Beer Ushers In A Good Day: Industry Profits Will Double By 2025

Good days are coming for the beer industry as a whole. In the ability to make money, beer has the potential to catch up.

"Chinese beer is probably the most unprofitable beer in the world. In the global beer industry, the profit of Chinese market is very low. " Recently, He Yong, Secretary General of China Liquor Industry Association and chairman of beer branch, said in an interview with media in Shenzhen.

However, he changed his mind. "I think that the great change does not necessarily lie in the changes among enterprises, but in the accumulation brought about by the whole industry. After so many years of accumulation, the industry may usher in a very large development space and spring in the future.

He Yong made the above remarks when attending the first snowflake Channel Partner Conference held by China Resources beer (00291. HK), the industry leader. At the meeting, he disclosed for the first time the indicators of beer in the guiding opinions (Draft) for the development of China's liquor industry during the 14th Five Year Plan period.

"The production and sales volume of the beer industry changed little, and there was no high expectation. However, by 2025, profits will grow by 100%, with an average annual increase of nearly 15%, which is the industry's high expectation for the future of the beer industry. " He said.

Profitability increased after the outbreak

"As of September, the output of beer enterprises above designated size has decreased by 6.8% year on year. The day before yesterday, I got the beer production data from January to October, but the decline was smaller in alcohol. So far, the impact of the epidemic on beer consumption and production has been greatly reduced. " He Yong told reporters of the 21st century economic report.

According to the data of the National Bureau of statistics, from January to October, the output of Liquor Enterprises above Designated Size nationwide was 5.46 million liters, down 10% year on year; the output of beer was less than 30 million kiloliters, a year-on-year decrease of 7%.

The decline in output was not dramatic, as the beer industry began to rebound from the bottom in April this year. After May, the beer industry has entered the off-season, and the monthly output has declined year-on-year, but this year's cumulative decline is not as good as that of liquor.

After the normalization of epidemic prevention and control, the biggest rebound in the beer industry is not output, but profit. After the first anti epidemic war, under the acceleration of consumption upgrading in the beer industry, the profit level of enterprises that are good at catching the changes of consumption psychology and adjusting the layout structure ahead of time have reached a new high.

Look at profits first. According to the monthly data of the beer industry disclosed by He Yong, from January to September, the profits of beer enterprises above Designated Size accumulated to 14.7 billion yuan, an increase of 75% compared with the first half of the year. Specifically, this year's single month profit of the beer industry shows an amazing growth rate. In March, the industry's profit fell more than 90% year-on-year, but since April, the industry has entered the profit space of double high growth. By September, the profit growth rate of beer industry was as high as 50%!

In the third quarter alone, compared with the first half of the year, Chongqing beer (600132. SH), Zhujiang Beer (002461. SZ), Yanjing Beer (000729. SZ) and Huiquan beer (600573. SH) were the companies with nearly doubled net profit or even higher net profit in the third quarter alone.

In the continuous high growth, in the first half of the year, China Resources beer ranked first in the net profit ranking with 2.079 billion yuan, and Qingdao beer (600600. SH) ranked second with 1.85 billion yuan. Huiquan beer was the champion of net profit growth year on year, and Zhujiang Beer was the second.

Let's look at the proportion of profit in sales and gross profit margin, which are the key indicators to measure the profitability of enterprises.

People who sell cheap beer often earn more than a bottle of mineral water. Nongfu mountain spring (09633. HK) has a gross profit margin of "king of water", which is envied by many beer companies. However, after the epidemic, the profit gap between beer and nongnongfu spring is narrowing.

According to the semi annual report, the net profit rate of Nongfu mountain spring was 24.8%, and the profit margin of beer industry was 11% in the first half of the year, and then reached a new high of 14% in August.

Among the listed beer companies, Chongqing beer (14%), Zhujiang Beer (12.25%), China Resources beer (11.9%) and Tsingtao beer (11.8%) exceeded 11% in the first half of the year. From January to September, the sales profit margin of the above designated beer industry further increased to 12%, and Chongqing beer increased the sales net profit rate to 14.8%.

The beer industry is beginning to take the road of structural upgrading.

Budweiser Asia Pacific (01876. HK) is still the company with the highest gross profit margin in the industry. Despite the impact of the epidemic, the net profit in the first half of the year decreased year on year, but the gross profit margin of Budweiser was still as high as 51.5%, close to Nongfu Shanquan. In the third quarter, Budweiser Asia Pacific financial report showed that the super high-end product portfolio showed double-digit growth.

Pearl River beer ranks second in the gross profit margin of the beer industry. In the first half of the year, the gross profit margin of its beer business was 47%, and the gross profit margin of leasing catering services was as high as 65.7%. Chongqing beer announced a gross profit margin of 41% last year, but the gross profit rate of high-end products with more than 8 yuan has reached about 57%. In the first half of the year, the sales volume of China Resources beer of sub grade and above increased by 2.9% compared with the same period of last year, and the gross profit margin was 40%.

"This is the company's highest proportion of high-end liquor revenue in a year." A number of beer companies related to the 21st century economic reporter said.

But not all listed beer companies have seized the opportunity of structural improvement. The gross profit margin of St Xifa (000752. SZ) and Lanzhou Huanghe (000929. SZ) in the first half of the year decreased year-on-year to 21% and 38.6% respectively, which were in the low position of the listed beer companies.

High end development logic

"It is estimated that in 2025, the output of China's beer industry will reach 39 million kiloliters, an increase of 11.4% over the end of the 13th five year plan, with an average annual increase of 2.2%; the sales revenue of the beer industry will reach 210 billion yuan, an increase of 40% compared with the end of the 13th five year plan, and an average annual increase of 7%." He Yong announced for the first time the prediction index of the development guidance of China's liquor industry during the "14th five year plan" (Draft). The beer industry will realize a profit of 30 billion yuan, 100% higher than that at the end of the 13th five year plan, with an average annual increase of 14.9%.

In the output scale, sales revenue and profit indicators of the beer industry, the output will increase the least in the future, but the profit will double.

According to the statistics on the output of Enterprises above Designated Size by the National Bureau of statistics, in 2018, the national beer production reached 38.12 million kiloliters, a slight increase of 0.5% year-on-year, achieving the first positive growth since 2014. Last year, the total output of beer enterprises was 37.65 million kiloliters, a year-on-year increase of only 1.09%. Affected by the epidemic situation this year, although the beer production rebounded the earliest among the alcoholic drinks, the annual rate was on a year-on-year downward trend.

"In 1998, China's beer production surpassed that of Germany, ranking second in the world; in 2002, China's beer production surpassed that of the United States, and China became the world's largest beer consumer. Up to now, China's beer industry has not reached the peak of 5062 million in 2013 It also means that the growth in volume is limited, he said.

In 2013, when the beer industry was fighting price war and increasing sales promotion, other kinds of liquor were also developing rapidly; after 2016, with the continuous negative growth of beer production year-on-year, the market share of the beer industry slowly rebounded, and the driving force was no longer the output, but the structural improvement, and the signal of high-end beer appeared.

"An epidemic situation has led to a passive inflection point consumption in the beer industry, accelerating the process of industrial development." He Yong told the 21st century economic reporter that consumers' emphasis on health and quality preferred to drink less and drink better, which led to the explosive growth of personalized and high-end products in the beer industry this year.

What is the connotation of high-end beer? He Yong summed up: first, quality and experience. When the quality of a product enters the grade stage, it is a high viscosity product use experience. Not only can consumers know why they want to drink beer through packaging and price differences, but also let them know what good beer is through experience.

Second, raw materials and flavor. Now is the era of extreme flavor, flavor comes from raw materials. Third, the periphery and uniqueness. He Yong believes that high-end beer pays more attention to spiritual enjoyment. Spiritual enjoyment revolves around all the details around the product. So far, China has no beer utensils. Why can Maotai liquor pierce the ceiling of liquor products? It is unique in history, geography, technology and raw materials. The more unique beer category is established, the higher the value of the product is.

"Consumption upgrading has been widely mentioned since 2016. I think it may be beyond everyone's imagination to what extent consumption upgrading will be in the future." He Yong is optimistic about the profit doubling plan of the 14th five year plan (Draft for comments).

He thinks that the logic of high-end beer is relatively high-end and absolutely high-end. For alcohol products, especially the popular beer consumption, the profit is very low for a long time because the beer in the previous stage is to drink enough. In the 2.0 era, it is likely that a large number of people will pursue good drinking, drinking and fun, rather than the patents of a few people. When the proportion of high-end products accounts for 60% and 70% becomes the mass products, beer will produce more high-end products.

Therefore, enterprises should attach importance to the relatively high-end market opportunities and the ability to bring about earth shaking changes and transformation to China's beer industry. From the consumer side, this change is characterized by scene, focus, fragmentation and emotion. In the post epidemic era, the market trends of China's beer industry are product health, channel digitization, consumption community and brand enlargement.

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