BUDWEISER Brewing APAC plans to expand sales of its premium products beyond restaurants and bars, seizing on consumers’ desire for life’s little luxuries even as they shy away from bigger purchases amid the mainland’s economic downturn.
“There’s this big momentum of ‘premiumization’ happening in China, which we don’t think will change in the future because it’s an accessible luxury,” chief executive officer Jan Craps told Bloomberg in an interview in Hong Kong. “Beer is a resilient category.”
The company this year wants to widen distribution of Budweiser and “super premium” offerings like Corona and Blue Girl to more cities, Craps said. The group also plans to accelerate retail sales as consumers increasingly shift to drinking at home. It’ll use existing partnerships, like one with Swire Pacific’s beverages arm, he said.
Budweiser and Super Premium beverages were a bright spot for the company as it announced fourth quarter results earlier Thursday, recording double-digit revenue growth in China – even as normalised net income missed estimates.
Status beer
Budweiser, despite producing some of the US’s most popular and affordable beers, is considered a status product by label-hungry Chinese drinkers. The company has been making a push to sell a range of premium beers – like its gold-canned Budweiser Supreme featuring a rich malt flavour.
But even as Budweiser APAC still holds the top position in China’s premier beer market, it’s facing surging competition from local brewers. The country’s liquor market has remained resilient despite weak sentiment, with sales for alcohol and tobacco growing 8.3 per cent on-year in December – outperforming China’s overall retail sales growth.
Budweiser APAC’s Hong Kong-listed shares slumped as much as 8.3 per cent in morning trading in Hong Kong Thursday following its results. The stock has underperformed major Chinese competitors Tsingtao Brewery, Beijing Yanjing Brewery and China Resources Beer Holdings so far this year.
Price wars
Consumer brands in China have also been engaged in price wars as they try to lure wary consumers with the lowest possible prices.
Budweiser APAC beers Corona, Hoegaarden and Budweiser offered the steepest discounts of brewers selling on Alibaba Group Holding’s e-commerce platform Tmall in the last week of January – with average price cuts of up to 52 per cent – according to a Bloomberg Intelligence price tracker. Rival makers Tsingtao Brewery and Carlsberg cut prices by just 28 per cent and 20 per cent, respectively, in the same period.
Craps said Budweiser APAC typically doesn’t discount premium products, though he said there might be some cuts on e-commerce channels – which account for a small amount of overall Chinese beer sales – or during certain periods he didn’t specify. The company doesn’t plan to roll out more discounts this year, he said.
At least three brokerages have cut the company’s price target this year, citing China’s weak consumer sentiment. The mainland contributed 75 per cent of Budweiser APAC’s net revenue in 2022, followed by just 19 per cent from South Korea, according to a BOCOM International research note. BLOOMBERG
