China: Growing consumer spending levels in China have helped boost sales at world’s second leading beer-maker, South Africa’s SABMiller. This week SABMiller announced that organic volume growth in China was more than 12% in the third quarter of the year, up from 10% in the first half, and that value sales were finally starting to improve as well.

A price rise in the company’s core market in north east China at the end of last year – ostensibly to offset increased input costs but also as a reaction to the rapid improvement in Chinese income levels there – was maintained with no adverse impact on volumes.

The north eastern part of China has benefited from considerable government investment in recent years to stimulate economic growth there, and both SABMiller’s China Resources Brewery unit and local rival Harbin, owned by Anheuser-Busch, have managed to maintain their price hikes after years of price deflation in the Chinese beer sector.

China’s beer market is dominated by economy beer brands, which still account for around 90% of volume sales, but the increasing affluence of many Chinese consumers following the country’s entry into the World Trade Organisation in 2001 has seen a steady migration towards premium beers. Premium beer brands, both local and imported, sell for around RMB5-8 per litre, far higher than the RMB1 per litre cost of most economy brands, and drinking one of these more upmarket brands is increasingly seen as a status symbol in China – proof that the drinker can afford the high price of foreign brands.

SABMiller has been steadily ramping up production of its local premium brand, Snow, moving it out of its north eastern homeland into the rest of the country through its growing network of brewers, and the brand now accounts for 30 per cent of its sales. More importantly, perhaps, Snow is growing more quickly than the local economy brands, suggesting that the move towards premium brands is not confined to a handful of provinces. Indeed, SABMiller is so confident of growth in the premium segment of the market that is to roll out one of its international brands there in 2005.

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