As China’s craft beer industry grows, the challenges affecting its development become increasingly apparent. Some craft breweries may be able to overcome several of these roadblocks individually, however, many are best addressed collectively.
Attending this year’s Craft Beer China Exhibition & Conference from May 17-19 in Shanghai, the excitement of China’s craft beer industry coming together was palpable. Demonstrating the outside interest in China’s craft beer market, Bob Pease, President & CEO of the US Brewers Association, set the tone for CBCE 2017 with his keynote address, “Craft Brewers: Sustaining Excellence and Growth”.
As craft beer is a new phenomenon in China, education plays a key role in the growth of the industry. For example, brewers must learn the characteristics of different base ingredients in order to successfully brew various beer styles, as well as proven techniques to incorporate different adjuncts. Adopting sound processes and practices also help improve beer quality.
At CBCE 2017, brewers had the opportunity to learn from international experts about topics such as yeast selection and management, the use of hops, barrel aging, beer clarification, and small-scale packaging. Seminars also covered the business of craft beer through topics such as market segmentation, branding, the hosting of beer festivals, and the management of rapid business growth.
China is currently unable to offer, domestically, the breadth of malts, hops, and yeasts necessary to brew the great variety of beer styles offered by craft brewers. Until local producers develop this capability and provide the needed quality, demand will be met by foreign suppliers.
At CBCE 2017, 19% of exhibitors were raw material suppliers, surpassed in number only by equipment manufacturers and craft breweries. As an indication of the interest in brewing ingredients, companies such as Country Malt Group, Hop Growers of America, and White Labs not only had booths in the exhibition hall, but also gave informative presentations during the conference.
Getting one’s beer to market in prime condition is a significant hurdle in China. Traditional channels are not used to treating beer as a highly perishable product that requires care and environmental control in order to maintain quality. Refrigeration between the brewery and point of sale is not common.
It’s also important to understand what the most popular beer packaging formats are in different regional markets or, for that matter, your target market. Realize that what works for lower cost domestic beer doesn’t necessarily apply to high-cost craft imports. Bottles dominate cans by a very large margin.
Needless to say, finding a good distributor is key. CBCE offers the opportunity to vet candidates in order to determine if they will handle your beer with the proper care, provide the necessary guidance, and actively promote your brand. While 4% of CBCE 2017 exhibitors were agents or distributors, they represented 18% of all visitors.
While draught is a more cost-effective means for selling beer, it’s not widespread in China, yet. However, it is common in craft taphouses and brewpubs which are driving its growth. In turn, the importance of proper beer service will also increase.
As stainless steel kegs are expensive, breweries may be reluctant to send them long distances without assurances they will be returned. They are also unwilling to bear the added cost of shipping empty kegs. Not only is this an issue for foreign breweries, it is also a concern for craft brewers in China wanting to send beer to the other side of the country.
At CBCE 2017, Petainer showcased their one-way, recyclable PET kegs, along with a KHS keg filler, as a solution to this problem. KHS China is Petainer’s official local distributor. At this time, they announced a significant commitment to developing the regional market.
Historically, governments have had significant influence over local beer industries and culture. Consider the impact of the Reinheitsgebot in Germany and Prohibition in the United States. In Canada, it was once illegal to have a brewery operating inside a pub. In Taiwan, it still is.
In recent times, high taxation has been a common impediment to the establishment of small, independent breweries that are craft beer’s foundation. When these barriers are removed, a surge in business openings follows, which is what happened in Japan, as Japan Beer Times President, Ry Beville, related in his CBCE seminar.
Nevertheless, each country’s craft beer industry faces its own challenges with unique characteristics. In order for industry to successfully lobby government to overcome these barriers, it must first have a strong enough sense of itself. This occurs with the formation of a formal body to represent its interests.
China’s craft beer industry is currently at that transitional stage where collective action is needed to persuade government of the widespread benefits that come once regulations are modified to help advance, or even encourage, craft beer. Louis Liu (刘俊杰), CEO of The Beer Link, made that call to action at CBCE 2017, encouraging all stakeholders to work together towards that goal.
On June 8, 2017, the Craft Brewers Association of China officially declared its formation with 39 founding members.
Hosted by The Beer Link and NürnbergMesse, CBCE 2018 will be held from May 16-18 at the Shanghai World Expo Exhibition & Convention Center. For more information on attending and exhibiting, visit the CBCE website.