Budweiser shakes people, which is intended for China Resources

Text |Modern consumption Wu Xiaowei.

Edit |Egg total.

According to him, up to now, nearly 2,000 local small and medium-sized dealers have participated in the "Dealer Excellence Program" opened by Budweiser APAC, while the "Dealer Talent Program" has trained more than 130 people.

It is not difficult to see that Budweiser is paying more and more attention to the distribution channel, which is not difficult to understand the cooperation it reached with Swire Coca-Cola in early December.

It is reported that Swire Coca-Cola and Budweiser will take the lead in Anhui and Hubei to start cooperation, in the main channels of these two provinces, Budweiser series of products will be owned by Swire Coca-Cola, this cooperation may be regarded as Budweiser China's initial action to improve distribution.

However, what makes the outside world curious is: Budweiser handed over the distribution of high-end beer to the channel of FMCG beverages, is this cooperation suitable?

According to Budweiser APAC's recently disclosed interim results data, Budweiser's earnings growth has lagged behind its peers. The beer industry has been in stock competition for many years, and Budweiser will have to go to war with other giants if it wants to reverse the trend of falling behind in growth.

This time, Budweiser and Swire Coca-Cola chose Anhui and Hubei to cooperate first, making their offensive route clearer-aiming at China Resources Snowflake.

1. How is the adaptability?Regarding the cooperation with Swire Coca-Cola, Budweiser China told Modern Consumption that the friendly business cooperation between the two sides adheres to the principles of mutual assistance, mutual benefit and win-win, aggregates the advantages of both sides, further expands the Chinese market, fully taps the potential of the Anhui and Hubei markets, and brings more and better beer products to more customers and consumers.

In fact, it's rare for a high-end beer company to partner with a FMCG brand, but it's not surprising.

At Budweiser APAC's Q3 results meeting, CEO and co-chairman of the board of directors Ke Yang said that the company is still lagging behind in terms of comprehensive distribution, so it will continue to expand the geographical distribution of high-end and ultra-high-end, and plans to have 250 distribution prefecture-level cities and 80 ultra-high-end distribution prefecture-level cities by 2025.

Therefore, this cooperation may be seen as the first step of Budweiser China to improve its distribution.

Figure: Swire Coca-Cola official website.

According to Swire Coca-Cola's website, Swire Coca-Cola is The Coca-Cola Company's fifth-largest bottling partner in the world, with franchises to manufacture, market and sell Coca-Cola products in Greater China, Cambodia, Vietnam and a wide range of Midwest regions.

The company is not only looking to increase sales in the soda category, but also to develop successful products in other major beverage categories to expand the value share of the overall non-alcoholic beverage market.

Logically speaking, the cooperation between the two parties may allow Budweiser China to reduce costs and increase efficiency, and at the same time, it will also allow Swire Coca-Cola to integrate channels and increase sales rates.

However, a closer look at the positioning of both parties shows that Swire Coca-Cola is the bottler of FMCG brands, and also plays the role of production, transportation and sales promotion of Coca-Cola systems. Budweiser is positioned as high-end and ultra-high-end beer, brewing, importing, promoting, distributing and **more than 50 beer brand portfolios.

Budweiser handed over the distribution of high-end beer to the FMCG channel, is this cooperation suitable?

Fang Gang, an expert in the beer industry, told Modern Consumption that the match between beer and beverages is still quite high, but there are local differences, and the two sides may use some methods to deal with them.

For example, in some high-end restaurants or night bars, the drinks may be relatively weak, and the beer may be stronger, and both parties may take some measures. For example, the night channel or the high-end catering channel still needs the support of Budweiser's team for a certain period of time, and for the distribution channel such as the supermarket channel, it may be covered by Coke people. Fang Gang said.

In the view of Shen Meng, director of Chanson Capital, although Swire Coca-Cola is one of the important bottlers of Coca-Cola in China, it is independent of the main body of Coca-Cola, so the cooperation with Budweiser should be regarded as the cooperation between Swire and Budweiser, and has nothing to do with Coca-Cola.

As a large-scale enterprise deeply rooted in China, especially in South China, Swire has a very large accumulation and rich experience in the construction and management of distribution channels, which can bring new market expansion space to Budweiser, which is sluggish and competitive, and at the same time, Swire, as a Hong Kong-funded enterprise, can also communicate effectively with Budweiser in terms of cooperation. Shen Meng further said.

2. First to Anhui and Hubei markets So, why choose Anhui and Hubei?

According to the official website of Swire Coca-Cola, Swire Coca-Cola covers 62 million consumers in Anhui and 57 million consumers in Hubei. In Shen Meng's view, Swire has more abundant resources in Anhui and Hubei.

Figure: Swire Coca-Cola official website.

According to Budweiser APAC's recently disclosed interim results, sales in China increased by 94%, revenue and revenue per hectoliter increased by 154% and 55%, normalized EBITDA increased by 172%, both revenue and profit performance increased.

But compared to its peers, Budweiser's earnings growth has lagged behind.

The beer industry has entered the stock competition for many years, and if Budweiser wants to reverse the trend of falling behind in growth, it must start a war with other giants, and this time it will target China Resources Snowflake.

At present, China's beer market has formed a five-oligopoly competition pattern dominated by Budweiser Asia-Pacific, Tsingtao Beer, Snow Beer, Chongqing Beer and Yanjing Beer.

Among them, Tsingtao Beer mainly sells in Shandong, Hebei and Shaanxi, China Resources Snow has Anhui, Sichuan, Guizhou and Jiangsu, and Budweiser Beer in South China such as Fujian, Jiangxi and Zhejiang.

According to the "Beer Industry In-depth Report" released by Huaxin**, Budweiser has a leading market share in Jiangxi, Fujian, Hubei and Zhejiang, respectively.

Figure: China Resources Snow Beer's official WeChat.

CR Beer is mainly concentrated in the eastern, southern and central regions, and has a leading market share in five regions: Guizhou, Sichuan, Anhui, Liaoning and Jiangsu, with % and 54% respectively.

In other words, the Hubei market is a leading area for Budweiser, and the selection of this market may be intended to test the water in the safety zone and further gain increments. The Anhui market is the territory of China Resources Snowflake, and the cooperation with Swire Coca-Cola may show Budweiser's offensive intentions.

Now in the Hubei market, the competition between China Resources Snowflake and Budweiser is very anxious, and at this time, Budweiser and Swire have cooperated to form a 'two-on-one', which may suppress China Resources Snowflake. Fang Gang said.

He also mentioned that the Anhui market is the base market of China Resources Snowflake, and Budweiser is weak in this region, so this cooperation can obtain some pure increments in the Anhui market with the help of Swire's channels.

3. When will you get out of the base area?Although Budweiser has begun to develop channels, its current base is still in Central China and South China. It is worth noting that in recent years, Budweiser has still made frequent efforts in South China.

For example, the Budweiser Foshan factory, which was invested and established in 2007, has developed into the world's largest production base of the Budweiser brand after five phases of expansion. Since 2017, Budweiser Foshan Factory has been transformed through industry + projects, focusing on building an industrial tourist attraction.

In 2019, Budweiser Group signed an agreement with Jebsen Group to jointly set up a joint venture in mainland China, Blue Girl Beer (Guangzhou)**In 2021, the country's first casacorona settled in Guangzhou.

Figure: Budweiser Beer official WeChat.

In November 2023, Yang Ke, CEO of Budweiser APAC, and Zhou Zuyi, Secretary of the Fujian Provincial Party Committee, met with the two sides to have an in-depth discussion on the future development of Budweiser in Fujian and reached a consensus.

Industry insiders pointed out that at a time when beer competition is becoming increasingly fierce, especially when the channel tentacles of Tsingtao Beer and China Resources Snow Beer are gradually extending to South China, it is particularly important for Budweiser to consolidate the core market.

But the competition in the South China market is fierce. According to the Beer Industry In-Depth Report, the revenue of the top five beer brands in South China is 95% of its total revenue: Pearl River Beer 95%, Yanjing Beer 31%, China Resources Beer 26%, Chongqing Beer 24% and Tsingtao Beer 11%.

From the perspective of Budweiser's layout in China, "focusing on the south and ignoring the north" has always been a major feature of Budweiser, and its market share in southwest regions including Chongqing, Sichuan and Yunnan is lower than that of other brands.

In the cooperation area with Swire Coca-Cola, although Anhui involves the northern zone, it does not belong to the typical northern region. Similarly, there has been no action in its weak southwest market.

Today, the northern market of the beer industry is controlled by China Resources Beer, Tsingtao Beer, Yanjing Beer, etc., while the market share in the southwest region is divided by China Resources Beer and Carlsberg. Taking the Chongqing market as an example, Budweiser only shares 5% of the market share with other brands.

Figure: Budweiser Beer official WeChat.

According to Euromonitor data, the market share of Budweiser, a high-end beer in China, will be 37 in terms of sales in 20228%, Budweiser's high-end market is being grabbed by other manufacturers.

In this way, if Budweiser wants to gain more market share in the Chinese market, it must go out of South China and break through to weak areas.

When Modern Consumption asked Budweiser China whether it would expand into other regional markets in the next step, the other party said that "there is no more information for the time being".

Wang Yongfeng, chief analyst of the food and beverage industry of GF**, once told ** that more than 70% of the provinces in China's beer market have been determined, and there are obvious winners. It will be very difficult for beer companies to leverage a certain market share in the dominant markets of other faucets.

In this cooperation, although Budweiser is equipped with Swire Coca-Cola's channel resources, how effective is it, and will the beer dispute with China Resources set off changes in the industry?Modern Consumption will remain closely watched.

American Editor |Wu Yizhong.

Audit |Ode.