They're Yelling For Yanjing Beer
At a recent Beijing beer festival, local quaffers had their choice of world-famous brews. Young women in red and white Budweiser skirts served drafts under Bud umbrellas. Waitresses bedecked in Carlsberg green hustled trays of the Danish beer. Heineken and Asahi flowed like water. But the one local brand at the festival drew some of the biggest crowds. Beneath a massive replica of a white beer can with its distinctive swallow logo, revelers lined up for a free glass of Beijing's own Yanjing beer.
Westerners know Tsingtao, the beer they drink with their moo shu pork and fortune cookies. But in China, Beijing Yanjing Brewery is the one to beat. Raking in sales of $116 million in 1996, the company makes China's most popular beer, shipping 589,000 tons last year, almost twice as much as Tsingtao. It's all part of a marketing push from its Beijing base to 20 other provinces, including southwestern Sichuan and Yunnan. Yanjing now holds an overwhelming 85% of the Beijing market--a jump from 65% just two years ago--and 3.9% nationwide in a highly fragmented business. It could become China's first truly national brand.
QUALITY CONTROL. Staying on top isn't going to be easy. China has some 600 local breweries, and global brands such as Heineken are gaining in the market. But of all the domestic companies, Yanjing seems to have the most professional management and deepest pockets. By advertising aggressively and maintaining quality control of its pilsner, the company has managed to raise the price of its main brand, which retails at about 24 cents for a 640 ml bottle. Local rivals go for around 22 cents. Yanjing's profits last year hit $9 million, according to Peregrine Investment Holdings. The brewery's main shareholder is Beijing Enterprises, the red-chip company that raised $325 million on the Hong Kong exchange. Yanjing has raised a further $71 million by listing shares in Shenzhen.
Yanjing will spend $72 million over two years to upgrade its breweries and beef up marketing, all to sell 1 million tons of suds by 2000. Says Ding Guangxue, vice-general manager of Beijing Yanjing Brewery: "Of course the market is competitive, but we have almost 20 years of experience improving quality and building share."
Yanjing is actively looking for new acquisitions to add to its 1995 purchase and turnaround of neighboring Huasi Brewery, says Ding. Since last year, the beermaker has rolled out four brands aimed at the fast-growing high end of the market, including an ice beer. And unlike rivals Five Star and Zhujiang, Yanjing has no foreign partner.
"EAZY" STREET? The biggest possible weakness in the strategy is Yanjing's positioning. The company's new upscale brands go for as much as 60 cents in Beijing outlets. The fear is that consumers may look down on any local brand that claims equal stature with Asahi, Becks, and others. The premium segment "is more difficult for locals than for internationally famous foreign brewers," says Jesper Madsen, president of Carlsberg China, which is building a $50 million brewery in Shanghai.
But foreign companies are moving into the low-cost category too, producing beers such as Fosters' Eazy and Princess labels and Carlsberg's Dragon Eight. Estimates put sales of foreign beers combined with the sales from joint ventures now at 26% of the total market, and the figure is rising. Fast-expanding local competitors may also mount a challenge: Guangdong Brewery has recently taken over ailing factories in the northeastern provinces.
Yanjing may have a home-court advantage, however. Early this year, an official from China's National Council on Light Industry announced plans to limit foreign breweries in China to 10% of production and joint-venture beer breweries to 30%. After protests from foreign brewers, another official denied there were such plans. But many suspect that unwritten restrictions still remain. "My guess is that it will be very hard for any new brewers to come in and get a significant position," says Jack Perkowski, chairman of Asimco, a direct investment fund holding the majority stake in Beijing's Five Star Brewery.
Beijing is also planning to grant cheap loans to a few companies so they can easily acquire other firms. In the beer industry, the government has selected Yanjing, Tsingtao, and Zhujiang for special treatment. If Yanjing takes advantage of such favors, its party may last a long time.