Free Essay

Tsingtao Brewery

In: Business and Management

Submitted By redtoc
Words 1202
Pages 5
1. Company Introduction - TSINGTAO Brewery Co., LTD

History. Tsingtao Beer, one of the oldest brewery brands in China, can trace its colonial roots back to 1903, when German forces occupied Qingdao (Coastal city located in Shandong province in China). Beer businessmen from Germany and British founded the Tsingtao brewery factory in Qingdao and started to brew in the European way. Since Japan seized China from Germany during the First World War Japanese took the control of Tsingtao from Germans and run the company in effect until 1945. As the People’s Republic of China was established in 1949, Tsingtao became state-owned enterprise. It was privatized in 1990s with the formation of Tsingtao Brewery Company Ltd. and then issued H-shares in Hong Kong which were listed on the Stock Exchange in 1993, being the first domestic enterprise listed on an overseas stock exchange. Following this, in the same year Tsingtao issued A-shares in China, which were listed on SSE.

Shareholders. When Tsingtao was listed on Hong Kong stock market, Anheuser-Busch, the world biggest brewery, acquired 4.5% of shareholding in order to enter Chinese market and extended its shareholding to 27% in 2002. As the Interbrew, Belgium brewery company, merged Anheuser-Busch in 2008, Japanese Asahi group replaced ABInBev’s position with about 20% of shareholding, which is the 2nd largest majority shareholder after Tsingtao Group. (Please see the appendix 1, “Shareholders”)

Performance. At present, Tsingtao Beer occupies leading position in the domestic beer industry in terms of size with 54 wholly-owned and controlling breweries, and 11 associated breweries in 20 provinces, cities and regions all over China. Tsingtao Beer currently ranked the second in terms of domestic market share with 20.6%. Also, Tsingtao Beer is widening the business scope internationally and the products are distributed more than 80 countries throughout the world. Although the revenue is steadily growing, the recent operating profit is relatively decreased compared to 2010.

2. Background of Beer Industry in China

Growth of beer market. The global beer consumption in 2011 was 181.6 billion liters and the consumption of China which is about 27% by 49 billion liters. In 2002, China overtook the USA to become the leading beer market in terms of volume sales. Since that time, China has been the biggest beer market in the world by volume for the 10th consecutive years. Chinese beer market has grown since 2000, at a CAGR of 44.4%. It is about three times the world beer market’s CAGR, which is 2.6%. This is due to the huge Chinese drinking population, which is 800 million people of a total 1.2 billion population. (Please see the appendix 3, “China beer consumption”)

Change of consumer behaviors. China’s unprecedented economic growth has led to increased disposable income, which has caused a rise in consumption and changes in eating and drinking habits. Chinese beer has seen a growth in popularity internationally in the past few decades. The rise of China’s middle class and increases in discretionary income have allowed many consumers to afford foreign-made and foreign-branded alcoholic beverages.
The growing health craze is also influencing the development of beer industry. Low-alcohol beers will continue develop in China while Chinese consumers’ habits and acceptance of the new-flavored and healthy beers develop. There remains strong potential for developing volume per capita consumption among key consumer groups, including youth consumers and women, while older consumers are showing an increasing propensity towards buying more premium beers, thus adding more value to the market.

Fierce competition. In China, with the improvement of living standards and the deregulation of government, buying beer has become routine problem solving. As a kind of fast moving consumer goods, beer appears in the Chinese daily life frequently. When people need to drink beer, everyone will have some brands for choosing.
Currently, the Chinese beer market is doing the most intense chicken game in the world market. The reason is that more than 40% of 400 beer brewers in China have had a deficit and major Chinese beer brewers have also expanded capacity by way of new construction, mergers & acquisitions or construction expansion. Also, foreign competitors - including ABInbev, Heineken, and Carlsberg - have been determined to offset the decline in their domestic markets by capturing new growth opportunities in China.
As a result, the four biggest players China’s beer market - China Resources Snow, Tsingtao, Anheuser-Busch InBev and Beijing Yanjing - accounted for a total of 45% market share in 2005 and increased gradually, accounted for 60% in 2013. The oligopoly situation of the Chinese beer market will be becoming more severe and likely to change the winner-take-all structure gradually. (Please see the appendix 4, “Beer market share in China”)

3. Global Trend of Beer Industry

Global beer company ranking. In 2011, the beer consumption in the world is about 180 million hectoliter which increased 2.4% comparing 2010 year. Due to Asian regional beer company, there are beer companies growing fast that CRE(china) +10.3%(+yoy), Tsingtao brewery +12.6%(+yoy), Beijing Yanjing beer +7.5%(+yoy), San Miguel +10%(+yoy). The high ranked 15 beer companies are occupying 80.6% of the world beer industry. In other word, it is mostly concentrated on a few number of top beer companies.
In 2011, AB Inbev, the world top beer company, merged with Grupo Modelo(Mexican beer company) which is famous for “Corona”. For reference, Grupo Model is capturing 60% of Mexican beer market. As AB Inbev’s M&A, their market share is 26% of world beer market. SABMiller, Second ranked beer company in the world, also merged with Foster’s which is capturing 50% of Australia beer market.

Global beer product. According to the perspective of beer product, CRE(China beer company)’s “Snow” is the best seller in the world. Even though, “Snow” is mostly sold in Chinese market. But a lot of Chinese buy that beer comparing the other global brand. Especially, “Snow” is growing so fast comparing “Tsingtao beer” in Chinese beer market. Because the sales of “Snow” is disperse through all over the region in China. SABMiller is 49% shareholder of CRE(china). Besides “Snow” beer, “Bud light” and “Budweiser” is ranked in second and 4th. These two beer products are also produced by AB Inbev. AB Inbev has 7 high ranked beer products(Bud light, Budweiser, Skol, Corona, Brahma, Harbin, Sedrin) of top 15.

Global beer country. In view of country, China is the most consumption country in the world.(490 million hectoliter) U.S.A is second consuming country. Brazil, Russia, Germany , Mexico is 3~6th in the world. Japan is the 7th. Germany is the best consumption country in the European market. The interesting thing is that the traditional beer consumption countries(U.S.A, Germany, England) is slowing down to sales of beer. On the other hand, the new emerging beer consumption countries(China, Brazil, Mexico) is soaring to sales of beer in the world. Beer is becoming more popular alcohol product wherever it is produced. Especially we have to consider the potential growth of Chinese beer market. It is still growing fast because of a lot of demand for Chinese beer consumption.

Similar Documents

Premium Essay

Branding

...The branding management of Tsingtao brewery Tsingtao Brewery Co., Ltd In 2004, China with the output of 27 million tons of beer became the world largest beer producer in the world. At the same time, Tsingtao Brewery Co., Ltd – the Hong Kong and Shanghai listed company had became China’s largest beer producer and exporter, with annual sales of 3.71 million tons of beer. By using four years of time, the company expanded its market share in China from 3% to 13% (1999-2002) and turn out to be the market leader. China’s beer market and segmentation According to the report, the top 10 brewers accounted 55% of the China’s beer market and Tsingtao, Yanjing and China Resources sold 8.1 million tons of beers in 2004. It summed up 30% of the sales. At the meantime foreign brands like Budweiser and Heineken started to enter the market and making profit. Since they occupied the high-end market and that’s the most promising and profitable market in China. They targeted the middle and upper class of the consumers and pricing at 7–9 yuan a can. In contrast Tsingtao was sold around 3.3 yuan. Furthermore in many tier two and three markets local brand beers were sold at 1 yuan. At this point we could segment the beer market into two. The first segment is ‘high price with strong branding’; the other segment is ‘low price with weak branding’. The major players in the first segment were those foreign brands as they did a better job in the marketing and promotion areas. As for the second...

Words: 653 - Pages: 3

Premium Essay

Foreign Market Entry and Diversification

...Bresnahan, 1985; Elzinga & Swisher, 2005; Gisser, 1999) in response to the threats which the industry has experienced. In order to mitigate eroding market share: given the growth of beer imports, competition from specialty-craft brewers, a decline in sales of the leading domestic premium brands, and competition from new products and marketing methods, the leading breweries actively acquire successful micro-breweries and add its label to their portfolio of beverages (Aaker, 1996; Arens & Bovee, 1982; Belch & Belch, 2001; Elzinga, 2004). Similarly, the industry leaders utilize extensive advertising strategies to save market share and simultaneously attempt to alter their positioning and public perception (Assmus, Farley & Lehmann, 1984; Baker & Bresnahan, 1985; Grabowski, 1977; Kelton & Kelton, 1982; Nelson, 2005). In order to maintain their market share, the major breweries keep discount famous-name beers while introducing new styles of beer (light, ice, non-alcoholic) as well as employing various packaging innovations (Berger, 1988; Seiler, 2002). On a global scale, a number of European breweries have moved into markets in...

Words: 1513 - Pages: 7

Premium Essay

Global Forces and Western European Brewing Industry Five Forces

...Western European Brewing Industry Case Study Question: 2. For the breweries outlined above explain: (a) How these trends will impact differently on these different companies; and (b) The relative strengths and weaknesses of each company. (A) Impact of these trends. 1. InBev (Belgium/brazil) • INBev is a merger of two companies Anheuser and Busch and hold the top spot in the world’s top 10 breweries. • INBev is known for being the world’s largest brewing company through mergers and acquisitions and has a 25 percent global market share • By diversifying its enterprise into many countries outside of Europe (where the consumption of beer was increasing), has helped the companies continued success. • INBev are geographically diversified with a balanced exposure to developed and developing markets and leverages the collective strengths of its approximately 155,000 employees based in 25 countries worldwide. • The corporation has a significant position in the Latin American market. • INBev occupies 50% of the US market and 50% of the Mexican market. • The company is established in countries where the consumption of beer is rising. • Revenue of 47 billion US dollars in 2014 • INBev has around 200 beer brands and continues to forge strong connections with consumers. The global brands included are Budweiser, Corona, Stella Artois, Beck’s, Leffe, Hoegaarden, Bud Light, Skol, Brahma, Antarctica, Quilmes, Victoria, Modelo Especial, Michelob Ultra, Harbin, Sedrin, Klinskoye...

Words: 803 - Pages: 4

Premium Essay

Research

...Strategy Advantages v Disadvantages 28 Space matrix 29 SWOT Analysis 30 IFE Matrix 31 Company Overview As the largest brewer in the world, Anheuser-Busch InBev (AB/InBev) has had quite an intense but creative history. In 1852, George Schneider, St. Louis brewer and saloon operator opened the Bavarian Brewery. Four years later, he expanded into a larger location for his brewery to operate due to positive production. However, shortly after the second opening financial problems resulted in Schneider having to sell his brewery to various owners. In 1860, as the brewery reached a worsening financial position, William D’Oench, a local pharmacist, and Eberhard Anheuser, a wealthy German-born soap manufacturer, purchased the brewery and saved it from bankruptcy (Anheuser-Busch, 2012). After nine years, D’Oench sold his half of the business and Anheuser became the sole owner of the brewery. Eberhard Anheuser’s son-in-law, Adolphus Busch, immigrated to St. Louis Missouri from Germany years prior to marry Anheuser’s daughter. Busch served in the American Civil War and shortly after that became a salesman for the Anheuser brewery. Adolphus Busch...

Words: 8148 - Pages: 33

Premium Essay

5 Porter Force in the Beer Industry

...Five Force Analysis: Supplier Power The beer market’s prime suppliers are farmers. Most breweries buy their supplies on the relevant countries’ futures exchange. Hence the branch has an opportunity to diversify its risk by trading futures contracts as well as hedging other risks. Various farmers supply the hops, barley, corn and rice used to produce beer. In 2008, there were 2,053 companies that purchased these ingredients. The overall beer industry sold nearly 206 million barrels of beer in 2009. For major brewers, the volume of ingredients purchased, the large number of farmers available to purchase the ingredients from, low switching costs on the part of the brewer, and inability of the farmers to forward integrate, supplier power in considered low in regard to the major brewers. Craft brewers who purchase fewer ingredients and sometimes more specialized ingredients may cause supplier power for this segment of the industry to be somewhat higher; yet, overall, suppliers have put limited pressure on price and supplier power is LOW. There are only a few large suppliers of aluminium cans, plastic and glass bottles, which increase the supplier’s bargaining power. However, taken into consideration largest brewery companies existing we can assume that the suppliers of those goods have a incentive in taking care those as a customer and will therefore provide them with the best possible price, in order to keep them as a customer. Competitive pressure from supplier bargaining power...

Words: 4049 - Pages: 17

Free Essay

Ab Case

...leading brands of beer established in St. Louis, Missouri, United States. Anheuser Busch has grown to be one of the world’s largest beer companies offering the world’s top two selling beers, Bud Light and Budweiser. Chinese beer market is an increasing market with a huge potential. Though there is a huge foreign interest on this market, most foreign investment usually failed. In 2004 company acquire Harbin brewery in China. Foreign companies tend to face problem as provincial regulation are there to protect local companies and furthermore to keep the tax revenues within province. Regulatory roadblocks were designed to keep tax revenues at home. Many recognized global brands were unable to achieve their company goals because the company really didn’t understand the customer taste and preference. Anheuser-Bush entry into China was in 1993 through 5% participation to the capital of Tsingtao brewery, the internationally renowned Chinese brewer based on the East coast and later in February 1995, through a $140 Million acquisition of 80% stake in Zhongde Brewery, a large brewery in Wuhan, in Hubei province, eastern China. The company produced its global brand “Budweiser” in Wuhan and engaged a massive advertising campaign to build the name as a premium brand all over China. The results were not as expected due to the fragmented nature of the market, the severe competitive rivalry in the crowded premium segments and the difficult logistical problems in transportation, warehousing...

Words: 3230 - Pages: 13

Premium Essay

Bosten Beer Case Hints

...Case: Boston Beer Company Address the following questions in a 4-5 page write-up of the Boston Beer Company Case to explore the issue of Initial Public Offerings. 1) What do you think of Boston Beer’s business model relative to the traditional beer companies’ business model? Relative to Redhook and Pete’s? (Hint: consider their brewing, production, distribution, marketing strategies. How is each firm attempting to achieve its own sustainable comparative advantage in the market place?) 2) Evaluate Boston Beer’s performance relative to its peers (Compare BBC's ratios to the ratios of its peers in exhibit 4). (Hint: how do differences in operating strategies translate into differences in financial ratios? Are there any downside risks to BBC's contract brewing strategy?) 3) What is your assessment of the intrinsic value of Boston Beer’s stock at the time of the case? What should be its IPO price? (Some hints below: First, you should look at the P/E multiples for Pete's and Redhook around the IPO time for BBC. You should also look at the average amount the price seems to jump on the day of the IPO, and the EPS of BBC for 1994 and 1995. From this, you should figure out what the implied price per share for BBC should be in this market environment. Second, you should try to justify this price per share by doing FCF analysis. Create a ten year pro-forma spreadsheet, projecting out barrels of beer each year, revenue per barrel, revenue...

Words: 668 - Pages: 3

Premium Essay

Tester

...considered mutual and compatible in this approach, instead of simply addressing them as separate things. In other words, one need cannot be gained at the expense of the other (Human Resource Management... 6). The human resource manager in charge of the corporate office of a large brewing company, and also the manager that I interviewed, is Lori Fulmer. Mrs. Fulmer is the benefits and risk manager of Gordon Biersch. Organization Information Dan Gordon and Dean Biersch founded their first restaurant in Palo Alto in 1988. What began as a single restaurant brewery collaboration soon turned into a chain. A little over two years ago, Trolley Barn Breweries Holding Company, which consists of many Big River Grille restaurants, Rock Bottom, A1A Ale House and Seven Bridges Bar & Grille, purchased the rights to the Gordon Biersch restaurants. The new company still retains the Gordon Biersch name. The two founding members still run the brewery based out of Las Vegas, Nevada. The lucrative merger blends the West Coast brewing style, which uses the unique German style of brewing, with the one of a kind microbreweries of the East. This merger...

Words: 281 - Pages: 2

Premium Essay

New Belgium Case Study

...New Belgium Brewery 1) What environmental issues does the New Belgium Brewing Company work to address? How has NBB take strategic approach to addressing these issues? Why do you think the company has taken such a strong stance toward sustainability? New Belgium Brewing Company strives to take an environment friendly approach to their manufacturing process and facility, focussing on reducing their carbon footprint and energy usage. They were the first-ever American brewery to fully incorporate a wind turbine as a power source versus the burning of coal. Other approaches included the addition of a steam condenser to recycle hot water for use around other areas of the plant and sun tubes which utilize natural sunlight to light the plant. Furthermore, their used hops and barley are saved for the use of feeding area livestock instead of being wasted. Employees are also encouraged to be individually conservative by riding their gifted “cruiser bikes” to and from work. It is our belief that the founder, Jeff Lebesch’s own personal values and love of the outdoors contributed to the company’s strong stance on sustainability. A long side that is the fact that adopting such sustainability measures will help to increase their bottom line. 2) Do you agree that New Belgium’s focus on social responsibility provides a key competitive advantage for the company? Why or why not? We believe that New Belgium’s emphasis on social responsibility provides a key competitive...

Words: 1716 - Pages: 7

Free Essay

American Microbrewery Beer Is a Better Quality Beer Than Imported Beer

...brewers don’t offer, tempting Americans to choose one. What people don’t realize is that America has a lot of good quality micro brewed beer that comes in more flavors and styles than imports have to offer and is a better quality beer. With the craft beer market rising rapidly in the United States, there is a colossal variety of tasty brew to be had. The trademark of craft beer and craft brewers is innovation. When people accuse American beer of being dull and boring, the first thing that comes to mind is big name breweries like Budweiser, Miller or Coors. Al Davenport says “What they don’t know is that the U.S. has an extremely rich and diverse craft-brew industry that produces, by many accounts, some of the best, if not the best, beers on the planet” (Davenport, 2012). Top American microbreweries like Shipyard, Dogfish Head, Stone and Sierra Nevada brew at the level of excellence beer enthusiasts’ love and exceed the quality of the very best foreign breweries. Craft brewers interpret numerous styles with unique twists of flavors and develop new styles that have no comparison to any other beer. With all the new microbrews being created it’s almost impossible to not to find the same,...

Words: 1118 - Pages: 5

Premium Essay

The Discovery Of Beer And Civilization Essay

...1. How is the discovery of beer linked to the growth of the first "civilizations"? The discovery of beer led to the growth of the first “civilizations” because it offered a healthy way to hydrate the body and its production came from available food products, such as gruel. To provide this new drink and make it available to others, they began to farm and tend to their lands. It became of great cultural importance to hunter-gathers, which made the substance well known among communities after just a relatively short period of time. Beer was a secure form of liquid that gave beer drinkers many health advantages, which helped shape the minds and bodies of their future generations and aided in the growth of the first establishments. 2. What does this history of beer in the ancient world tell us about the early civilizations? The history of beer in the ancient world hints that many early civilizations understood the concept of “dangerous water”, water that had been contaminated and could cause health risks if consumed. It is what caused the swap from water being the most consumed liquid, to beer in some regions. It also tells us that civilizations valued quality just as we do now, due to the fact that they worked hard to improve its taste and texture of beer through the process of trial and error. 3. What sources does the author use to gather his information on the use of beer? Standage uses sources from the Stone Age period to find reliable facts and information on the ancient...

Words: 1464 - Pages: 6

Premium Essay

New Belgium Brewing Case Study

...New Belgium Brewing has created a craft brew that is loved by many not just around the country but the world including myself. Although the taste is something that is quite pleasing to the palate I feel that there success can be based on two things specifically. The first would be their focus on energy saving and environmental safe brewing standards and then where they came from. Ryan Withall stated in his article with Sustainable Brands-The Bridge to Better Brands that New Belgium Brewing Company understands that if they want to sustain themselves for the long run and that will include "environmental initiatives, employee ownership, fair employment practices and active engagement with suppliers, distributors and the greater community" (2014)....

Words: 279 - Pages: 2

Premium Essay

Agriculrural Sibsidies

...Beer statistics 2010 edition Table of Contents Table of contents ....................................................................................................................................................... p 1 Glossary and abbreviations ....................................................................................................................................... p 2 Foreword................................................................................................................................................................... p 3 Beer trends EU27 2003-2009 ................................................................................................................................... p 5 Beer production 2003-2009 (data) ............................................................................................................................ p 6 Beer production 2009 (chart) .................................................................................................................................... p 7 Beer Consumption 2003-2009 (data) ....................................................................................................................... p 8 Beer consumption 2009 (chart) ................................................................................................................................. p 9 Consumption per capita 2003-2009 (data) ................................................................................

Words: 7035 - Pages: 29

Premium Essay

Aldrige Beer

...ALRIDGE BREWING COMPANY Craft Brewing Goes Public In August 1995, Paul Shipman, the CEO of Alridge Brewing (AB) prepared himself to enter uncharted territory. A craft brewing operation had never before been taken public in the United States, and he and his management team were about to do just that. Sure, there were massive large-batch breweries like Anheuser-Busch and Miller Brewing Company that were profitable, publicly traded firms—but there was something different about Alridge: it embodied the ethos and grassroots beginnings of the microbrew movement, and Shipman was confident that widespread market demand for craft beer was set to explode. He and the team had steadily developed their premium-quality handmade ales for nearly fifteen years, and their loyal customer base was strong. In the last year alone, he’d forged alliances with both Starbucks (for the purposes of co- branding a coffee- flavored brew) and A-B that had purchased a capped 25% interest in AB in exchange for access to its national distribution networks and accounting systems. Shipman had overseen significant capacity increases, with plans on the horizon for yet another brewery in Portsmouth, New Hampshire. He had worked hard to position AB favorably for expansion, and the public offering would provide the necessary capital. But how would the “microbrew” feel of AB translate to the largescale commercialization and growth pressures of the open market? Producing and distributing microbrews on a large scale was...

Words: 5809 - Pages: 24

Premium Essay

Financial Audit

...Craft Brew Alliance (BREW). They are a brewing company that is on the verge of becoming a true American craft brewer that is taking full advantage of the flourishing craft-beer industry. By definition there is only one publically traded American craft brewer. This company is The Boston Brewing Company (SAM). Defined by the Brewers Association an American craft brewer is small, independent and traditional. Craft brewers can produce 6 million barrels or less, less than 25% of the brewery is controlled by an alcoholic beverage industry company who is not a craft brewer and has either an all malt flagship beer or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor. Craft Brew Alliance is a small and traditional brewer, but 32% of the company is owned by Anheuser-Bush Inbev (BUD). The Boston Brewing Company has been herald to have made microbrewers relevant in today’s society. They are the standard for publically traded craft breweries and will be used for comparison in this financial analysis. Current Ratio: Similarly to SAM, BREW has shown an overall increase dating back from 2008. In 2010 a distribution agreement was reached with BUD, reducing current liability. This directly increased the current ratio. Debt/Equity Ratio: Ratios for both companies follow similar trends. In 2010, BREW opted to invest $8 to $10 million in brewing operations and supply chain. This is confirmed by the spike on the...

Words: 740 - Pages: 3