China: China Resources Beer strategic transformation delivering measurable results

By 2016, China�s beer industry had hit a turning point. After years of rapid growth, production peaked at 50 billion liters in 2013. Suddenly, younger consumers � especially Gen Z � were shifting to premium, experiential, and craft-style beers. Meanwhile, global beer giants like AB InBev and Heineken were aggressively expanding their premium portfolios in China, ratcheting up the competitive pressure, IMD reported on May 13.

For China Resources Beer (CR Beer), China�s largest brewer by volume, the shifting market dynamics represented an existential threat. Its flagship brand, Snow Beer, was built on scale and low pricing, but this approach was no longer sustainable. Internally, the company grappled with operational inefficiencies, weak positioning in the premium segment, and an aging, costly workforce � challenges newly appointed CEO Hou Xiaohai called the �Three Mountains.�

To overcome these challenges, Hou believed that reinvention was critical. As he put it: �Transformation is about adapting to new consumer trends, industry cycles, and societal shifts. To succeed, companies must align with changing consumer behaviors and economic realities.�

This conviction became the cornerstone of CR Beer�s �3+3+3� nine-year strategy launched in 2017. Designed as a phased approach to systematically address the company�s core challenges while building long-term competitiveness, it would be a defining journey for the company � and for Hou.

Before pursuing further growth, CR Beer needed to address deep-rooted inefficiencies and establish a bedrock for cultural transformation.

In 2017, Hou convened 100 senior executives at CR University�s Xiaojingwan Campus to begin a company-wide restructuring. The company streamlined operations, significantly reducing inefficiencies and boosting productivity. Breweries were reduced from 98 to 63, the headcount was cut from over 58,000 to 25,000, and a 47% wage increase was introduced to retain key talent. The company also launched a sweeping digital overhaul led by Guo Hua, a former IBM and Accenture executive, to enhance supply chains, intelligent manufacturing, and digital marketing capabilities.

However, Hou recognized that sustainable transformation depended on people. In 2018, CR Beer�s Corporate Culture Reshaping Project engaged over 26,000 employees, embedding a new philosophy: �Every individual matters, every bottle shines.� This philosophy was integrated into performance evaluations, leadership development, and daily operations, creating alignment across the organization.

By 2021, CR Beer had streamlined its operations and re-energized its workforce. With the groundwork laid, the company focused on a new challenge: brand reinvention.

With structural reforms in place, CR Beer shifted its focus to brand innovation and premiumization. Recognizing that younger consumers craved experiences that resonated with their lifestyles and values, Hou rolled out a comprehensive rebranding strategy under the tagline: �We made for young.� (Editor�s Note: This was the company�s original tagline.)

Central to this strategy was the revitalization of Yongchuang Tianya SuperX, which was re-positioned to capture the youth market. The company invested heavily in influencer campaigns, music festivals, and high-profile events like the XGames. The results were swift and impressive � sales quickly doubled, affirming CR Beer�s ability to dominate the premium segment and engage a new generation of consumers.

This partnership immediately strengthened CR Beer�s premium portfolio, leveraging Heineken�s global reputation and integrating its products into CR Beer�s extensive distribution network.

As CR Beer focused on developing its premium portfolio, Hou saw an opportunity to accelerate growth through a global alliance.

�Rather than exporting Chinese beer, we should first bring in top international brands, collaborate, and refine our approach,� he explained, setting the stage for CR Beer�s next move.

In 2018, CR Beer launched a long-term strategic partnership with Heineken, securing exclusive distribution rights for Heineken products across mainland China, Hong Kong, and Macau. Under the agreement, Heineken acquired a 20.7% stake in CR Beer, while CR Beer took a 0.9% stake in the Heineken Group.

This partnership immediately strengthened CR Beer�s premium portfolio, leveraging Heineken�s global reputation and integrating its products into CR Beer�s extensive distribution network. Meanwhile, Heineken regained meaningful access to the Chinese market, where its share had fallen to just 0.4% by 2017. By the end of 2023 � the final year of their first five-year plan post-merger � Heineken�s sales in China quadrupled to 600,000 tonnes, making China its second-largest global market.

Building on this momentum, CR Beer introduced the �4+4� brand matrix, combining four domestic brands (Yongchuang Tianya SuperX, Marrs Green, Craftsmanship, and Flower Face) with four international brands (Heineken, Red Baron, Tiger, and Sol). This balanced strategy effectively catered to diverse consumer segments, solidifying CR Beer�s hold on China�s premium beer market.

Having weathered multiple economic cycles � expansion, market saturation, and fluctuating demand � CR Beer recognized the risks of overreliance on a single product. In 2020, the company established CR Liquor, a wholly owned subsidiary, signaling a move into the high-margin Baijiu market dominated by industry giants like Moutai and Wuliangye. Between 2021 and 2022, CR Beer acquired significant stakes in prominent Baijiu producers, including Shandong Jingzhi (40%), Anhui Jinzhongzi (49%), and Guizhou Jinsha Jiaojiu (55.19%).

By employing a dual empowerment strategy, CR Beer integrated its beer and Baijiu businesses, capitalizing on synergies across distribution, operations, and branding. This strategic push reflects the company�s broader vision of �leading the new world of beer� and �exploring the new world of Baijiu� � a bold bet on diversification in a market with stiff competition.

The goal is to sharpen the company�s competitive edge and sustain its growth trajectory in an increasingly challenging market.

By 2024, the company�s 30th anniversary, strategic transformation was delivering measurable results. Premium beer sales volume surged, with Heineken up nearly 20%, Lao Xue and Amstel sales doubling, and ultra-premium brand Nong Li increasing by 35%.

Between 2020 and 2024, CR Beer�s total revenue grew by 22.85%, while net profit soared by 126.3%. Its beer market share increased with premium beer sales reaching 2.5 million tonnes, cementing its status as a market leader. Meanwhile, the Baijiu venture hit RMB 2.149bn ($295m) in revenue, driven by a 35% increase in sales of its flagship product, Zhaiyao, which accounted for over 70% of Baijiu earnings.

For Hou Xiaohai, these results cemented his industry standing. His strategic vision and execution earned him the 2024 Ram Charan Management Practice Award for Transformational CEOs and recognition in the Leaders 50 Global Business Leaders list. His leadership approach became a benchmark for driving transformative change.

As CR Beer moved into the final phase of its �3+3+3� strategy in 2025, Hou introduced the �Three Precision� model, which emphasizes a streamlined organizational structure, rigorous cost optimization, and operational excellence. The goal is to sharpen the company�s competitive edge and sustain its growth trajectory in an increasingly challenging market. The question now is whether CR Beer can replicate its successful beer transformation in China�s fiercely competitive Baijiu market.

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