SABMiller Plc's top Chinese beer Snow is set to become the group's biggest brand in 2006 and one of the world's top four beers, but raising profits in the world's biggest beer market will take time, the brewer said.
London-based SABMiller , the world's second largest brewer, says the low profitability of the Chinese brewing industry will only improve after further takeover activity in a nation which currently boasts 536 breweries.
SABMiller overtook Tsingtao Breweries Co. Ltd in the first-half of 2006 to be China's biggest brewer, and Snow -- China's biggest beer brand since 2005 -- has seen volumes almost double in the first nine months of 2006.
The Snow and Miller Lite brewer, which operates in China through its 49 percent stake in China Resources Snow Breweries, expects Snow volumes to top 25 million hectolitres in 2006, not surprising since it sold 24.4 million in the first nine months.
It is estimated Snow volumes could reach 26-27 million hectolitres for 2006, ahead of Miller Lite which had volumes of 22 million in 2005 and probably only behind Budweiser, Brazil's Skol and Mexican beer Corona in world beer rankings. Snow's probably leap to this No 4 spot comes after it ranked No 9 in 2005 with volumes of 15.8 million hectolitres, and on current trends during in 2006 is set to overtake Brazil's Brahma, Coors, Heineken, Miller Lite and Asahi after Snow's sales in China rose 91 percent in the first nine months.
But despite Snow's growth, profitability for SABMiller and the Chinese beer industry is low. CR Snow accounts for 18 percent of SABMiller's global beer volumes but less than 5 percent of group profits as beer prices as low as 12 U.S. cents for a 640 ml bottle can be less than some bottled water. "Pricing will depend on further consolidation, but that is more long term," said SABMiller's Financial Director for China Wayne Hall.
Prices need to rise especially as marketing and production costs are on the increase. But tough competition between local and global players, attracted to the world's fastest growing beer market, makes this difficult. China has been in focus since 2002 when it surpassed the United States as the world's biggest beer market by volume, and most of the world's top brewers such as InBev , Budweiser-brewer Anheuser-Busch Cos. Inc , Heineken and Carlsberg are already present.
Hong Kong consultant firm Seema estimates the Chinese beer market grew volumes 10 percent per annum over the last 15 years, reaching 307 million hectoliters in 2005, and grew by 13 percent in the first nine months of 2006.
Only Yanjing Brewery Co. and Kingstar out of China's top ten brewers have no investment from foreign brewers, and Yanjing especially has been long rumoured it may dispose of a strategic stake to a global brewer.
Beijing-based Yanjing ranks third and Kingstar, based in Henan province northwest of Shanghai, fifth, within China's top ten, with Seema ranking CR Snow as leader followed by Tsingtao, 27 percent owned by Anheuser-Busch, with the world's top brewer InBev, which makes Stella Artois, Skol and Brahma, at No 4.
The growth of Snow helped CR Snow to pip Tsingtao in the first-half with a 14.9 percent share of the Chinese beer market against Tsingtao's 13.8 percent, and Humor Wang, general manager of CR Snow, says the lead stretched in the Jan-Aug period with CR Snow up to 15.2 percent with Tsingtao unchanged.
Snow now makes up 50 percent of group volumes, and analysts say it may expand its lead over second and third brands Yanjing and Tsingtao as the first is occupied expanding from its Beijing base and the later is turning around some loss-making breweries.
Meanwhile, CR Snow is keen to expand from its current 46 breweries with two further greenfield sites planned at Harbin in northern China and Zhejiang province, south of Shanghai. In addition, the group has identified four further greenfield sites and is also looking at some small possible acquisitions.
CR Snow, which has focused itself along the Yangtze River and eastern seaboard, is only now starting to enter China's two biggest cities of Shanghai and Beijing where beer consumption levels are much higher than in rural China.
Chinese per capita beer consumption in 2005 was 23.4 liters, but in Beijing it reached nearly 70 and Shanghai 50, moving closer to western levels of 100 liters in the UK and almost 80 in the U.S.
Source:佚名