Beer lovers across the country are now beginning to explore new favorites like craft beers, creating new opportunities for domestic as well as foreign companies. In this article, we look at the characteristics, evolution, and future projections of China's craft beer market.
China's beer industry has seen huge growth over the past decades. According to Statista, China overtook the United States to become the world's largest beer producer and the largest beer market at the beginning of the 21st century. It has come to a stage where craft beer became the new favorite.
Craft beer "is generally made with traditional ingredients like malted barley; interesting and sometimes non-traditional ingredients are often added for distinctiveness." according to the definition of the Brewers Association, the not-for-profit trade association representing small and independent American craft brewers. And craft brewers are a relatively niche market compared to non-craft brewers which have a long and deep affection with beer lovers.
Production of industrial beer in China shrank over the years, and craft beer picked up momentum. The craft beer market size expanded from CNY 20.5 billion (USD 3 billion) in 2018 to CNY 33.1 billion in 2020, and the annual growth rate from 2021 to 2023 is estimated to be around 30%, according to Zhongtai Securities.
There are more than 13,000 enterprises in China doing craft beer-related business, of which over 8400 were registered in the past three years, with statistics cited from Tianyancha. Market leaders include Master Gao (Chinese: 高大师), Trueman Brewing (Chinese: 楚门精酿), Helen's (Chinese: 海伦司, HK:09869), Boxing Cat Brewery (Chinese: 拳击猫), Panda Brew (Chinese: 熊猫精酿), and Bravo Brewing (Chinese: 保霖精酿). Established domestic beer companies such as China Resources Breweries (Chinese: 华润雪花啤酒, HK:00291), Tsingtao Brewery (Chinese: 青岛啤酒, SH:600600) and Beijing Yanjing Brewery (Chinese: 燕京啤酒, SZ:000729) started producing craft beer as soon as they sniff out opportunities.
Craft beer used to be a men's thing and later gained popularity among consumers of all genders. The first groups of craft beer consumers, mostly men, were those who have been abroad or are from other countries where they tried craft beer before. As domestic breweries add more drinks to their menus, especially fruit-flavored and less strong ones, more and more female consumers started trying and falling for craft beer. Xing Lei, the founder of Trueman Brewing, told us that around 70% of the customers at Trueman's are women.
Several factors facilitated growth in the craft beer industry in China. To begin with, thanks to the rising income level, Chinese consumers have a growing spending power and willingness. They can afford it and are looking for higher quality products. Besides, the evening economy is thriving, with the support of relevant government policies. Pubs, bars, clubs, and restaurants are an integral part of the sub-sector. In addition, people have growing social needs, either spending time with friends or meeting new people. And alcohol often plays a part in social activities. Moreover, young consumers are in search of products and services that showcase their good taste. Craft beer, which is a step forward from industrial beer, taps into that need.
"Craft beer from overseas is always better" has become an outdated stereotype. Domestic brands are making progress not only in their breweries but also in international beer competitions. Trueman Brewing won a Silver medal in the prestigious World Beer Cup in 2022 and Mahanine Brewing (Chinese: 大九酿造) secured a Bronze. At the Brussels Beer Challenge in 2022, Chinese brands took home 16 awards, 6 of which were Gold. Freshness is the key. Technological advancements in cold chain logistics gave Chinese craft beer breweries access to fresher malt, yeast, and hops from abroad and allow them to distribute their craft beer across the country with temperature-controlled delivery.
We noticed that there are mainly two types of craft beer pubs and restaurants: "craft beer-centered" and "craft beer plus meals".
Pubs run by craft beer enthusiasts mostly adopt the "craft beer-centered" model, featuring drought beer and having only a few snacks on the menu. Some of them sell craft beer of their own brands and also serve beers from other breweries; others don't produce the beer themselves but bring together brands popular in the community. These pubs boast high-quality beers with distinctive flavors and aim to promote craft beer culture. Their target customers are mainly craft beer lovers, for whom price is usually not an issue, and thus these pubs are often located in first- and second-tier cities where consumers can afford and are willing to pay for expensive drinks.
Trueman Brewing (Chinese: 楚门精酿) is one of the prominent names in China's craft beer business, with its branded beer sold in over 1,000 taprooms and pubs across the country. Trueman Brewing was a child of craft beer lovers. Xing Lei, the founder of the house, started the business out of a personal interest in craft beer. "There were no grand plans," said Xing Lei in an interview with EqualOcean, "I didn't really think of the marketing strategies, the ROI, and stuff like that." It is the passion for craft beer and the companionship of like-minded people that takes Trueman Brewing to where it is now. The company is expanding its business, but slowly, with quality being the priority.
Restaurants that want to have a slice of the action in the craft beer business mainly adopt the "craft beer plus meals" approach. They are new entrants to the market or established restaurant/beverage chains, seeing the opportunities in adding craft beer to their drink lists. Instead of producing craft beer, they usually work with large beer breweries or OEMs. These players place bigger orders for ingredients and packaging materials and thus can significantly lower their costs. Hot pot restaurant chain Haidilao (Chinese: 海底捞, HK:06862) added craft beer to its menu in 2017, and soon in 2019, Haidilao's craft beer sales topped CNY 400 million.
BEERBITT MAN (Chinese: 啤卤侠), a restaurant chain featuring craft beer and lou sauce braised dishes, opened its first craft beer restaurant in 2022 and owns 11 by the end of the year. It received Pre-Series A funding of nearly CNY 10 million (USD 1.47 million) on January 20, 2023. BEERBITT MAN might be a latecomer in the game but it is not moving slowly. Founder of the house Lin Huangheng told us in an interview that it takes only around 18 days to open a new restaurant, thanks to their supply chain resources. The beers are from Tsingtao Brewery and the lou sauce braised dishes are premade. Lin Huangheng holds a down-to-earth view of craft beer, believing that it could be served fresh and cheap, and enjoyed by a wider audience in third- and fourth-tier cities.
China's craft beer market is still a growth market presenting ample opportunities for businesses to expand. We believe that pubs and restaurants, either "craft beer-centered" or "craft beer plus meals" labeled, will see great potential for business expansion and development in the following years, as pandemic-induced lockdowns and restrictions fade into the past. According to a report from APEX & Consulting (Chinese: 灼鼎咨询), craft beer consumption in China could reach 2500 million liters by 2025. Li Qing, the founder and chief executive of URBREW, said at a craft beer forum in 2022 that China's craft beer market is seeing increased maturity and he expects the following decade to be the golden years witnessing significant growth in the penetration rate.