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By Ding Guangye, China United Equipment Group
IN RECENT years, China's beer industry has been developing rapidly, although when compared to those in advanced countries, there are gaps in terms of industry collectivisation, large-scale production, high-efficiency equipment and craft brewing.
The local industry will thrive even more. With China's population of about 1.4 billion, consumption potential is high. And by taking advantage of its late-mover advantage and by seizing the opportunities brought on by the Industry 4.0 revolution, expect the beer segments to grow even further. This report (divided in two installments) explores the beginnings, development, and future of the beer industry in China.
I. Background
In 2019, enterprises above designated size (in China, an enterprise above designated size refers to an enterprise with business income reaching 20 million yuan), recorded a total output of 46 million tons, sales revenue of 180 billion yuan, and profit of 13 billion yuan. This was not easy to achieve.
In 1900, the Russians established the first brewery in Harbin, and the Germans built theirs in Qingdao in 1903. This is the beginning of beer production in China. At the time, Europe already had hundreds of years of modern beer brewing history and a large number of enterprises. In China, however, there were only about eight small factories by 1949, with a total output of over 7,000 tons. In short, the national per capita was only more than ten grams, or less than a sip.
After the establishment of the People’s Republic of China in 1949, beer brewing technologies were introduced, talents trained, and factories built. However, the development was slow, with an output of only 410,000 tons by 1978. Then reforms begun in China, boosting the development of the beer industry. The output in 1988 reaches 6.5 million tons, ranking third in the world after the US and Germany. In 1992, it exceeded 10 million tons, surpassing Germany. In 2002, with an output of 24 million tons, it ranked first in global production, setting a new milestone. In the following years, it maintained a relatively high growth rate until it reached and stabilised at 45 to 50 million tons, far ahead of the United States in the second place.
Some 40 years ago, China had nearly no equipment manufacturing capacity, and only a handful of enterprises. Equipment were imported –a batch of old equipment dismantled from Japan, Germany and even eastern Europe could be a hit. From surveying, mapping and imitating the simplest parts such axle sleeves and gaskets, to the assembly of components and then simple equipment, China eventually realised independent research, development and manufacturing of almost the entire industrial chain today. The two technical shortcomings, high-speed filling and on-line inspection, have also caught up in recent years. A number of outstanding enterprises have grown fast, with some hiring hundreds of staff, and making hundreds of millions of yuan in sales revenues. The largest enterprises are listed, and have reached sales revenue of one billion yuan.
Major global companies like Krones, KHS, Sidel, and Sacmi have set up independent or joint venture equipment production plants in China, to expand their businesses from repair services, component assembly to complete machine production.
In terms of quality however, locally made valves, sensors, electrical components, and other basic parts have not been able to compete with those from foreign brands. In terms of innovation capability and comprehensive strength, local companies had a lot of catching up to do with companies like Krones and KHS.
(Photo © Marazem I Dreamstime)
In 1995, the International Brew & Beverage Processing Technology and Equipment Exhibition for China (CBB) was launched in Beijing, with 120 exhibitors in an area of 6,000 square meters. CBB is China’s first professional beer equipment and technology exhibition and largest international exchange platform. Held every two years, it has become a catalyst for technological progress, itself growing by nearly 10,000 square meters each time. It says the gap with the world’s largest exhibition Munich drinktec is narrowing.
Associations and institutes for the beer industry: The Beer Division of China Alcoholic Drinks Association, Beer Committee of China National Food Industry Association, School of Biotechnology, Jiangnan University, Sino-German Beer Technology Center of Qilu University of Technology, Hubei Light Industry Technology Institute , China National Research Institute of Food & Fermentation Industries, National Institute of Metrology, China, China Beijing Light Industry Design Institute, and the technical centers of beer groups have done a lot of prolific work on surveys, statistics, forums, seminars, training, appraisal, awards, and communication.
Raw material bases. The construction of raw material bases for barley and hops in places like Xinjiang and Inner Mongolia has achieved remarkable results. But in terms of scale and efficiency, there is still a lot to learn from the United States. Take the example of the Yakima Hop Company in Washington State consisting of 30 to 40 farms. One of the private hop farms covers an area of 7,000 acres, with an annual output of more than 6,000 tons of hops. There are only more than ten formal employees, and in the busiest period, they only need to hire two hundred temporary workers. Picking, baking, packing, etc. are all mechanised. Recently another USD20 million was invested to update major equipment. The Yakima plant processes hops not only from its farms but also from Britain, and sells to the world.
In Western countries where the market is already saturated, attention now goes to energy conservation and consumption reduction, as well as in strict environmental protection requirements and emission reduction. Western countries are also experts in consumption reduction in grain, coal, water, electricity, natural gas, and the recovery and reuse of yeast, carbon dioxide, heat, biogas, wastewater, condensate, slag, lees, bottle slag, etc., some even close to theoretical limit. For some newly built large-scale factories in China, from a high starting point, it is possible to reach the international advanced level, but for most factories, there is a long way to go.
At present, technologies to produce draft beer, dark beer, white beer, non-alcoholic beer, wheat, IPA, smoked beer, ice beer and so on, are basically introduced from abroad. Though some Chinese companies have developed new flavours of their own, like ginseng, bitter gourd, rose and lychee, the output for such is very small. The ability to innovate needs to be improved.
The beer festivals held in Qingdao, Yanjing, Dalian, Harbin, Xi’an, Guangzhou, Shanghai, Shenyang have boosted economic development and enriched people’s lives. But compared to the top three international beer festivals in Munich Germany, Denver, the United States, and London in the United Kingdom, the gap is still large from scale to influence.
Europe is the birthplace of modern beer and enjoys strong beer culture. The United States inherited its beer culture from large number of immigrants from Britain and Germany in the early days. China has nothing of this sort to look back on. Nowadays large groups in China have reached a consensus to build a beer culture system with its own characteristics.
Enterprises like Tsingtao Brewery, Zhujiang Brewery, Harbin Brewery fully draw on the experience of the Dutch Heineken Beer Museum and use the old factory to build a beer museum, integrating knowledge, fun, food and shopping.
The three indicators: industry collectivisation, large-scale factories, and high-efficiency equipment determine many other indicators such as output per capita, profit per capita, cost per ton of wine as well as energy saving and emission reduction.
The collectivisation process of China’s beer industry begins in 1995 when Tsingtao Brewery, Yanjing Beer and China Resources started to merge small enterprises. At present, the total output of the five biggest groups, namely China Resources, Tsingtao Brewery, Yanjing, Budweiser China, Carlsberg China reached 32 million tons, accounting for 70% of China’s total output. Together with Zhujiang Brewery, Kingstar Beer, Bleu Ribbon, San Miguel Brewery, Naale Brewery, etc., the top ten groups produce 36 million tons, accounting for about 80% of China’s total output. The dominant regional markets of each major group become clear. Collectivisation is almost completed and has entered the later stage.
China now has 500 beer plants above designated size, of which 300 are owned by the five major groups. The factories continue to grow in size and the average output increases from 10,000 tons 30 years ago to 100,000 tons today. The output of the major factories of large groups is mostly 200,000 or 300,000 tons, and some factories in places like Shenyang, Qingdao, Pingdu, Mengyin, Beijing, Guilin, Siping, Putian, Wuhan, Guangzhou reached 600,000 tons. In particular, output of AB InBev’s plant in Putian has reached 1.2 million tons and is growing rapidly.
Capacity of saccharification equipment in major factories is 60 to 100 tons, and that of fermentation is 300 to 600 tons. But the gap in packaging is hard to ignore: many 36,000 can/hour canning lines, and 36,000 or even 24,000 bottle/hour glass bottle lines are still used, significantly lagging behind.
There are over 1,000 craft beer companies with a main business income under 20 million yuan. With total output of 500,000 tons, they only account for 1% of the industry’s total output. There is plenty of room for development.
Click here for Part 2
