Subverting Asian local beer brands may pose a challenge for Anheuser-Busch InBev!
The world's largest beer manufacturer, Anheuser-Busch InBev, is aggressively entering China and other Asian markets, but the facts may prove that it may pose a challenge for Anheuser-Busch InBev in order to subvert the local beer brand that dominates the local market for a long time.
After Budweiser Asia Pacific listed in Hong Kong, Anheuser-Busch InBev said it will seek to expand in Asia, especially in China, South Korea, India and Vietnam.
In China, high-end beer is very popular. According to Euromonitor, Anheuser-Busch InBev ranked third with a market share of 16%. Throughout Southeast Asia, the company has not even entered the top ten.
Hong Wei, chief international strategist of China Bank of Communications, said: "Chinese local beer companies have strong control over the local beer market, so the next strategy of Budweiser remains to be seen."
Analysts said that large beer companies have already acquired smaller beer companies in Asia, which may be one of the strategies of Anheuser-Busch InBev. However, local beer still dominates in Asia.
Chinese beer market
China is the world's largest beer market by sales, but the Chinese market is challenging in the fierce competition between local beer manufacturers and global beer giants.
According to Reuters, China Resources Beer's share in the Chinese market exceeds 25%. Its popular Snow Beer is the world's highest-selling beer.
According to the data, China Resources Beer is the largest beer producer in China by market value, followed by Tsingtao Brewery and Chongqing Beer.
Source: Ou Rui
Hong Wei said that although China's domestic beer manufacturers have a large share of the regional market, China's beer market is still very fragmented. The Chinese's first choice is still white wine, and the best performer is white wine. Therefore, it remains to be seen how much further growth of Anheuser-Busch InBev can be obtained from the Chinese market.
About half of the globally consumed beer is sold by Anheuser-Busch InBev, Heineken, Carlsberg and Snow Beer. In addition to Budweiser, Budweiser InBev also has other popular beers such as Times Beer, Corona and Fujia White.
Southeast Asian beer market
Jared Neubronner, research analyst at Euromonitor, said the Southeast Asian market may have better prospects as Southeast Asia is expected to be the main driver of economic growth. He also said that its key markets will be Vietnam and the Philippines.
“Baiwei InBev has not been among the top ten beer manufacturers in Southeast Asia in 2018, because local beer manufacturers dominate. For further development, Anheuser-Busch InBev needs to make breakthroughs in Southeast Asian countries such as Vietnam and the Philippines.”
Some companies have already acquired some local brands in these markets. For example, Thai Beverage Company acquired Sabeco (Saigon Beer Alcoholic Beverage Company), the largest beer company in Vietnam, for $4.8 billion in 2017. This has made Thai beverage companies become the number one beer producers in Southeast Asia.
According to Euromonitor, in the entire Asia-Pacific region, the Thai beverage company listed in Singapore has a market share of 3.9% in 2018, ranking sixth.
Neubronner said: "Many of Southeast Asia's leading beer producers are local manufacturers with strong local knowledge and distribution networks, so if Anheuser-Busch InBev wants to increase its market share in the region and leverage the expertise of local manufacturers, it is possible Acquisition of local beer companies."
In China, in 2018, China Resources Brewery placed new shares to Heineken at a price of HK$24.35 billion, accounting for 40% of the total share capital after the expansion. This poses a challenge to Anheuser-Busch InBev's position in China's high-end beer market. However, beer may lose to spirits, wine and other alcoholic beverages.
According to Euromonitor's data, as consumers turn to other alcoholic beverages such as spirits, Chinese beer consumption will fall by nearly 1 billion liters by 2023.
Brendan Ahern, chief investment officer of Jinrui Fund, said demand for alcohol-related stocks in Asia has been strong. Brendan Ahern manages 16 funds focused on China with $2.5 billion in assets.
When talking about the IPO of Anheuser-Busch InBev, he said: "In the recent past, alcohol stocks have been an area favored by Asian investors, and Anheuser-Busch InBev is taking advantage of this."
He pointed out that as the demand of Chinese consumers continues to grow, the revenue and earnings per share growth of related companies has been very strong. Due to strong demand, these companies are able to expand production while keeping prices constant.