Summary of Key Points
In the first half of this year, China Resources Beer's revenue increased slightly, but its net profit decreased by 10.7%. Although its premium beer products sold well, its liquor business performed poorly. The overall beer industry saw almost no growth, with sales volumes declining during the peak season (May to June) in all regions. Leading companies such as AB InBev Asia-Pacific China experienced significant declines in performance, and even Yanjing Beer's profit growth slowed down. The competition within the industry has shifted from traditional brand channels to new retail models (such as instant delivery and contract manufacturing), marking the beginning of a period where companies are competing for each other's market share.
Why Did China Resources Beer’s Profit Decline?
The main reasons for the 10.7% drop in net profit include:
1. Lack of “one-time gains” from headquarters relocation: In the previous two years, the company may have sold its old office building or received subsidies when moving its headquarters, which resulted in additional income this year; without that, profits naturally decreased.
2. Rising costs of raw materials: The cost of packaging materials like bottles and cartons has increased, eroding some of the profit margin from selling beer.
3. Increased investment and the drag from the liquor business: To maintain its presence in the low-end market (economic-priced beer) and launch new products, the company invested more money. Additionally, the liquor business suffered a 27% decline in revenue and a loss of 280 million yuan, which was worse than last year.
However, the company is still focusing on premiumization: sales of mid-to-high-end beer increased by over 10%, with Heineken seeing a 20% increase in sales. Sales of its Laoxue and Hongjue brands grew by 40% and 80% respectively, but these gains were not enough to offset the overall profit decline.
The Beer Industry Is Struggling During the Peak Season
This year has been tough for the beer industry:
- Almost no growth: National beer production only increased by 0.2% in the first half of the year. Sales volumes in May and June, which are typically peak seasons, decreased by 6.2% and 3.1%, respectively.
- Regional declines across the board: In the past year, sales in East China and South China (major beer-consuming regions) fell by 4.5% and 6.9%, while North China and Southwest China saw even more significant declines (10.5% and 18.5%). Almost no region was spared.
In simple terms, the total amount of beer consumed has not increased; in fact, sales volumes have even decreased during the peak season.
Leading Companies Are Under Pressure, with AB InBev Asia-Pacific China Suffering the Most
Not only China Resources Beer but also other leading beer companies are facing challenges:
- AB InBev Asia-Pacific China’s double-digit declines: Sales volume and revenue both fell by 6% in the first half of the year, with even worse performance in the second quarter (9.7% decline in sales volume and 15.9% decline in profit).
- Yanjing Beer’s slower growth: Although profits increased by 25%-35%, this is slower than in previous years, indicating a lack of momentum.
Apart from a few companies, most in the industry are just making it through tough times.
Competition Has Shifted to New Retail Models
The competition within the beer industry has shifted to new retail models, with a focus on understanding consumer needs:
- Instant delivery becoming popular: Companies are collaborating with platforms like Meituan to deliver beer quickly to customers’ homes, dormitories, and hotels, which is seeing rapid growth.
- Contract manufacturing is more complex than just producing under a brand name: China Resources Beer produced over 50,000 liters of beer through contract manufacturing in the first half of the year, but products must be tailored to the preferences of platform users (for example, developing fruit-flavored beers for younger consumers).
- New consumption patterns are changing the game: Traditionally, people either drank beer at stores or took it home. Now, with increased demand for instant delivery, companies need to adjust their products and marketing strategies accordingly.
The Future
The industry experts say that it will be difficult for beer sales to grow significantly. To succeed, companies will need to steal market share from their competitors (for example, by selling one more bottle than their rivals). The competition will become even fiercer:
- Companies must understand new retail channels and consumer preferences.
- Premiumization remains a trend, but it needs to be integrated with new consumption patterns.
- If businesses like liquor drag down overall performance, they may need to make adjustments.
In summary, the era of easy profits in the beer industry is over. Now, companies must focus on precision: accurately understanding their customers, securing distribution channels, and developing products that meet consumer needs.
(The entire analysis is written in plain language, making it easily understandable even for those outside the financial sector.)