There has been a lot written about the beer industry in China this year and with good reason.
Beer consumption passed the 50-billion liter mark for the first time ever in 2011. The country’s leading producer, Snow, even passed the country of Germany in total production.
On Tuesday, analysts at Nomura projected that China “will account for around 40% of global beer volume growth in the next four years,” according to Just-Drinks.com. In its report, Nomura forecasts that industry profits will increase from the current estimate of $1 billion up to around $9 billion in 2021.
Meanwhile, in the U.S., beer consumption has been on the decline. Large manufacturers like A-B InBev are still increasing profits due to cost savings from recent mergers and acquisitions but they are increasingly focusing on emerging markets outside of the States where growth potential is higher.
Where do craft brewers fall in the mix?
Brooklyn Brewery is just one small producer with a global perspective. Its second largest market to New York City is Sweden and others are joining them in their world view.
American craft brewers exported 110,000 barrels of beer in 2011, an increase of 86% from the prior year. With more than 50 breweries now enrolled in The Brewers Association’s Export Development Program, export volume could top 200,000 barrels and sales could approach $50 million in 2012.
Growth, at least from a percentage standpoint, is largest in the Asia-Pacific region, up 213% from 2010 though it is still a brand new region to small U.S. brewers (read: it’s growing off of a small base). That said, there are signals that pent-up demand for full-flavored beers exists in China as it does in the U.S..
The owners of Slow Boat Brewery and Great Leap Brewpub told the Wall Street Journal in February that “there’s a growing and largely untapped market” in Beijing. As of that report, those two small operations were the only two ‘craft’ breweries in China’s capital, estimated to have a population of more than 20,000,000 people. That is 2.5x the size of New York City, which has, at least, 14 breweries and brewpubs with more in-planning.
Growth opportunities still exist aplenty in the States for small brewers, especially in relatively untapped markets like the South. From big to small, China and other emerging markets could present an interesting opportunity for some brewers though.
An analyst at UBS downgraded The Boston Beer Co. earlier this month, citing the “Innovator’s Curse” in which Boston Beer sales growth will slow as Twisted Tea reaches distribution saturation. The company has already started looking at export markets with the United Kingdom apparently being the first. Boston Beer has more resources than any other small brewer to export its brands or create new ones to fit emerging markets.
In a more creative deal, Russell Breweries recently licensed its brands to a Chinese firm and expects to make at least $1 million (Canadian) from the arrangement. Those funds will be used to improve Russell’s British Columbia-based operations.
Finally, Michigan-based Arbor Brewing, still technically a microbrewery in terms of production, plans to open a brewpub in India later this year.
With hundreds of small breweries readying to open stateside over the next few years, expect more of the incumbents to start thinking outside of the box and outside of the U.S..