{"id":14582,"date":"2025-05-25T07:01:23","date_gmt":"2025-05-25T07:01:23","guid":{"rendered":"https:\/\/infundpros.com\/?p=14582"},"modified":"2025-05-25T07:01:24","modified_gmt":"2025-05-25T07:01:24","slug":"how-heineken-tapped-into-chinas-beer-market","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=14582","title":{"rendered":"How Heineken tapped into China\u2019s beer market"},"content":{"rendered":"
\n

Western consumer brands in China have long been coming to terms with the prospect of lower growth in the world\u2019s second-largest economy. But demand for Heineken\u2019s beers tells a different story.<\/p>\n

In 2023, sales volumes for the Dutch lager maker\u2019s various brands, including Amstel, rose more than 50 per cent. Last year, as the overall mainland China beer market shrank, its volumes increased nearly 20 per cent to just under 700mn litres \u2014 almost enough to serve a pint to everyone in the country.<\/p>\n

Heineken\u2019s growth comes after a deal agreed in 2018 with China Resources Beer, China\u2019s biggest brewer, which gave the state-owned group rights to the brand on the mainland while Heineken took a stake in China Resources Beer and gets royalties from the deal.<\/p>\n

The approach points to pockets of opportunity for well-known foreign names in China\u2019s fast-evolving consumer sector, even if the wider markets in which they operate are saturated.<\/p>\n

\u201cThis is a very healthy transactional relationship,\u201d said Tristan van Strien, global investor relations director at Heineken of the relationship with China Resources Beer. \u201cThey need us and we need them.\u201d <\/p>\n

Heineken\u2019s growth rates \u201chave undoubtedly outperformed\u201d, said Euan McLeish, an analyst at Bernstein. \u201cNone of the other premium brands have been talking about double digits.\u201d\u00a0<\/p>\n

China\u2019s overall beer market is in decline. Sales fell an estimated 4 to 5 per cent last year amid concerns over consumer confidence.<\/p>\n

But for China Resources Beer, whose sales dropped 2.5 per cent in 2024, Heineken is a pick-me-up.<\/p>\n

Its deal with Heineken gave it rights to the Dutch beer in China for an initial 20 years, in exchange for a stake in one of its holding companies that gives Heineken an effective interest of about 21 per cent in China Resources Beer.<\/p>\n

<\/source><\/source><\/picture>
Cartons of Heineken beer on the assembly line at the Jiashan factory in eastern China\u2019s Zhejiang province<\/span> \u00a9 Imagine China\/Reuters<\/span><\/figcaption><\/figure>\n

The lager, previously mainly sold in two southern provinces, was rolled out across the country. Growth has been rapid, helped by sponsorship of events such as the Shanghai Formula 1 grand prix in March, where 500ml servings were on sale for Rmb40 ($5.5).<\/p>\n

A 500ml serving of Heineken in China costs an average of Rmb12-15 ($1.67-2.08), according to Morningstar, though prices vary significantly across regions and from bars to shops.<\/p>\n

Heineken has grown by \u201cleveraging the distribution network of China Resources Beer\u201d, said Jacky Tsang, an analyst at Morningstar.\u00a0<\/p>\n

China Resources Beer, whose local Snow beer is the country\u2019s best-seller, is using Heineken to push into China\u2019s premium market \u2014 often defined as beers that cost at least 20 per cent more than the average.<\/p>\n

\u201cThe overall beer volume in China is on a gradual decline trend,\u201d said Tsang, meaning China Resources had \u201cto go after price growth to drive profit growth\u201d.<\/p>\n

Heineken\u2019s growth, from a low base, contrasts with other western brands, which have also generally positioned themselves as premium options in China.<\/p>\n

Danish brewer Carlsberg, which has about 10 per cent of China\u2019s beer market, reported that sales edged 1 per cent lower last year. Jacob Aarup-Andersen, chief executive, said last month the market had been \u201cstructurally declining\u201d for 15 years, but there were still \u201cample growth opportunities\u201d.<\/p>\n

<\/source><\/source>\"A<\/picture>
Budweiser built its distribution network in China before Heineken. <\/span> \u00a9 Oriental Image\/Reuters<\/span><\/figcaption><\/figure>\n

Anheuser-Busch-owned Budweiser, which, unlike Heineken, has built a significant distribution network in China, has also reported declining sales.<\/p>\n

Competition between the two \u201cis viewed as a winner-takes-all celebrity death match in the mind of many investors\u201d, said McLeish, in reference to the still-developing premium market.<\/p>\n

It now takes just 37 minutes of work for the average Chinese to afford 500ml of premium beer, Bernstein estimated, compared with well over an hour a decade ago \u2014 close to a global definition of affordability.<\/p>\n

\u201cWe think in 20-year cycles, and this is the premium development cycle that\u2019s happening in China,\u201d said van Strien, who added that \u201cpremium beer tends to do really well\u201d in downturns. <\/p>\n

\u201cYou\u2019re not talking about a huge capital outlay for someone to have a nice sociable evening.\u201d<\/p>\n

For McLeish, China Resource\u2019s strategy poses a risk to \u201cbrand positioning\u201d if the rapid expansion has an adverse impact on price and its premium status.<\/p>\n

China Resources Beer \u201cdoes not really have experience building premium brands\u201d but \u201cif they had taken their time\u2009.\u2009.\u2009.\u2009the growth rates would never have been nearly as fast\u201d, he said.<\/p>\n

Kevin Leung, investor relations director at China Resources Beer, said there were some promotions but no \u201csignificant price drop on any Heineken product\u201d.<\/p>\n

There are other risks. Heineken\u2019s exposure to China Resources Beer\u2019s falling share price led it to take a \u20ac874mn impairment charge last year, even as its own volumes sharply increased.<\/p>\n

The Dutch company does not disclose its dividends and royalty income from the deal, but said its share of income from China Resources Beer and its royalties from China equate to about 6 to 7 per cent of net income globally.<\/p>\n

Van Strien said volumes grew faster than 20 per cent in the first quarter of this year, and that in the same period, volumes of its Amstel brand doubled. <\/p>\n

The deal with China Resources had \u201cno planned endpoint\u201d, said van Strien. \u201cThe reality is, having a local ownership is often a good thing for us,\u201d he said.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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