beer production in June was related to the World Cup. In fact, during the World Cup, the total amount of beer consumption has increased, but it has been seized by imported beer, and domestic beer has not enjoyed the dividend.

The impact of imported beer is one of the problems facing the beer industry in China. At the same time that domestic beer production declined, imported beer has maintained rapid growth for five consecutive years. According to statistics, the import volume of Chinese beer reached an all-time high of 716,200 liters in 2017. In January 2018, China's imported beer increased by 83.9% year-on-year.

On the other hand, with the improvement of consumers' health awareness and the improvement of consumption structure, traditional beer has gradually lost its appeal to consumers.