High-end Beer Market as the Battlefield

As the grain price is increas- ing globally, the profit margin in the mainstream and low-end beer markets in China is lowered again, forcing beer makers to throw their eyes at the highend beer market.

In middle April, one of the ten best high-end beer brands in the world Tuborg Beer, which is under Denmarkbased Carlsberg, announced its debut in China in a high profile, adding more fuel to the competition in China’s highend domestic beer market.

Open the new trend in the market

Tuborg is the largest beer brand in Denmark and the leading beer brand in Russia. It witnessed an 800% annual growth rate in sales in the largest country of the world. “Tuborg is the crown among all brands of Carlsberg,” said Phix, vice chairman of commerce at Carlsberg Asia.

Apart from its special European flavor brought by the Danish yeast, the most characteristic part of Tuborg is with its brand new design of easy-open lid which can be removed with a gentle drag. Stephen Maher, CEO of Carlsberg China, said that Tuborg targeted young people. Its new 3-d bottle and easyopen lid are to cater for the appeals of young men for “simplicity, convenience, individuality and fun”.

It is known that Tuborg will be first produced in Huizhou and Chongqing awith three packages covering large and small sizes and canned beer. The canned beer is priced at 8 yuan per can. Bars, restaurants and other catering places open at night will be the place where they are sold. “Bringing Tuborg into China will create a good link between high-end products and mainstream products of Carlsberg, marking the further improvement of Carlsberg’s distribution in China’s high-end beer market. We aim to build Tuborg into a strong middle- and high-end beer brand in China in the future.” Maher said.

Data shows that the sales amount of Carlsberg increased to 1.4 million kiloliters in China in 2011, up 8%-9% year on year. The growth is higher than the average level of the beer industry.

Foreign and domestic beer makers battle against each other

“The middle- and high-end beer market now is the fastest growing seg- ment market in the beer market. The compound growth rate is expected to reach 15% between 2010 and 2015,”said He Yong, secretary-general of the beer brand of the Chinese Association of Brewing Industry.

“Influenced by the economic situation, the low- and middle-end beer market in China did not see a big growth in sales. Therefore, the high-end market, which is full of potential, became the main target of contest of various beer giants,” an expert said.

Xiao Runde, beer brand director of the Chinese Association of Brewing Industry, said that Budweiser, Heineken and Carlsberg take about 70% of the high-end beer market in China. However, the Chinese beer makers are growing their presence in China in recent years, gradually forming a threat to the dominant place of foreign beer makers. “Generally speaking, the profit margin of highend beer is 5-10 times higher than ordinary beer. Therefore many Chinese local beer makers are increasing the proportion of high-end products in their product portfolio.”

International beer markets do not idle away. They immediately set up their defense line. For example, Budweiser accelerated its production capacity distribution in China with its new plants established in Sanshui and Tangshan. Maher said: “The entry of Tuborg will consolidate the leading place of Carlsberg in China.”

Lack of “knockout products”

The wine-related website JustDrinks announced that the total volume in the high-end beer market will be increased to 65.5 million kiloliters by 2013, up 74.7% from 2006. In the Asian-Pacific region, the volume will have a 125% increase to 13.5 million kiloliters. The increase in the AsianPacific region will be mainly driven by the Chinese market, implying that the consumption of high-end beer in China will grow at a fast pace in 2013.

Maher from Carlsberg said that presently the high-end beer accounted for 15% of the total volume of beer market and thus there is a great space for further improvement.

But the market Tuborg targets seems to be a little “crowded”. Apart from old rivals Budweiser and Heineken, many Chinese beer makers also have launched or plan to launch products whose single price is around 6-8 yuan for young consumers.

Now the representative Chinese domestic products include Augut from Tsingtao Beer, Jinbiao Premium from Huarun Snow and so on. But Maher said that Tuborg is the worldclass product that inherits the historical heritages, patent technologies and advantages of Carlsberg. It also has premier advantages in the sportbased marketing resources, which can help it change the competitive situation of high-end beer market.