Chinese beer giant Tsingtao Brewery is set to further consolidate its leading market position in Shaanxi by significantly expanding capacity with two new breweries, while AB InBev is also rumoured to be keen on penetrating the central Chinese province.
The development highlights the Tsingtao's eagerness to expand across China in order to maintain its position.
Tsingtao has just started constructing two new large-scale breweries in Shaanxi province, which has close to 40m inhabitants, newspaper 21st China Business Herald reported recently.
In Weinan city, Shaanxi, 50 km west of provincial capital Xi’an, Tsingtao is constructing a 4m hectoliter (hl) per year brewery, with an annual first-phase production capability of 2m hl.
Additionally, Tsingtao recently began building a 6m hectoliter/year brewery in Baoji city, around 125 km east of Xi’an with a 4m hectoliter first phase capacity.
Hans beer bosses Xi’an market
In Shaanxi, Tsingtao Brewery is behind the local beer brand Hans, while the other Tsingtao brands also are being distributed.
In China’s ancient capital, and current growth city, Xi’an, Hans Dry Beer was the best selling beer in 2011, according to a Deutsche Bank 2012 analysis.
The two new breweries will undoubtedly strengthen China’s No.2 brewer in Shaanxi, and Tsingtao will be better equipped to keep its current market-leading position in the province, where it possess a market share of 75-85%.
Belgium/American brewer Anheuser-Busch InBev is also eyeing the Shaanxi beer market, where market data suggest that beer production growth was around 4% in 2012.
AB InBev eyes Shaanxi
The world largest brewer has reportedly been looking to establish a production base of 10m hl/year in Shaanxi. The cities of Baoji and Xianyang have both been mentioned.
Tsingtao’s Shaanxi expansion fits the company’s mid-term target of reaching a 100m hl sales volume target by 2014.
Aktiefokus China research shows that Tsingtao is constructing new production capacity and upgrading existing facilities in up to 16 provinces across China, and that the new capacity plus upgrades totals more than 70m hl of extra capacity.
In order to realize its sales volume target, Tsingtao must achieve double digit sales volume growth in both 2013 and 2014.
Aktiefokus China estimates that Tsingtao’s 2012 volumes will reach approximately 80.4m hl up 12.4% year-on-year, while net sales are expected to grow 13.3% to around RMB 23.5bn (US $3.775bn).
Aktiefokus is a supplier of market and financial information for the professional segment. Aktiefokus is headquartered in Copenhagen, Denmark, but also has a branch office in Chongqing, China. Customers include Danish and Europeans bank analysts and major Danish financial newspapers.