For years, beer brands in China have been pushing premium products, aiming to tap into the growing middle class’s spending power. However, this strategy is now facing significant challenges as the world’s second-largest economy experiences a decline in consumer spending, and the number of beer drinkers shrinks.
China Resources Beer (CR Beer), the state-backed brewing giant with the largest market share in China, reported a 3.4% drop in overall sales volume for the first half of 2024. This decline comes amidst a “significant contraction in consumer goods.” Despite this, CR Beer managed to increase its profit by 1.2%, reaching 4.7 billion yuan (US$658.5 million).
Similarly, the APAC subsidiary of Belgian-Brazilian brewing giant AB InBev, known for brands like Budweiser and Corona, reported a 13% decline in net revenue and an 8.5% drop in volume in China during the same period, citing a “soft industry.”
In the past, premiumisation—offering higher-quality, more expensive products—was a reliable way for brewers to boost profit margins and gain market share. This was particularly effective as beer consumption in China began to decline in 2013. By last year, production had fallen to 35.6 billion liters, a 30% decrease from its peak a decade ago.
However, in recent years, this upmarket strategy has faced difficulties as consumers become more budget-conscious, seeking better value for their money.
“When the economy was strong and salaries were rising, people were more likely to spend on expensive, high-quality beer,” said Richard Lin, chief consumer analyst at SPDB International. “But now, with economic uncertainty and job insecurity, consumers are more cautious, and the confidence companies once had in premiumisation is no longer guaranteed.”
The market is now experiencing a shift towards a “new phase” focused on “value, experience, and personalisation,” according to CR Beer chairman Hou Xiaohai. He noted that consumer trends are clearly segmenting: while high-end products are still popular, more affordable, mass-market options are also gaining traction, leading to both upgrading and downgrading in the market.
In addition to the spending decline, an ageing population is expected to further reshape the beer market. Analysts predict that China’s population aged 20 to 60—the main beer-drinking demographic—will shrink by around 150 million people over the next decade, an 18.8% decrease from 2023. Over the next 40 years, this number could drop by approximately 480 million, a 60% decline from 2023 levels.
“An ageing population and a declining proportion of young people could reduce beer consumption,” said Lin of SPDB International. “However, the growth of the beer industry depends not just on volume, but also on the market structure and beer prices.”
Older generations, who tend to have more financial stability, are likely to place greater importance on the quality of their purchases. As this demographic turns to beer, demand for higher-end products is expected to increase, driving the overall premiumisation of the market.
Despite current challenges, the trend towards premiumisation remains strong. CR Beer’s high-end brands saw more than 10% growth in sales volume in the first half of the year, with Heineken leading the way with over 20% growth.
“Experience from mature international markets shows that premiumisation can occur even when per capita consumption is declining,” said Jacky Tsang, equity analyst at Morningstar. “Beer premiumisation involves increasing selling prices and a growing mix of premium beer volume, which tends to cannibalise lower-end beer volume.”
