Big brewers fermenting deals in Southwest

08:31, May 28, 2010      

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The nights are certainly getting longer and louder in Jinli. No, it is not any geographical phenomenon, but the hustle and bustle of a typical summer night as more and more revelers head to the streets to chill out. Loud banter, music and sounds of "ganbei" ring the air in Jinli in Chengdu, one of the largest cities in southwestern China.

With the mercury sizzling, it is the chilled beverages that are selling like hot cakes. And for several years now beer has been the most popular beverage in Sichuan province.

The taste for beer also has its roots in the relaxed and easy life style of the region. So much so, that there is tremendous competition among the beer majors to boost investments and corner bigger market shares in the premium beer segment.

The popularity of beer can also be seen in the clutter of billboards displaying various brands dotting the streets.

"Most of our clientele come to have a drink after 7 pm, and we usually sell around 200 bottles of premium beer, priced at 15 yuan each, every day, even though our main business is food," said Xiao Li, a waiter at the Guan Jin bar in Jinli.

Molson Coors, the world's fifth-largest brewer is one of the biggest that have stepped up their investment pace here. The company recently spent $40 million to buy a 51 percent stake in a new joint venture with the Hebei Si'hai Beer Company. The joint venture plans to launch premium beers with lower production cost in China.

"Chengdu and Chongqing are among the cities that had the best sales figures last year for our premium brand Coors Light. We will consider making another new investment if the market keeps on growing," said Peter H. Coors, chairman of Molson Coors.

Companies like Molson Coors are also encouraged to expand as premium beer sales in southwestern China are five times larger than the Northern regions, said John Zhang, general manager (operations), China of Molson Coors.

The Guangzhou-based Molson Coors has been selling its premium brand, Coors Light, mainly in bars and night-clubs in southwestern China. The brand now accounts for 10 percent of China's premium beer market.

Molson Coors' competitor, Carlsberg, the world's fourth-largest brewer, is also planning new investments in the southwest. The brewer is currently waiting for the outcome of a bid to acquire 12.25 percent stake in Chongqing Brewery Company.

Carlsberg has also shown interest in the nation's southwestern market. Jorgen Buhl Rasmussen, president of Carlsberg, said he was planning to move the headquarters of Carlsberg China from Chengdu to Chongqing.

With competition heating up, there is also a price war. Both Carlsberg and Coors Light are priced the same, and sell at around 180 yuan per dozen in Guan Jin bar. "Carlsberg and Coors Light are the two best-selling brands due to their reasonable price and good taste," said Li.

The world's largest brewer Anheuser-Busch InBev's China arm started work on a new brewery in Ziyang, Sichuan province, this year.

Fu Meikai, president of Anheuser-Busch Asia-Pacific region, said: "Anheuser's production in southwestern China will mainly focus on the premium restaurants and bars.

Average beer consumption per person in southwestern China is 29 kilograms annually, below that of northern cities like Beijing, where beer consumption is 91 kilograms, according to China Jianyin Investment Securities.

"The beer industry in southwestern China is focused on premium beer due to the more relaxed and easy lifestyle here. In addition, the local economic growth and relatively low consumption base signifies huge growth potential," Huang Wei, a food and beverage analyst with China Jianyin Investment Securities, said.

Source: China Daily


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