Recently, there was news that some beer enterprises such as Wusu Beer and China Resources beer adjusted the prices of some products. With the rising costs of energy, barley and packaging materials, price adjustment may become a high probability event in the beer industry.
Beijing News reporter recently visited a number of supermarkets, tobacco hotels and small stores in the Beijing market and found that this round of price adjustment has not yet appeared in the terminal market, and the beer price has not changed significantly in the past year.
Meanwhile, some listed beer companies have revealed in response to investors’ questions that their measures to deal with rising costs are to optimize the product structure and transform to medium and high-end products, which is also reflected in the terminal market. Beijing News reporter noted that in the Beijing market, the best selling beer in the terminal is concentrated in the price band of 5-10 yuan, and some stores can’t even buy beer below 5 yuan.
Fang Gang, a beer marketing expert, believes that the recent price adjustment in the beer industry is similar to that in 2018, which is the result of rising costs and upgrading of industry consumption. There are four ways for beer enterprises to improve their profits: optimizing production capacity, raising prices, upgrading product structure and building brands. However, there is no trend for beer enterprises to collectively adjust the prices of existing products.
price adjustment of some beer enterprises
According to the price adjustment letter issued by Carlsberg (China) beer industry and Trade Co., Ltd. Xinjiang branch on January 13, 2022, “the prices of raw materials, labor and transportation continue to rise, resulting in rising costs. It is decided to increase the price of 620ml red Wusu wine products (1 620ml 12 bottles, packed in cartons) from February 1, 2022.”
It is understood that this is the third price adjustment of Wusu Beer in half a year. In September 2021, Chongqing Brewery Co.Ltd(600132) the ex factory box price of dawussu outside Xinjiang increased by about 6 yuan, with a price increase of more than 10%; 330ml small bottle of Wusu for liquor upgrading, and increase the box price at the same time. The specific price increase range is uncertain. On November 15, 2021, Wusu Beer Hubei Branch issued a price adjustment notice. The prices of two single products were adjusted: the price of 620ml red Wusu was adjusted to 75 yuan per piece, and the price of 620ml red Wusu (gift box) was adjusted to 37.5 yuan per piece.
Public information shows that Wusu Beer is a brand of Chongqing Brewery Co.Ltd(600132) and Chongqing Brewery Co.Ltd(600132) is a member of Carlsberg group in Denmark. At present, Wusu Beer has five breweries in Urumqi, Wusu, Aksu and other places in Xinjiang.
On March 28, Chongqing Brewery Co.Ltd(600132) confirmed the price increase to the reporter of Beijing News and responded, “the company has taken measures in procurement to absorb the cost pressure caused by the rise of raw materials as much as possible by improving its operation capacity and efficiency. When these measures can not fully absorb the cost pressure, the price of its beer has been adjusted in 2021.”
Cai Xuefei, a wine analyst, told the Beijing news that Wusu Beer is a representative brand of domestic minority regional beer rising in recent years. It has certain regional cultural characteristics, certain fashion flow and price adjustment basis.
In addition to Wusu Beer, at the beginning of this year, Zhejiang sales branch of China Resources Snow Beer (China) Co., Ltd. issued a price adjustment notice, saying that due to the rise in raw material prices, labor costs, transportation costs and other reasons, the product costs have increased significantly. The company has raised the price of snow series products since February 1, 2022. As early as July 2021, the ex factory box price of Cr beer’s “brave journey to the end of the world” series products has increased by about 4 yuan, with a price increase of about 10%. In November 2021, Budweiser Asia Pacific also adjusted the price of some of its products by 3% – 10%.
cost increase is the main reason for price adjustment
Industry analysts believe that the recent intensive price adjustment of beer enterprises is related to the rise of raw material prices and the increase of cost pressure, which can be seen from the financial reports of many listed beer enterprises in 2021.
Chongqing Brewery Co.Ltd(600132) has repeatedly mentioned the problem of rising costs in the 2021 semi annual report and annual report Lanzhou Huanghe Enterprise Co.Ltd(000929) also said in the 2021 annual performance forecast that the price rise of raw and auxiliary materials for beer production caused by the price fluctuation of bulk commodities is one of the reasons for the large losses in its main business.
Facing the rising price of raw materials, China Resources beer has taken price adjustment measures to deal with it. In the second half of 2020, the average price rise of raw materials and the average price rise of raw materials began to offset the impact of the average price rise of raw materials since 2021.
Some beer enterprises also respond to the rising pressure of raw material prices by adjusting the product structure Beijing Yanjing Brewery Co.Ltd(000729) in the third quarterly report of 2021, it was mentioned that in order to cope with the operating pressure such as rising costs, the company launched Yanjing U8, V10 refined white beer and other products suitable for consumption upgrading, which have been recognized by the market.
Puyin international research shows that in the cost of beer raw materials, barley, as the main raw material of beer production, accounts for 9% – 14% of the production cost of Chinese beer enterprises; As one of the main packaging materials of beer products, aluminum accounts for 8% – 13% of the production cost. This makes the gross profit level of the beer industry greatly affected by the upstream commodity prices.
Data show that in 2021, China imported 14.28 million tons of barley, while China’s barley output was only about 2 million tons. Nearly 84% of the barley needed by China’s beer industry needs to be imported.
It is worth noting that rising costs triggered a round of collective price adjustment in the beer industry in 2018. It can be seen from the price adjustment letters of China Resources beer and Tsingtao Brewery Company Limited(600600) at that time that the price adjustment is mainly due to the rise of raw materials, labor costs and transportation expenses. The price adjustment products are concentrated in the price band below 5 yuan, and the price increase range is about 10%.
Fang Gang, a beer marketing expert, believes that the background of the recent price rise in the beer industry is similar to the collective price rise in the beer industry in 2018, which is the result of rising costs and upgrading of industry consumption. However, the performance of these two price increases is different. The price rise of beer enterprises in 2018 is directly clear, and the recent adjustment of beer enterprises is carried out in a variety of ways in parallel.
medium and high-end beer growth point
Although the cost pressure of beer enterprises is increasing and has a certain price adjustment basis, the scope and intensity of price adjustment are not obvious at the channel terminal.
The Beijing News reporter recently visited many supermarkets, tobacco hotels and small stores in Beijing and learned that the terminal price of beer products has hardly changed in the past year. Take Wusu Beer as an example. This round of price adjustment has not been transmitted to the terminal. The price of 500ml red Wusu Beer is generally about 7.5 yuan / bottle. “It has always been this price. There is no price adjustment, and our purchase price has not changed.” Said a clerk at a tobacco Hotel in Tongzhou District, Beijing.
In addition, the attitude of channels towards beer price adjustment is also inconsistent. Some merchants said bluntly, “if the purchase price rises, I’ll follow it. Anyway, someone always drinks beer.” Some businesses also believe that if only individual beer prices rise, consumers tend to buy beer without price rise, which will affect the market share of price adjustment products.
Compared with the price adjustment, when answering investors’ questions on how to deal with the rise of raw materials recently, a number of beer enterprises revealed that their more measures are to optimize the product structure and transform to medium and high-end products.
Guangzhou Zhujiang Brewery Co.Ltd(002461) 2022 when answering investors’ questions on February 28, the company said that the price was determined according to the market and cost conditions. In recent years, the company has been trying to increase the proportion of high-end beer and actively respond to the impact of cost by focusing on medium and high-end transformation and carrying out cost reduction and efficiency improvement Beijing Yanjing Brewery Co.Ltd(000729) 3 the record of investor relations activities released on March 22 shows that it optimizes and upgrades its existing products, increases research and development, tests and reserves new products, continues to promote medium and high-end products, and develops and innovates characteristic beer of different styles.
In fact, the beer industry has strengthened the promotion of medium and high-end price products before this round of price adjustment. According to the financial report, Beijing Yanjing Brewery Co.Ltd(000729) 2021 in the first half of the year, the proportion of medium and high-grade products in the main business income was 61.7%, an increase of about 6.5 percentage points over the same period in 2020. Over the same period, the sales volume of Tsingtao Brewery Company Limited(600600) high-grade and above products increased by 41.4% year-on-year. In addition to increasing the proportion of products at the price of 10 yuan, high-end beer is also the starting point of major brands. Since 2021, Budweiser, Qingdao, China Resources snowflake and other head beer enterprises have launched super high-end beer with a price of about 1000 yuan, releasing the signal of brand high-end.
According to the feedback of several liquor store owners to the Beijing News reporter, at present, the beer with the best terminal sales in the Beijing market is concentrated in the price band of 5-10 yuan, such as Yanjing U8 and Budweiser Fujia white beer. Products priced below 5 yuan are mostly placed on the edge by channels. Some stores can’t even buy beer at this price, and the overall market share of middle-end beer has increased.
Beijing News reporter visited the Beijing market, 5-10 yuan price belt beer occupies a significant position on the shelf.
Fang Gang believes that at present, there is no trend for beer enterprises to collectively adjust the prices of existing products. At present, beer enterprises can improve their profits in four ways: optimizing production capacity, raising prices, upgrading product structure and building brands.
Cai Xuefei, a wine analyst, reminded that in the current situation of high pressure on the economic environment and repeated epidemics, the situation of the catering consumption market is not optimistic, and the alcohol consumption is relatively weak. It is difficult for terminals and channels, consumers and dealers to accept frequent price adjustment strategies in the short term, and sales may decline with the rise of prices.
