The Rise of Craft Beer in China
China, not the US, is now the world’s largest market for BEER, valued at USD 80 billion.
According to Fortune, beer comes second only to tea as the most consumed beverage in China, and that stands for something. However, Hatchery is seeing that the real trend lies more in craft beer than your regular grocery store variety of commercial beers.
Move over, Tsingtao - China seeks Craft Beer. Hatchery takes a peek.
Young Chinese consumers are starting to understand and love craft beer and this is spurring a massive beer culture in the cities, with frequent beer fests and local bottle shops popping up around street corners, stocked with an impressive list to choose from.
Beer is not new to China. They say beer drinking has been a thing for 9000 years, if not more. The first beers were brewed from rice, honey, grape and other fruits. However, there was a bit of a break from beer – read 2 millenia – when the country was ruled by the Han Dynasty and in favor of Huangjiu (potent rice wine), up until the 19th century which saw the advent of modern beer brewing as we know it.
The first brewery was set up by the Russians in Harbin, followed by more set up by Germans, Czechs and Japanese. Some of the best-known commercial beer brands include Tsingtao, Snow, Suntory, China Pabst Blue Ribbon and Harbin beer. According to a study done by Hatchery, North China provinces, including Beijing, drink more beer and alcohol in general than the South.
Craft breweries are growing fast, though they still remain a small fragment of the country’s beer total market. Craft beer in China has grown by more than 24-25% in the last couple of years. In fact, a World of Beer has recently opened their first China shop in Shanghai.
Some of the best Chinese craft beers are from breweries in Shanghai, Guangzhou, Beijing, Chengdu, Wuhan, Shenzhen, and Nanjing. Craft beer - still at a nascent stage - is challenged by big players with big pockets, who can easily shift the scales and the attention away from local brewers, thereby distorting the market.
Generally speaking, the availability of non-commercial craft beer is possible because of imports by non-commercial foreign craft brewers and local beers produced by Chinese craft brewers – both fueling better beers that check off global standards of quality, taste, creativity and variety. The opportunity lies in beer behemoths coming in and buying out successful breweries, and promoting or even monopolizing their own craft beer at a higher price point across bars and restaurants to grab market share.
A landmark purchase in Shanghai was in March 2017 with AB InBev buying out Boxing Cat – a long time independent craft beer establishment in Shanghai. Boxing Cat came into the limelight by winning a Gold for China (a first) in the World Beer Festival. AB InBev (they own Budweiser, Corona, Stella Artois) are also the ones behind Goose Island IPA and bringing it to the Chinese consumer.
Beer flavor preferences
When it comes down to tastes, we have observed in focus group studies that the ladies would tend to go for a wine or a cider (more on this below). Beers would be occasional, and light beers are favored over darker ones for the weight conscious.
However, the male population is likely to try out all types of craft beer and learn about hop profiles, and enjoy ales from places they have visited. While there may be a slag in the beer industry growth statistics, craft beer is going strong, accompanied by Cider.
Enough beer talk, what about Cider?
When discussing beer, it would be wrong to not include insights on Cider. Cider began to successfully sell in China sometime in the year 2000 when Britain’s Bulmers joined forces with a Chinese company to sell Woodpecker cider. Today, this beverage is becoming a hugely popular go-to drink at bars and restaurants, and can give regular beers, even craft, a serious run for their money.
At the moment, Cider takes up a very small part of the alcohol industry in China, but is project to grow at a CAGR of 15% in the next few years. Currently, Cider is the summer beverage of choice for a sizeable chunk of drinkers, because of it’s dry, refreshing and sweet (not too sweet) taste.
At Hatchery, we are excited to be part of China’s craft beer and cider revolution. There is huge potential for beer success in China. Look at Slow Boat for example – it has become one of the biggest craft brewers in China since inception in 2011, and they make some really good, crisp beer. Jing A, Great Leap Brewery, Arrowfactory, Boxing Cat (Shanghai) are some of the early craft leaders. International players like Goose Island, BrewDog, Brooklyn, Little Creatures, Tuatara et al are all gearing up for significant marketing investment plays via distribution and/ or import partnerships. For Cider brands like Zeffer Cider, the biggest opportunity lies in raising awareness among consumers on what Cider is.
The time is right if you are looking to sell some delicious, original craft beer in a welcoming market that is China.
Based in Beijing, China, Hatchery is an innovative platform that brings together entrepreneurs, investors, mentors and local communities to develop, test, launch and enjoy exciting new food and beverage ideas. Since our founding in 2015, we have been working hard to bring more of the world’s unique flavours and cuisines to China.
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