Beer Manufacturing in China

Beer Manufacturing in China

Beer Manufacturing in China

Introduction

China is a rising economic power and is the largest country in terms of population. The growth in China has affected the consumption patterns of the people and has increased the demand of beer in the country. The Chinese beer manufacturing industry is a consumer of malt, yeast, water, barley and other ingredients to manufacturer beer and numerous malt and brewing products. The chief products manufactured are low degree alcohol (ranging from 2.5% to 7.5%) carbonated fresh beer products. The packaging of beer is carried out in the form of kegs, for selling to hotels, restaurants, bars, and pubs. Companies also pack beer products in the form of bottles and cans for selling to retail and wholesale alcoholic drink distributors and also to the hospitality industry. We will be exploring the microeconomic environment for the Chinese beer industry. We will look the supply and demand issues in detail and will review role of government in the industry. We will look at the market structure of the Chinese beer industry, the product differentiation, barriers to entry, profit margins, concentration ratios, prices prevailing in the market. We will match the market structure with the theoretical market structures and will see which one matches with the beer industry. We will also assess the competitiveness of the industry on the basis of Michael Porter five forces.

Discussion

The Chinese beer industry has witnessed phenomenal growth due the rise in income of the people. The major operations of the industry are manufacturing of pure beer, barley malt, wheat malt and turbid beer. The products and services marketed by the beer industry are draught and keg beer, bottled beer, canned beer and other beer products.

Microeconomic Environment

The beer industry in of China is dependent on a number of raw materials. China being an agriculture country has been fulfilling the domestic demands of beer industry from the local market which has been one of the reasons of the success of domestic breweries.

Supply / Demand Analysis

The factors which drive the demand for the beer industry were analyzed by the IBIS and their observations are as follows:

The rise of economy of China has increased the per capita income of the people of country. This increase in per capita income has caused the consumption of beer to rise. The decade of 1980 to 1990 saw the beer consumption growth to increase by more then 15% and surpassed the growth of GDP of Chinese economy. It can be expected that since the government of China has a policy of maintaining a 7% GDP growth rate, the beer market of China has the potential for further enhancement (IBIS, 2008). The subsequent years, 2009 and 2010 also validates this hypothesis (See Figure 1).

Figure 1: China Beer Market Volume 2006-10 (retrieved from Marketline.com)

It can also be said that current global recession has effected growth but the future of beer industry remains on the growing trend.

China in 2008 has been the host of Beijing Olympics ...