Tsingtao Brewery Group


Term Paper, 2008

10 Pages, Grade: 2,3


Excerpt

Table of Content

1. Introduction

2. The business
2.1. history
2.2. products

3. Analysis of the Chinese beer market

4. strategy
4.1. expanding
4.2. branding
4.3. sponsoring

5. outlook

6. references

1. Introduction

China has a rapid economic growth and a huge market. Therefore it is very interesting to take a look at one of Chinas big players. For this term-paper, I chose the Tsingtao Brewery Group. Its sponsoring of the Olympic Games will draw world-wide attention to it.

In this term-paper, I would like to give an insight in Chinas largest brewery, explain its history, the products and its strategy in the domestic and international market. The Chinese beer market is the most attractive world-wide, that’s why it is worth knowing how the market is set up and how it might develop in the future.

2. The business

2.1 History:

Tsingtao Brewery Group is a public company, based in Qingdao in Shandong province. The Brewery was founded 1903 by a group ofbusiness men from Germany and Great Britain.

If you take a look at the history of the company, you will see that it is comparable to the history of China. From 1915 on, it was under Japanese management. Japan was defeated in 1954 and Tsingtao Brewery was turned into a Chinese Brewery. When China embraced communism in 1949, the brewery became a state-owned company. Tsingtao Beer was first exported in 1954, but it was in 1979, when China opened its doors to the world, that Tsingtao Beer became relatively well-known to the world. Beijing government named it the official export beer of China.

In 1993 Tsingtao Brewery Company Limited was formed, when the company merged together with three other beer producing companies from Qingdao. As part of the “China Nine”, they were the first, together with eight other Chinese companies, to sell stock on public market, the Hong Kong stock exchange. The listing turned out to be very successful, because Tsingtao Brewery had a very recognizable name outside China and was considered to have high growth potential. (Tsingtao Brewery Group: Introduction, Development; 2008)

If you look at the company today, this has proven to be true. Tsingtao Brewery group expanded intensively over the past years and exports to over 50 foreign countries. As it becomes more and more successful by growing, it is not planning to stop. (Datamonitor: China - Alcoholic Drinks; 2006)

They have created a very good image; its company reputation was ranked second of all Chinese companies and 11th world-wide. (Corporate Reputation Review, 2006)

2.2 Products:

At the beginning, Tsingtao beer was brewed according to the German “Reinheitsgebot” (purity law). The equipment, the process and the raw material were all German. But as the brewery was taken over by the Japanese, these regulations determining the ingredients were disobeyed. What is said to make the beer so distinctive is the spring-water from China’s Laoshan mountain region. (Tsingtao Brewery Group: beers; 2008) Because of the many acquisitions, Tsingtao Brewery Group controls about 50 brands. The products are mainly placed in the low- to medium-end market.

The most successful is by far “Tsingtao beer”, the country’s and even the world-wide top­selling Chinese beer. As mentioned earlier, it is Chinas official export beer. It storms the mainstream market. (Oliver Johannes Ebnet: Internationalisierung und Unternehmenserfolg Börsennotierter Braukonzerne; 2006).

It is the eighth most well-known beer brand in the world.

3. Analysis of the Chinese beer market

China has the biggest beer market world-wide with a vast growth. Since 2002 China is also the biggest producer of beer. From 2002 to 2006 the market value grew by 7% and reached a value of 24.6 billion US $. Until 2010 it is forecasted to have a market value of 31.2 billion US $. You can see a similar development if you look at the market volume. There was a growth of 6, 2% in 2006 and it is forecasted to even grow by 28, 8% until 2010. As you can see on Figure 1, the beer consumption has been growing constantly. Reasons for the swelling beer consumption are the population growth and the improvement of living standard.

The Chinese beer market consists of ales, stouts, bitters, low or non-alcoholic beers, premium lager, specialty beers, and standard lager. (Datamonitor: Beer in China; 2006)

The most lucrative sector of those is the standard lager with a market value of 66, 4 %.

Premium lager comes in second with a market value of 18, 9 %. (Oliver Johannes Ebnet: Internationalisierung und Unternehmenserfolg Börsennotierter Braukonzerne; 2006)

The premium sector is mainly filled with international brands.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Total Chinese Beer Consumption and Annual Growth Rates 1994-2004 (Oliver Johannes Ebnet: Internationalisierung und Unternehmenserfolg Börsennotierter Braukonzerne; 2006)

The four big players of the Chinese brewing industry are China Resources Snow Breweries (CRSB), Tsingtao Brewery Group, InBev China, and Beijing Yanjing Brewery Company. All four together only have half of the market share, they only have strong control over there original regional market. This is because of the bulk of breweries in China. It used to be over 800 but in the past years, through mergers and acquisitions, it came down to about 500 breweries. (Bundesagentur für Außenwirtschaft: Chinas Bierkonsum wächst, aber die Margen sinken; 2008)

CRSB has an international partner as well; SABMiller owns 49% of the shares. In 2006 it exceeded Tsingtao brewery and is now “China’s Nr. 1 in terms of sales volume”. They took over many small breweries. (Han Xiaofei: China Resources Snow Breweries becoming China No. 1 in terms of sales volume; 2007)

InBev China is the Chinese branch of the international leading brewing concern InBev. (InBev: About InBev; 2008)

Beijing Yanjing has so far declined all international offers for a partnership. It has most of its market share in northern China.

Figure 2 gives an overview of the six leading brewers and there financial performance from 2002 until 2004.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Six leading brewers financial performance 2002-2004 (Oliver Johannes Ebnet: Internationalisierung und Unternehmenserfolg Börsennotierter Braukonzerne; 2006)

The Chinese consumers tend to buy local beer, because it is cheaper and for the thought of freshness, because it hasn’t travelled such a long way. There are regional brands in each province, municipality, and autonomous region. The market is made up of many small captive markets; small cities, districts, individual eateries and a lot of entertainment venues. These captive markets are well protected by the individual brewery that controls it, because there are “barriers” such as distance, inefficient distribution systems or exclusive distribution arrangements, which make it hard to enter. (Oliver Johannes Ebnet: Internationalisierung und Unternehmenserfolg Börsennotierter Braukonzerne; 2006)

Beer is sold best through the on-trade channel of distribution (59, 7 %). To 13, 1 % it is distributed through super- and hyper-markets. (Datamonitor: Beer in China; 2006)

The EBITDA margins in China are with 1€/hl relatively low, in Australia and Ireland for example they are at 32€/hl. This is because of the low beer price in China; the costs for producing are fairly similar. But because of the size of the market, the producers can benefit from a high sales volume.

4. Strategy

Since the 1990’s, Tsingtao brewery group pursued the following strategies:

7. “Great Famous Brand”

8. “ManagementofFreshness”

9. “Develop from Strategic Highpoint and Expand at Lower Cost”

10. “Develop MarketNetwork”

11. “Develop with Famous Brand”

12. “Systematic Integration and Mechanism Innovation”

(Tsingtao.com)

Expanding:

These strategies led the company to form acquisitions all over the country. The reasons were the advantages of a bigger company, such as economies of scale and above all the regional presence of the companies they took over, because of the preference of Chinese consumers to buy local brands, as mentioned earlier.

To cite an example, in May 2000 they bought the bankrupt Langfang Brewery, because it was located in northern China and Tsingtao Brewery Group felt it could no longer neglect the north. At that time, the general manager Peng Zuoyi said “Langfang is of strategic significance for Tsingtao beer to enhance its presence in North China”. Langfang is close to Beijing and Tianjin and many foreign countries have invested there.

[...]

Excerpt out of 10 pages

Details

Title
Tsingtao Brewery Group
College
Furtwangen University; Villingen-Schwenningen
Grade
2,3
Author
Year
2008
Pages
10
Catalog Number
V132525
ISBN (eBook)
9783640387892
File size
404 KB
Language
English
Tags
Tsingtao, Brewery, Group
Quote paper
Judith Blaß (Author), 2008, Tsingtao Brewery Group, Munich, GRIN Verlag, https://www.grin.com/document/132525

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