AB InBev eyes up growth potential for beer in China
Widespread and extensive COVID-19 closures impacted the category in 2022. But which most channels now re-opened, the company is optimistic that 2023 will be a strong year and the start of long-term growth in the country.
“China is a priority because of its size and unique operating environment,” says AB InBev. “The growth of middle and upper economic classes is unparalleled, and in the next ten years, this part of the population should grow faster than in the last decade.
"Our ambition in China is to continue to invest in premiumization and expand our portfolio into new regions.”
Budweiser and craft
This drive for premiumization has already started. Despite the ‘significant impact’ of COVID-19 restrictions (volumes declined 3% and revenue declined 4.2% in 2022), premium and super premium brands actually saw volume and revenue growth ahead of FY19 pre-pandemic levels.
Budweiser, in particular, has seen distribution expand from 184 cities in 2021 to 201 cities in 2022. And by the end of 2025, AB InBev wants to see the footprint expanded to more than 250 cities. In fact, China already represents Budweiser’s largest market.
“We continued to progress our expansion strategy with Budweiser reaching all-time high Brand Power in FY22. Budweiser and our super premium portfolio grew volumes by double-digits in more than half of the expansion cities despite the impact of restrictions.”
Another string in the premium bow is craft, which AB InBev pledges to continue to invest in. It launched craft brew 059 Coastline Craft in China in 2022, and expanded its brewpub footprint with three new locations in Q4. Most notable, however, is its partnership with Scottish craft brewer BrewDog, announced last month.
In July, it opened a new brewery in Putian, which specializes in high-quality craft beers, and becomes one of the company’s largest craft breweries in Asia-Pacific. The 7,400 sq/m (79,652 sq/f) site houses a product innovation lab and brewing operations for brews such as Goose Island, Boxing Cat, 059 Coastline Craft, and BrewDog.
Helping drive growth is the roll-out of AB InBev’s e-commerce platform BEES (an app designed to help small and medium-sized retailers place orders, arrange deliveries and manage invoices).
The platform – initially launched at the end of 2019 in the Dominican Republic – now has around 3.1 million monthly active users across 20 markets, making it one of the world’s largest B2B e-commerce platforms.
In 2022, BEES was expanded to more than 90 cities across China. “The roll out and adoption of the BEES platform has accelerated with over 40% of our revenue through digital channels in December”, notes AB InBev.
059 Coastline Craft has been created to highlight the flavors and culture of the Fujian province. It’s named after Fujian’s “059” district code, while “Coastline” is a nod to the province’s long coastline and aspirational spirit.
Flavors include Wuyi mountain tea (right) and tropical fruits of the southern Fujian province.
How long will the Chinese market take to recover?
The impact of COVID-19 closures throughout 2022 was significant: particularly in Q4, where volumes declined by 7%.
“Our business was disrupted due to prolonged channel closures particularly in regions where our footprint is most concentrated, as well as reduced traffic and mobility after the lifting of control measures in December," notes AB InBev.
"Our premium sales channels were heavily impacted, especially nightlife venues and Chinese restaurants, which led to a double-digit revenue decline in our Premium and Super Premium segments in 4Q22."
Although the premium segments took a hit in Q4, AB InBev says the overall FY22 performance was resilience for the sector across the other parts of the year.
But the company now estimates that restaurant and nightlife channels are almost fully re-opened. “In light of the current pace of improvement, we are optimistic about our business recovery in 2023 following a transitional quarter in 1Q23.”