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Beer in Asia
Asia's powerful thirst for beer does not mean bumper profits for brewers
Aug 19th 2010
DRINKING beer is not a competitive sport—unless you are a student or a rugby player. But if it were, Asia would now have the bragging rights. Recent figures from Japan's Kirin Institute of Food and Lifestyle (owned by the Kirin brewery) show that in 2009 Asia overhauled Europe in beer production for the first time. Almost all beer is consumed where it is made, so Asians collectively chug more than the boozers of any other continent.
That would seem like encouraging news for the world's big four brewers—Anheuser-Busch InBev (ABI), SABMiller, Carlsberg and Heineken—which between them supply nearly half the needs of the world's beer drinkers. All four have pursued roughly the same strategy in recent years. They bought breweries in rich countries, where beer drinking has levelled off or fallen, and boosted profitability by stripping out costs. At the same time they snapped up brewers in emerging markets, where the party can only get livelier. But they cannot afford yet to relax with a cool one. Most tasty takeover targets have been swallowed, so the brewing giants will henceforth have to rely more on organic growth. Asia's spectacular thirst ought to help a lot, but won't yet.
Consider China, which has come from nowhere a few decades ago to become the world's biggest quaffer of beer by far. Its people slosh down 70% more than Americans do, and the market is growing by nearly 10% a year (a bit better than America's 1.2%). But profits are slim. ABI's results for the first half of this year show margins of 41% in America but only 14% in China and South Korea. And China's market is highly fragmented—the top two brewers have only 35% of it, compared with 70-100% in some countries. This means that retailers have brewers over a barrel.
Buy a brewer in a poor country and you get a familiar brand and a ready-built distribution network. As incomes rise, the locals may be lured into drinking more profitable premium beers. Alas for the big brewers, this is not yet happening in China, and may not for a generation, says Anthony Bucalo of Credit Suisse, a bank.
Other Asian markets are tiny, apart from Japan. But western brewers have never been able to compete with Japanese ones on their home turf. And takeovers are unthinkable given the country's ice-cold attitude to foreign ownership. Some day, billions of thirsty Asians will make global brewers sing. But not today.
Business
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