Tsingtao consolidates national
position By Michael Mackey
QINGDAO - There are many symbols of China,
but Tsingtao beer, China's leading domestic beer
and its number one exported branded product, could
be said to be one of the more accurate ones.
Tsingtao's recent history reflects both export
success and the rising importance of domestic
demand, as well as the growing significance of
Chinese brands, and even marketing trends: the
company's winning a sponsorship for the 2008
Beijing Olympics was a major milestone for it.
A few eyecatching statistics will put
Tsingtao in perspective. Worldwide production of
beer totaled some 154.75 million kiloliters in
2004, up 4.4% over the previous year, according to
Japan's Kirin Brewery; and for the third
consecutive year, China
retained its pole position as
the world's biggest brewing nation. Gathering
production figures from various brewers'
associations, Kirin found China produced 28.75
million kiloliters last year, up 12.9% - and
Tsingtao, as the Middle Kingdom's premier domestic
beer, is very much a part of this. The US was the
second largest country producer at 23.33 million
kiloliters, only an 0.9% increase on 2003 -
showing the maturity of the US beer market. Japan,
the seventh largest producer with 6.6 million
kiloliters, was up only 1%, the first rise since
2001. The increase in world production was put
down to growth in the global economy (led by China
to some considerable extent), and a hot summer -
not surprisingly, hot weather boosts beer sales.
With figures like this, and economic
growth seemingly unlikely to wither, China seems
set to consolidate its position as the world's
biggest beer producer, surpassing even traditional
beer-drinking countries like Germany and, to a
lesser extent, the US and Japan. What this tells
us is simple: the Chinese like beer, and as they
urbanize and grow wealthier, they are drinking
more and more of it. The growth in beer
consumption raises significant resource issues,
however: breweries are major industrial consumers
of water, and China already has a fresh water
shortage.
Tsingtao's expansion
plans Tsingtao has more immediate concerns,
like its ongoing expansion, to contend with. In
the latest step of this saga, the brewery will
spend 160 million yuan (around US$17.9 million) to
add a fifth plant in Shaanxi province, to
strengthen its leading position in China's
northwest. The new plant, 55% owned by Tsingtao's
Xian branch, will be located in Yulin city in the
north of the province, where individual disposable
income is 5,500 yuan per annum. The new plant can
produce 100,000 kiloliters per year. "The new
market is one of our important markets," Zhang
Ruixiang, secretary to the Tsingtao board, has
been quoted as saying. "Setting up this new plant
will help [develop] the North Shaanxi market." By
such comparably small, but well-managed steps, is
Tsingtao underlining its bid to be a national
brand. This emergence of branded products, both
nationally and internationally, is a symbol of the
times in China.
The incremental strategy
has been brought about by the nature of the
Chinese beverage market. The world's biggest
potential market for not only beer, but any
alcoholic beverage, is now highly fragmented and
regional - basically a series of regional baronies
whose products wouldn't sell well elsewhere in the
country even if the transport network allowed it.
The statistics paint a revealing picture: at least
500 and as many as 1,000 small brewers, with an
annual average production of 50,000 tons, and
foreign brands share three-quarters of the market.
The remainder is split between leading domestic
brands Tsingtao and Beijing-based Yanjing.
Shenzhen-based Kingway, which is expanding
aggressively, can be considered a new challenger.
But Kingway faces some formidable obstacles,
including opening in Xian when Tsingtao already
has five plants there, and the company's lack of
exposure to the Yangtze River Delta, where so much
of China's economic growth is taking place.
Tsingtao bags Olympic
sponsorship In the near term, a symbolic
watershed for the beer industry will be the 2008
Beijing Olympics. Tsingtao seems to be a clear
winner here, as it was one of the companies chosen
to be an official domestic beer sponsor of the
Games, sharing that honor with Beijing-based
Yanjing. There is also an international beer
sponsor, namely, Anheuser-Busch. Both domestic
firms will provide funds, beer products and
related services to the Beijing 2008 Olympic
Games, the Beijing 2008 Paralympics, the Beijing
Organizing Committee for the Games (BOCOG), the
Chinese Olympic Committee, the Chinese sports
delegations and the 2006 Turin Winter Olympic
Games. In between these activities, they are
expected to run a publicly listed company in a
competitive but consolidating market as well as
sleep eight hours a night. This honor came
Qingdao's way because some of the yachting events,
involving 11 medal categories, will be held there.
Tsingtao seems to see the Olympics
sponsorship as both a major marketing opportunity
and a kind of civic duty. CEO Jin Zhigno has said:
"Tsingtao Beer has always had the vision of
becoming a leader in the global beer industry, and
sponsoring the Beijing Olympics is an integral
move for [the company] to achieve its
globalization dreams."
One problem is that
there is an established principle in Olympic
marketing that there should be only one sponsor in
each product category. While China's official
media acknowledge this, Yuan Bin, director of the
Marketing Department of the BOCOG, said "this is
an exception ... the IOC and BOCOG jointly decided
to give all three enterprises sponsor status in
light of the special situation." What the "special
situation" was she did not elaborate: it may be
that China itself is the special situation.
Michael Mackey is a
Shanghai-based freelance writer.
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