Business / Industries

Beer sales suffer due to cool weather

By WANG ZHUOQIONG ( Updated: 2015-07-31 17:19

Tang Xiaotao's stock of beer in his fridge has not gone down by much this summer, thanks to frequent rain that has been keeping the weather unusually cool.

Customer behavior like his are what is keeping the beer industry worried, as sales have been slower this year because of the cool weather.

David Zhang, senior drink analyst at Mintel Group Ltd, a market intelligence agency based in the United Kingdom, said the beer industry in China is facing saturation and the market is more easily affected by outside factors. For example, the cool weather is expected to have an impact on the beer industry this year.

Zhang said Mintel forecasts that beer sales will see a decline of 1 percent in volume this year. The market shrank by 1.8 percent in volume in 2014.

However, He Yong, secretary general of the beer division of China Alcohol Drinks Association, didn't blame the temperature as the primary factor affecting beer sales last year.

2014 was not the coldest year, he said, nor does weather play a long-term effect on beer consumption.

The structures of beer consumption in China have evolved, with consumers driven by quality rather than quantity and manufacturers by product quality compared with market share.

With five leading beer conglomerates — China Resources Snow Brewery Co, Tsingtao Brewery, AB InBev, Yanjing and Carlsberg take up 80 percent of market share, it is increasingly challenging to raise market share by simple mergers and acquisitions, said He.

Zhu Danpeng, researcher with China Food Institute said the beer market depends a lot on temperature as the second and third quarter make up 80 percent of the total sales in a year.

Beer consumption can be divided into outdoors and indoors, according to Zhu. Indoors consumption are mostly medium and high end products while outdoor consumption are of medium and low end products, consumed at street vendors and night meal providers. The outdoor businesses are easily affected by the weather, said Zhu, who forecasts that the total production and sales will decline by five percent this year.

The annual fiscal report for 2014 by Yanjing Beer Co Ltd – the leader in the Beijing market – stated that the decline of the beer industry in 2014 is the result of the weather and the slowdown of consumption. Its revenue has decreased 1.78 percent to 13.5 billion compared with 2013, with the volume of sales down 6.9 percent to 5.32 million metric tons. To adjust its product portfolio in meeting customers' demands, Yanjing Beer has invested more on its medium and high end product lines, a category in which sales increased more than 30 percent in 2014.

The China Resources Snow Breweries has its 2014 revenue up 4.5 percent to 34.48 billion Hong Kong dollars ($4.5 billion), while its net profit decreased 19.3 percent year-on-year.

Snow Breweries' annual report has cited the weather as the factor dragging down their beer sector's performance in 2014. "The cool summer in the third quarter has affected the sales in the Yangtze River delta," said the report.

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