Asia: Budweiser Brewing Company APAC still expects beer market in China to continue epxanding

Budweiser Brewing Company APAC, Asia’s biggest brewer by sales, still expects the Chinese market for beers to continue expanding in the second half of this year despite negative factors such as extreme weather and weak consumption, according to Chief Executive Officer Jan Craps, Yicai Global reported on August 3.

“We see a strong recovery in the beer industry with premiumization leading the trend,” Craps, who is also co-chairman, said at a press conference for Budweiser APAC’s first-half earnings today. “We continue to expect the third and the fourth quarter to do quite well because we have seen this channel reopening which is supporting the recovery of the premium segments.

“If you look at the different consumer segments -- namely the Chinese consumer in the high income, the upper middle income, the middle income and the lower income -- probably the higher income has the impact from the current environment,” he said.

“If you look at the upper income, upper middle income, there could be some down trading there,” Craps added. “But within the alcohol segment, it would be more felt by the expensive or more premium baijiu and western spirits when they trade down in nightlife occasions. Typically they would come into premium and super premium beer, which is more of an affordable luxury if you compare it to other alcohol segments.

“We continue to see growth in this segment and premium beer drinkers are still willing to spend for a better experience,” he said.

Revenue at Hong Kong-based Budweiser APAC jumped 14 percent to USD3.7 billion in the six months ended June 30 from a year earlier, while sales rose 9.4 percent to 5 billion liters thanks to the strong Chinese and Indian markets.

Net profit fell about 8 percent to USD580 million, but normalized earnings before interest, taxes, depreciation, and amortization climbed 10.7 percent to USD1.2 billion, driven by the ongoing business recovery and premiumization in China.

Shares of Budweiser APAC [HKG: 1876] closed down 4.1 percent at HKD17.50 (USD2.24) apiece in Hong Kong today, while the benchmark Hang Seng Index came off 0.5 percent. The stock has fallen 29 percent since the end of last year.

Craps mentioned in particular the firm’s performance in China, saying “Budweiser APAC has greatly benefited from the recovery in the Chinese market.” In the second quarter especially, the market was strong and business performance was better than the industry average.

“When you look at the summertime, it’s the beer season and the most important part of the year,” he said. “If you look at the numbers of the last couple of months, we've been doing very well and we are leading the industry performance in China.

“We are gaining market share driven by premiumization trends and the channel sales channel reopening,” Craps told reporters. “Both revenue and EBITDA in China were above pre-pandemic levels driven by more than 20 percent, driven by the premiumization trends.

“If you look at our strategy, which is premiumization, expansion and digitization, all of these strategic initiatives are doing very well this year,” he said. “So we are quite optimistic about what the summer will bring, leading the industry recovery in China.”

China’s beer sector performed steadily in the first half, and Chinese brewers with annual revenue of at least CNY20 million (USD2.8 million) produced 19.3 million kiloliters in the period, up 7 percent from a year ago. But production grew more slowly in June, with 4.2 million kl made, a 1.6 percent annual increase.

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