The Wall Street Journal

Why Breaking Into the Chinese Beer Market Is Almost Impossible

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As global beer sales have stalled, major brewers such as AB InBev and Carlsberg are flocking to China. WSJ's Steven Russolillo in Hong Kong tests their strategies, sipping the beers specially crafted to win over Chinese drinkers.

Image composite: Sharon Shi. Video: Clément Bürge

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… show captions ↓
(rock music)
- [Narrator] China is the largest
beer market in the world
and a particularly hard one to crack.
(beer tab pops)
Global brands have been desperate
to sell more here but you know what?
It's really competitive.
- [Steven] International beer giants,
like Heineken, Carlsberg and Annheuser-Beusch,
are in an intense competition with
the Chinese giants like Tsingtao and Snow.
Last year alone, the country
consumed 46 billion liters of beer.
That's about twice as much as in the U.S.
The issue with this market, mostly because it's so
competitive, is that it's really hard to make money.
Consumers here can buy beer for about
30 cents a can in supermarkets.
- [Chris] We're in Yu Man Tang.
Historically, this is a place with
a lot of local business, there's a night market.
Locals will come out here to eat some street food
and drink some beer at night.
- [Steven] Chris Wong has been selling beer
in the region for the past seven years
to wholesale and individual consumers.
- [Chris] So a lot of people they enter
into the China market, seeing a lot
of people there they see a pot of gold.
However, there's a lot of difficulties, right?
People are used to drinking very cheap
commercial lagers just as cheap as water.
- [Steven] International beer-makers
and start-ups alike want people
to drink more expensive beer.
Like IPAs, wheat beers or just regular
lagers popped in fancy bottles.
These drinks can make up to eleven times
more money than the regular beer
usually consumed in China.
So, how do you convince people to spend more money on beer?
Especially at a time when
the Chinese economy is slowing down?
(hiphop music)
First, you gotta tap into the culture.
- [Rohit] We do about 1000 liters per batch every day.
Production has been increasing constantly every month
for the last six years since we've been operating.
- [Steven] Rohit Dugar says that you
can't succeed in the market without
understanding Chinese consumers.
The Hong Kong based entrepreneur launched
a line of craft beers, called Young Master,
that sit at the very top end of the market.
His beers sell for up to 20 dollars
at bars in large Chinese cities.
Something many brewers dream about.
He says his rivals don't have a plan like his.
- [Rohit] There are small start-up,
much larger breweries, they are viewing
China as kind of a quick win.
The long-term success will be for people who
are on the ground putting in fundamental effort.
- [Steven] So Dugart has developed a clear-cut strategy:
Make his beers look and taste familiar to Chinese drinkers.
- [Rohit] The way we name our beers.
The illustrations from local scenes.
The aesthetics we use, everything
is kind of informed by local culture.
This beer is called Cha Chaan Teng sour.
We added some salt-cured lime
and it's a very common ingredient used locally.
People mix it with sodas and drink it in coffee shops.
(upbeat hiphop music)
- [Steven] Cheers. - [Rohit] Cheers.
- [Steven] Ah that's good, tastes like something
I would drink, like, after running a marathon.
But not all Chinese consumers are
ready to shell out 20 bucks
for a luxurious craft beer.
We asked Matteo Fantacchiotti.
- [Steven] Hey, how's it going?
Who manages sales for Carlsberg in Asia,
to explain how his company does the job.
- [Matteo] Blanc is quite a citrusy beer.
It pairs well with fine dining group experience.
- [Steven] Carlsberg sells a wide range of beers
and each one is marketed to suit different occasions.
- [Matteo] This is the typical local beer in China.
So very light, going very well with hot pot and hot cuisine.
- [Narrator] Here are some of Carlsberg's beers
you can get at a grocery store.
From the low end to the premium.
The idea is to get people who've been
drinking a Wusu for about a buck
to upgrade to a Carlsberg.
The goal would be to gradually move them
all the way up to a 3 dollar Brooklyn lager.
Beer-makers are doing everything they can to stand out.
Brands put their logo on the tap
right here in front of consumer's faces.
Corona has figured out that limes
are key to grabbing people's attention
and Chinese consumers see it as a novelty.
It's one of the key reasons why Corona sales,
in China, have surged about 25 times
over the past four years.
Where beer comes from is important to Chinese drinkers.
- [Matteo] Drinking more premium international brands
is a symbol of, first, you can afford it,
secondly, you know what to drink
and the local brand will play a significant role
because there is the pride, habit of,
you know, drinking your local beer brand.
- [Steven] An example of super local beer,
Wind, Flower, Snow, Moon.
Carlsberg has been acquiring local craft
breweries like this one in Yunnan.
Industry analysts say Chinese consumers
are attracted by foreign brands,
which has made some, like Budweiser,
extremely successful in the region.
Beer-makers want to appeal to Chinese palettes.
Remember that fermented lime beer?
From that Hong Kong brewery?
Well, there's also pineapple flavored beer
and some brewers say their beers are made with wheat
and clean water to give off a healthy impression.
(record scratch)
So, I didn't have to drink these beers
while reporting this story but I insisted on it.
You know, for the sake of journalistic due diligence.
(inspiring operatics)
It's not bad, it's fruity, pleasant.
I can get used to it.
These sales strategies have been
used before in other parts of the world.
- [Greg] We could've brewed our beer
in a town you've never heard of.
- [Steven] And actually worked pretty well.
- [Man] Let them drink beer, ha ha ha.
- [Steven] But beer-makers say
it's even more important to get them right in China
because if they don't plan properly,
there can be consequences.
- [News Anchor] Indefinitely, it's not
proceeding with it's announced public offering-
- [Steven] For example, in July,
Annheuser-Beusch INBEV, the producer of Budweiser...
- [Newswoman] China sales for them is a big deal.
- [Steven] ...dropped its plan for what
would've been the year's biggest IPO.
The company says it flopped because
of prevailing market conditions.
Investors worried that the strategy
would not make enough money in Asia.
The intense competition between Chinese
and international beer-makers might scare
board rooms and investors across the world,
but for Chinese drinkers, that only means one thing,
a greater diversity of beers.
So consumers better hope that companies keep up the fight.
(upbeat hiphop music)

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