"Huaxia Wine News" reporter Liu Xuexia
In recent years, the beer industry has been fighting for high-end, and gunsmoke has been everywhere. Traditional beer giants and new beer forces learn from each other and accelerate iteration, while at the same time, expansion, extrusion, and dislocation competition are more obvious.
The beer market is "half seawater, half fire". So, how will the beer industry be upgraded and transformed in the future? And where is the "ceiling"? Recently, Caitong Securities released a research report on the beer industry, believing that under the catalysis of the peak season, the performance of beer sales is expected to be boosted, the prospect of structural upgrading is broad, and the return of value is the right time.
What to look for in the upgrading of the beer industry structure?
China's beer industry is currently facing a fork in the road: price increases, factory closures and structural upgrades. Among them, the price increase is effective in the short term, and the room for profit improvement is limited and unsustainable due to the closure of factories, and the structural upgrade is the core main line.
Where does the impetus for the structural upgrading of the beer industry come from? One looks at the supply side, and the other looks at the demand side. The upgrading of the product structure on the supply side has become the core way for enterprises to exert their subjective initiative and promote the improvement of profitability. Structural upgrading has been further fueled by rising incomes and changing consumption habits. In recent years, as the competition pattern has stabilized and costs have risen year by year, the trend of innovation and upgrading led by beer companies has become more and more obvious, and the supply side has become the main driving force for structural upgrading.
From the perspective of the supply side, the market concentration of China's beer industry is relatively high, and the low-price strategy is difficult to continue to expand the market share for enterprises. In addition, the cost of raw materials and packaging materials has remained high in recent years, and enterprises urgently need to improve product profits through structural upgrading. Beer companies are actively launching high-end series of products to improve product quality, which has become the main driving force for high-end and branding in the beer industry.
The profitability level needs to be improved, the low-price strategy is unsustainable, and structural upgrading is the key way out. Before 2013, the manufacturers of the "horse race" and low-price competition strategy in the rapid integration of the industry at the same time, but also led to the overall profitability is low, with the industry leading pattern gradually stabilized, the leading enterprises from sales expansion to profit improvement, high-quality development has become the industry consensus. Structural upgrades and product innovation will help mainland enterprises absorb the pressure of rising costs and improve long-term profitability.
From the demand side, personalized demand is emerging, accelerating the pace of product structure adjustment, and the high-end market is promising. With the transformation of beer consumption to younger, fashionable and personalized, the mainstream consumption concept of the market has undergone great changes, from imitation, following to transcendence, the beer consumption concept has experienced the process of drinking, drinking, drinking well to fun, young, fashionable, passionate, healthy and safe, has become a new culture of Chinese beer.
At the right time, the structural upgrade entered the stage of accelerated release of potential energy. Around 2013, the replacement of local brands by mainstream brands was gradually completed, and at the same time, with the improvement of consumer income levels and changes in consumer preferences, the industry gradually entered the stage of "high-end replacing low-end", which has continued to this day. With the compression and stabilization of low-end sales in the beer industry in recent years, a consensus has been reached on the optimization of the leading competition pattern, and the contribution of structural upgrading to the profits of the industry and various enterprises is expected to be accelerated.
Where is the "ceiling" for structural upgrades?
● The proportion of high-end beers at the tip of the pyramid is still low
There is still a lot of room for high-end proportion to benchmark overseas. From a structural point of view, in 2020, China's high-end beer market share will only account for 35%, and low-end beer still occupies a large share, while the market share of high-end beer in the United States is as high as 46% in the same period, and China's mid-to-high-end beer market still has a lot of room for growth. As China's product structure is expected to continue to be optimized, in the future, it is expected that the proportion of mid-to-high-end products will increase, and the product structure will be spindle-shaped, that is, mid-range beer is the main component, with small at both ends and large in the middle.
In the future, the logic of the continuous increase in the proportion of high-end products lies in: first, under the wave of consumption upgrading, high-end beer has gradually been favored by the public because of its certain improvement in raw materials, production technology, taste richness and other aspects compared with economic beer, and its market share continues to increase; Second, the main consumer group of beer is changing, and Generation Z is gradually becoming the mainstream consumers of the high-end beer industry in the future; Third, with the weakening of external disturbance factors, mid-to-high-end beer consumption places such as bars, KTVs and high-end restaurants in entertainment venues have resumed business, and the restoration of ready-to-drink scenes has promoted the increase in demand for mid-to-high-end beer products.
●As the growth rate of ton prices slows down, we should pay attention to sub-high-end upgrades, low-end optimization, and high-end concentration
Under the phased slowdown of consumption upgrading, Caitong Securities believes that the high-end upgrade of beer can pay attention to: the sub-high-end price of 6 yuan to 8 yuan to 10 yuan upgrade progress; Integration and optimization of low-end products below 6 yuan; The company's determination to invest in high-end brands.
According to the statistics of China's per capita consumption expenditure from 2018 to 2023, the consumption power of mainland residents has declined in recent years. However, for the beer industry, with a wide capacity, diversified price bands, and a phased slowdown in high-end consumption, we can still pay attention to the upgrading space of sub-high-end and low-end.
First of all, sub-high-end upgrades, large price band capacity + strong certainty of brand power blessing. Mid-range catering and entertainment contribute to the core driving force in consumption restoration, and the restoration of mid-range catering scenes makes it less resistant to upgrading from 6 yuan to 8 yuan to 10 yuan price band beer. Various beer faucets aim at this price band upgrade trend, such as China Resources SuperX, Yanjing U8, Heavy Beer Lebao, Chongqing Guobin, Qingdao Classic, etc. The sales volume of sub-high-end products is not low, the price band capacity is large, and the superposition of the price band is mostly the internal upgrade of the same brand, and the upgrade is relatively smooth with the blessing of brand power, so the upgrade has a greater incremental contribution to each company and has strong certainty.
Secondly, the proportion of low-end products is still high, and there is broad room for internal integration and optimization. At present, the sales volume of low-end products of beer faucets is still relatively high (in 2023, the low-end products of China Resources Beer, Tsingtao Beer, Yanjing Beer, and Chongqing Beer will account for 78%, 60%, 34%, and 3% respectively), and after years of cultivation, a solid market position has been formed. Optimize the internal structure in the monopoly market, integrate low-end products into high-end products, cater to consumer trends, have little market resistance, and the cost of upgrading in advantageous markets is small, and the upgrade of 1 yuan is almost a net profit increment for the company.
Finally, enterprises have a strong investment in high-end brands and focus on long-term continuous cultivation. In the current consumption environment where the overall high-end and ultra-high-end performance is slightly weak, companies are still continuing to cultivate in the high-end matrix, whether it is product development and launch, or consumer cultivation and brand marketing, all of which reflect the long-term layout and determination.
Is it a product matrix or a large single item?
The distribution of beer consumption price ranges is scattered, the consumption scenarios are becoming more and more abundant, and the growth of high-end wine is significant. Should the product strategy of the beer industry be the full coverage of the product matrix, or the core creation of large single products? Caitong Securities believes that in the future, the upgrading and transformation of the beer industry should be guided by product portfolio, cultivating different large single products in different price bands, and creating different large single products in different scenarios to cover different consumer groups.
●The strategy of large single product is the most effective way to stake in the early stage of industry development
In the 90s of the 20th century, mergers and acquisitions in the beer industry were integrated, and regional synergistic brands were unified to create large single products. At the end of the 90s of the 20th century, the beer industry had a wide range of idle production capacity, the profit level of the industry continued to decline, and the beer industry entered a period of mergers and acquisitions in the same industry. In this context, the importance of the creation of large single products for beer companies lies in the brand effect of consumer cognition, the cost effect of production economies of scale, and the concentrated explosion of consumer preferences.
At present, the companies have created several million-ton large single products, with a stable share and obvious large single product effect. For example, China Resources Beer Snowflake bravely braves the world, Tsingtao Beer Classic, Refreshing, Budweiser Classic, etc., Chongqing Beer Wusu, Yanjing Beer U8, China Resources Beer Chunsheng, Heineken, Chongqing Beer Lebao, Chongqing, Tsingtao Beer Chunsheng, etc., are also moving towards the goal of one million tons.
●Under the stock competition, matrix large single products may be the best solution
Beer consumption is structured in a complex way, with audiences for each price band. At present, the main consumption volume of the beer market is still concentrated in beer with a price of less than 8 yuan per 500ml to meet the daily drinking needs of consumers. At the same time, from the perspective of consumption flow in the past three years, the proportion of beer consumers with consumption upgrades has increased significantly, mainly for low-end beer consumers to upgrade to high-end and high-end wine consumers. In terms of market size, the beer market has increased in all price bands, but the supply of high-end liquor for sale has increased more significantly. Therefore, in the future, the structure of the beer industry should be upgraded, and products with different prices should be created for people with different consumption power to occupy the price band.
The beer consumption scene is diverse, and the value concept in "wine tasting" enriches the beer consumption appeal. In recent years, with the rapid development of social economy and the rapid change of people's lifestyles, the concept of beer drinking has changed from the past "fighting" to today's "tasting" consumption, "drunken freedom" and "late-night pubs" are becoming more and more popular, and more and more young people no longer take buying drunk as the purpose of drinking. The precise positioning of the scene can make the product have a clearer positioning and audience, provide enterprises with a higher average selling price and the resulting profitability, and create the possibility of cultivating large single products.
Under the trend of consumption upgrading, craft beer is rising. China's craft beer is currently in the early stage of development, with a wide space and a high growth rate. As the post-90s and post-95s generations have gradually become the main force of consumption, their drinking consumption concepts are more rational and they are more pursuing diversified and trendy products. According to the "Research Report on the Status Quo and Development Prospects of China's Craft Beer Industry", it is expected that by 2025, the sales scale of the domestic craft beer market will reach 87.5 billion yuan, and the penetration rate of craft beer will reach 11%.
Matrix large single product or the optimal solution for beer companies to find increments and seize market share. Under the current consumption trend of diversified price demand levels and different drinking groups, scenarios and value appeals, beer companies are looking for the optimal solution for new increments or creating matrix-type large single products, that is, cultivating different large single products in different price bands and creating different large single products in different scenarios. For example, the three major products of China Resources Beer's "Heineken + SuperX + Pure Raw" are oriented to the three markets of high-end, mainstream and economy; Chongqing Beer's "6+6" brand matrix builds different consumption scenarios for catering, tourism, music and leisure.
To sum up, with the catalysis of the peak season, the performance of beer sales is expected to be boosted, the structural upgrade will continue to be promoted, and the profit elasticity is expected to continue to be released. In addition, the profit improvement brought about by the cost decline is expected to be more obvious under the scale effect brought by the increase in revenue, and the profitability improvement is expected to accelerate.