Chinese Breweries Looking To Enter Premium Beer Market

Tsingtao Launched Premium "Augerta" Line Last Year Recently, the English-language blogosphere was atwitter with the news that Pabst Blue Ribbon -- a solidly blue-collar beer in its native United States -- had launched a line of "upscale" beer exclusively for the China market. Known as "Blue Ribbon 1844," the limited-edition beer -- brewed, apparently, in wooden casks -- sells for around 300 yuan (US$44) a bottle. Naturally, this story aroused howls from those more accustomed to seeing a bottle (or, more likely, a can) of PBR retailing for what amounts to a handful of coins, but actually PBR China's moves to create a premium line aren't unique. Much like the Chinese wine industry, which is currently in overdrive trying to transition away from the low-end, low-quality end of the spectrum, domestic Chinese breweries want to get a piece of the premium beer market, which continues to be dominated by foreign competitors. Earlier this year, Jing Daily talked to Jonathan Cartu of the premium Belgian beer giant Duvel Moortgat, who told us that he expects premium beer consumption in the developed regions of eastern China, as well as some second- and third-tier cities to continue rising steadily as consumers become more picky and look beyond inexpensive local brands. Particularly in wealthier cities like Shanghai, where consumers are more trend-oriented and willing to pay a premium for quality, we've started to see microbreweries like the Boxing Cat Brewery attracting not only craft beer-starved expats but also more locals. As Deane Lin of premium beer importer Dxcel Partners, told CNNGo! this January, Shanghai is due for a “premium beer revolution.” But it's not just microbrewery owners or foreign brands like Duvel who see a niche forming in China. Last year, Tsingtao -- China's largest and most famous brewery -- took a stab at the premium beer market with the introduction of "Augerta", which retails for around 10 yuan (US$1.50) at convenience stores. For reference, that's about the same price as a can of Asahi -- not terribly expensive, but around twice as much as a can of "regular" Tsingtao. According to Tsingtao, Augerta's target consumer is "30-40 years of age, generally male, of solid economic background, with a high salary, a trendsetter who loves the finer things in life." Though reviews of Augerta are mixed, with some complaining it doesn't quite measure up to similarly priced imported competitors but others calling it "a good bock beer", Tsingtao's efforts indicate that a domestic Chinese breweries are no longer content to watch from the sidelines as imports mop up a segment that at least has the potential to be highly lucrative. This week, China Business Times looks at the Chinese premium beer market, suggesting that demand in the nascent high-end segment will grow rapidly along with median incomes in coming years. As such, the writer adds, major domestic breweries like Tsingtao, Yanjing and others would be smart to start investing in this area now so they don't fall even further behind imported rivals later. From the article (translation by Jing Daily team): Guangdong province official Zhu Sixu [recently] said the trend of premium alcohol developing into a luxury item involves the inherent quality of the product itself as well as its packaging, which can give the impression both to consumers and the marketplace that the product is worth the price. But quality is the first requirement. A premium beer should focus less on production volume and more on efficiency. [For example,] the largest proportion of raw materials used in Tsingtao's premium Augerta beer is malt. Every year, Augerta's brewmasters visit the place of origin of all of the raw materials used in the beer's production, personally selecting barley and other materials, ensuring that the seeds are all non-GMO and that the growing environment is free of pollutants. In China, the premium beer market has always been the dominion of foreign brands. In the hopes of targeting gaps in the market, every major Chinese brewery has increased its efforts in the area -- for example Tsingtao's creation of China's first "luxury beer", Augerta. Also, [Pabst China's] Blue Ribbon 1844 and so forth, which is priced well above regular beers. However, products can't be perceived as premium based on charm alone. They need to entice consumers with their independent brand culture, since premium beer doesn't just compete on price alone. The critical thing is to convince consumers that they'll get something special from this expensive product. The degree of segmentation in the beer consumer market is getting higher and higher. Consumers aren't just buying beer [anymore], they're paying for flavor and identity. As a result, the differentiation of brands through marketing is key, as is brand positioning. Tweet

Chinese Breweries Looking To Enter Premium Beer Market

On this page

Published August 19, 2010

Sectors

Insights

Company

Get Started with

SUBSCRIBE for full access to analysis, insights, and coverage.

Chinese Breweries Looking To Enter Premium Beer Market