On March 24, China Resources beer (00291. HK), China's largest beer company, announced its annual performance in 2021. Judging from the announced performance of Budweiser Asia Pacific, Chongqing Brewery Co.Ltd(600132) and other performance, although affected by the epidemic and cost, China's beer industry still ushered in a good year in 2021 under the upgrading of product structure.
Recently, there have been many outbreaks in China. At the performance briefing held today, Hou Xiaohai, chairman and general manager of China Resources Snow Beer (China) Co., Ltd., said that the epidemic has restrained the growth of high-end beer, but it is expected that the impact of the epidemic this year will be "no worse than last year". Therefore, he is cautiously optimistic about the development of the beer industry in 2022.
beer high-end acceleration
According to the announcement, China Resources beer achieved a revenue of 33.39 billion yuan, a year-on-year increase of 6.2%, and a net profit of 4.59 billion yuan, a year-on-year increase of 119.1%. After deducting the after tax compensation income of 1.3 billion yuan brought by land transfer, the net profit still increased significantly compared with 2.09 billion yuan in the same period of last year.
The impact of the epidemic on China's beer market in 2021 was weaker than that in 2020. However, due to the shrinking capacity of mainstream market segments and the repeated epidemic in some regions at some times, the sales volume of China Resources beer decreased slightly by 0.4% to 11.056 million kiloliters compared with the previous year.
The first financial reporter noted that the performance growth of China Resources beer mainly comes from the continuous high-end. In 2021, the sales volume of China Resources beer's secondary high-end and above beer reached 1.866 million kiloliters, a year-on-year increase of 27.8%. The sales proportion of products above the secondary high-end segment also increased from 11.5% in 2019 to 16.9% in 2021, and the gross profit per kiloliter also increased by 10.7% compared with 2019.
The high-end trend of several beer enterprises that announced their performance in the same period also showed an acceleration.
In 2021, "Budweiser Asia Pacific" achieved a revenue of US $6.79 billion, a year-on-year increase of about 15%, a normalized profit before interest, tax, depreciation and amortization of US $2.14 billion, a year-on-year increase of 27%, and a year-on-year increase of 8% in beer sales. In the Chinese market of Budweiser Asia Pacific, the revenue and normalized earnings before interest, tax, depreciation and amortization in fiscal year 2021 increased by 18% and 28.7% respectively compared with 2020. The growth is also mainly driven by the double-digit growth of high-end and ultra-high-end products.
Chongqing Brewery Co.Ltd(600132) performance express shows that in 2021, the revenue was 13.12 billion yuan, with a year-on-year increase of 19.9%, and the net profit was 1.17 billion yuan, with a year-on-year increase of 38.8%. Institutions pointed out that this is also related to the upgrading of product structure driven by high-end brands such as Wusu and 1664 under Chongqing Brewery Co.Ltd(600132) banner.
"The high-end speed of beer exceeded expectations." Hou Xiaohai said that China Resources beer was originally expected to achieve sales of more than 2 million tons of products above the secondary high-end level in 2025, but according to the current data, this goal may be achieved ahead of schedule this year. In 2021, the consumption of China Resources's medium and high-end beer and super beer brands was suppressed by the closure of 40% in 2021.
what are the rising costs and the impact of the epidemic
Although the performance reported good news frequently, since the second half of 2021, Chinese beer enterprises are being affected by the epidemic and the rise of raw material costs. Especially since 2022, the rapid rise of the cost of beer raw materials such as packaging materials, barley and aluminum and the continuous outbreak of epidemic in various places have made the market worried about the next stage of development of the beer industry.
Previously, a person in charge of a beer enterprise disclosed to the first financial reporter that the production cost of beer increased by about 25% in 2021, which also affected the performance of beer enterprises. In the fourth quarter of 2021 Guangzhou Zhujiang Brewery Co.Ltd(002461) although the revenue maintained growth, the net profit was only 17 million yuan, a year-on-year decrease of 73%, the largest decline in the fourth quarter of nearly four years.
Since the second half of 2021, China's mainstream beer brands have also reported price increases for many times, with the overall price increase ranging from 3% - 10% to resolve the cost pressure.
The financial report shows that in addition to upgrading the product structure, China Resources beer has also adjusted the prices of some products from the second half of 2021, and the overall average sales price has increased by 6.6% compared with 2020, so as to offset the cost rise caused by the rise in the prices of raw materials and packaging materials. Meanwhile, China Resources beer continued to shut down its factories to improve production efficiency. In 2021, China Resources beer shut down five beer factories.
Hou Xiaohai said that since the second half of 2021, the costs of beer raw materials and packaging materials have increased rapidly. Through the overall price increase of Yongchuang Tianya Series in September 2021, the pressure of rising costs has been better released, and the growth of sales of medium and high-end products has also digested some of the rising costs. In 2022, although the conflict between Russia and Ukraine and other uncertain factors led to a further increase in the cost of raw materials, through measures such as locking the procurement cost and upgrading the product structure in advance, the price increase pressure of most raw materials has been digested. The price increase of China Resources beer in 2022 is no longer a "required option", and may only be adjusted in "local areas and local products".
According to the plan, China Resources will continue to launch a number of new products in 2022, including whole wheat pure raw and Heineken alcohol free beer, so as to further promote the upgrading of product structure to absorb costs.
It is worth noting that since this year, the epidemic has also become another uncertain factor affecting the beer industry. In the third quarter of 2021, due to the epidemic in Guangdong and Fujian, Budweiser Asia Pacific's beer sales fell by 7% year-on-year. From January to February 2022, China's beer supply and marketing were booming, but since March, a new round of epidemic situation has occurred in many places.
In this regard, Hou Xiaohai said that at present, the spread of Omicron has increased the pressure on epidemic prevention and control in many provinces. Some cities have taken closed measures, night shows and catering have been greatly restrained, and beer consumption has also ushered in a low tide. However, we should be optimistic that the epidemic prevention and control will not be particularly long. Therefore, it is expected that the impact of the epidemic this year should not be worse than that in 2021.
The reporter learned from many liquor dealers in Shandong that the community control since early March this year has been unsealed recently, but the local hall food has not been restored. Although it has a certain impact on liquor sales, it has "seen the dawn".
Beer expert Fang Gang said that since this year, the epidemic has had a certain impact on the beer industry, but at present, the overall impact is limited. The impact of the epidemic is mainly reflected in the decline of catering, bars and other channels, but it will also make some changes in the channel structure of beer enterprises, because supermarkets, e-commerce and other channels corresponding to household consumption may be improved. In the future, beer enterprises need to further adapt to the changes of channels according to the changes of epidemic situation.
