Tsingtao: buoyed by beer buying
Published:23-August-2005
By BR staff writer
It's a good time to be a Chinese brewer: Tsingtao, the country's largest, has experienced 20% growth in earnings in the first half of the year. This comes in stark contrast to the stagnation of the global beer market, but Tsingtao needs to remember that the days of plenty will not last forever. Competition will intensify as foreign players look to emerging markets for future revenue growth.
Tsingtao Brewery has posted earnings growth of 20% for H1 2005.
Tsingtao's recorded growth in H1 earnings was higher than the 10-15% rise expected by analysts. The company's total H1 net income reached CNY173.64 million ($21.4 million), compared to CNY144.8 million a year ago.
The company rightly cited surging growth in the Chinese beer market as the driver of its impressive figures. Indeed, Datamonitor research shows that this market has enjoyed year on year value growth of 7.8% between 1999 and 2004.
As Tsingtao, China's leading brewer, is 27% owned by US-based Anheuser-Busch, the company's recent success further underlines the growth potential such emerging markets offer to global players, particularly those suffering from a slowdown in their home markets. Several overseas brewers pushed heavily into China in the 1990s, before discovering the immediate rewards were somewhat underwhelming. Many therefore exited the market around the turn of the century, but the signs are that the likes of SABMilller and Carlsberg are now returning for the long haul.
By way of comparison, the Russian market provides another attractive investment opportunity and, as in China, leading global brewers have been quick to capitalize on the market's growth potential. Only this month SABMiller reportedly expressed an interest in acquiring Krasny Vostok, a major independent Russian brewer.
However rapid growth of the category in Russia and China is very much the exception rather than the rule when it comes to the global beer market, which has stagnated in recent times. Consumers' increasing recognition of health issues, and the related boost to wine's popularity in many western markets, may in part explain why brewers are aggressively exploiting opportunities far beyond their home regions.
Tsingtao is likely to continue to prosper as long as the relentless rise in Chinese consumer spending is there to underpin its fortunes. However the stellar growth seen now may not last as competition intensifies, and global drinks players come to view a significant presence in China as a necessity rather than a novelty.
