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Beer Asia-Pacific: Market Overview - Review Sheet | MKT 568, Study notes of Marketing Management

Material Type: Notes; Class: Global Marketing Management; Subject: MKT Marketing; University: Murray State University; Term: Unknown 2007;

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BEER IN ASIA-PACIFIC: Beer Asia-Pacific:
Market Overview – Introduction
This report analyses the market for beer in Asia-Pacific. For the purposes of the study,
the market has been divided into four sectors:
* Lager
* Dark beer
* Stout
* Non-/low-alcohol beer
Much of the information in this report is of a statistical nature and, whilst every
attempt has been made to ensure accuracy and reliability, Euromonitor cannot be held
responsible for omissions or errors. The forecasts given are estimates based on the state
of the market at the time of writing and the most reliable sources of information
available.
Hong Kong has been treated as a separate entity alongside the People's Republic of China,
of which it is a Special Administrative Region (SAR). This is because, at the time of
writing, market conditions in the former colony were substantially different - in terms of
currency, taxation and legislation - from those prevalent in mainland China.
Figures in tables are calculated from unrounded data and may not sum.
BEER IN ASIA-PACIFIC: Beer Asia-Pacific:
Market Overview - Main Findings
* The beer market in Asia-Pacific performed as well as could be expected during 2007,
given that many national markets were still recovering from the financial crisis which
affected the region towards the end of the review period. Rising demand in less developed
national markets such as China was offset by a poor performance from the region's
largest market, Japan.
* Total beer sales in Asia-Pacific amounted to over 31 billion litres in 2007, an
increase of around 4% over 2006. In value terms, the regional beer market was worth
over US$81 billion in the same year, up almost 9% on the previous year.
Changing drinking habits coupled with an increase in the number of Western-style pubs and
bars were the main contributing factors to regional growth, aside from more general
macroeconomic factors. Most national markets saw a relaxation in legislation governing the
production of alcoholic drinks during the review period, which also aided growth.
China generated the greatest volume sales in the region throughout the review period,
underpinned by its large population. Trends favouring the consumption of drinks with a
lower alcohol content combined with the increased domestic production of beer stimulated
growth. The final year of the review period saw a number of mergers and acquisitions
between domestic players and international brewers in China.
Lager was the largest sector in the region in both volume and US$ terms, with sales
amounting to 30 billion litres and US$77 billion by 2007. Despite the wider availability
of more exotic beer types across the region during the review period, Asian consumers have
not yet developed any great interest in non-lager products. Lager was thus also the
fastest growing sector, with volume growth of over 4% in 2007, driven by a strong
performance from the economy lager subsector.
Glass was the most popular packaging format as it is the standard packaging format for
lager in most national markets. The tradition of using returnable glass bottles in a
number of key national markets helped sustain the popularity of the format throughout the
review period.
Kirin Brewery Co Ltd was the regional market leader in 2007, commanding a volume share of
7.3%, slightly down over 2006. Kirin was closely followed by another Japanese brewer,
Asahi, which had a 6.2% share of the regional market in the same year. Asahi is Kirin's
main competitor, both at a regional level and in Japan itself. Outlets included in the
"other food stores" category continued to generate the greatest volume sales in the retail
beer market in 2007, underpinned by the large numbers of such outlets in markets such as
China and Indonesia. Supermarket/hypermarkets are however gaining share across the region,
and were the most dynamic format between 2003 and 2007, accounting for 27.6% of total
sales by the latter year.
Euromonitor forecasts that the Asia-Pacific beer market will grow at a rate of nearly 7%
in volume CAGR terms between 2007 and 2012, with strong performances from the most
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BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Market Overview – Introduction This report analyses the market for beer in Asia-Pacific. For the purposes of the study, the market has been divided into four sectors:

  • Lager
  • Dark beer
  • Stout
  • Non-/low-alcohol beer Much of the information in this report is of a statistical nature and, whilst every attempt has been made to ensure accuracy and reliability, Euromonitor cannot be held responsible for omissions or errors. The forecasts given are estimates based on the state of the market at the time of writing and the most reliable sources of information available. Hong Kong has been treated as a separate entity alongside the People's Republic of China , of which it is a Special Administrative Region (SAR). This is because, at the time of writing, market conditions in the former colony were substantially different - in terms of currency, taxation and legislation - from those prevalent in mainland China. Figures in tables are calculated from unrounded data and may not sum. BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Market Overview - Main Findings
  • The beer market in Asia-Pacific performed as well as could be expected during 2007, given that many national markets were still recovering from the financial crisis which affected the region towards the end of the review period. Rising demand in less developed national markets such as China was offset by a poor performance from the region's largest market, Japan.
  • Total beer sales in Asia-Pacific amounted to over 31 billion litres in 2007, an increase of around 4% over 2006. In value terms, the regional beer market was worth over US$81 billion in the same year, up almost 9% on the previous year. Changing drinking habits coupled with an increase in the number of Western-style pubs and bars were the main contributing factors to regional growth, aside from more general macroeconomic factors. Most national markets saw a relaxation in legislation governing the production of alcoholic drinks during the review period, which also aided growth. China generated the greatest volume sales in the region throughout the review period, underpinned by its large population. Trends favouring the consumption of drinks with a lower alcohol content combined with the increased domestic production of beer stimulated growth. The final year of the review period saw a number of mergers and acquisitions between domestic players and international brewers in China. Lager was the largest sector in the region in both volume and US$ terms, with sales amounting to 30 billion litres and US$77 billion by 2007. Despite the wider availability of more exotic beer types across the region during the review period, Asian consumers have not yet developed any great interest in non-lager products. Lager was thus also the fastest growing sector, with volume growth of over 4% in 2007, driven by a strong performance from the economy lager subsector. Glass was the most popular packaging format as it is the standard packaging format for lager in most national markets. The tradition of using returnable glass bottles in a number of key national markets helped sustain the popularity of the format throughout the review period. Kirin Brewery Co Ltd was the regional market leader in 2007, commanding a volume share of 7.3%, slightly down over 2006. Kirin was closely followed by another Japanese brewer, Asahi, which had a 6.2% share of the regional market in the same year. Asahi is Kirin's main competitor, both at a regional level and in Japan itself. Outlets included in the "other food stores" category continued to generate the greatest volume sales in the retail beer market in 2007, underpinned by the large numbers of such outlets in markets such as China and Indonesia. Supermarket/hypermarkets are however gaining share across the region, and were the most dynamic format between 2003 and 2007, accounting for 27.6% of total sales by the latter year. Euromonitor forecasts that the Asia-Pacific beer market will grow at a rate of nearly 7% in volume CAGR terms between 2007 and 2012, with strong performances from the most

important sector - lager - as well as from less important ones, such as dark beer. Real value growth will be relatively modest due to intensifying competition following the maturing of beer markets across many national markets within the region. BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Market Background - Taxation While taxation on alcoholic drinks is considered an important source of revenue in most countries, levels of tax varied across the region. Taxation has of course a direct impact on pricing and consumption levels. Sales tax/VAT is levied on most countries bar Hong Kong which - as a free port - has no VAT on any consumer goods. Aside from general VAT or sales tax, many countries levied an additional tax specifically on beer. Domestic breweries in China are heavily taxed. Central government generally subjects brewers to a 33% tax on income, as well as 17% VAT and a special tax of RMB220 for each tonne of beer produced. Consumption tax (tax applied to products considered to be luxury items) of around 10% is also levied on all alcoholic drinks. Import tax on beer is around 60%, although there is the possibility that both import tax and excise duties may be reduced when China offically joins the World Trade Organisation (WTO). In Japan , beer typically attracts a tax rate of around 45%. In addition, VAT - now at 5%

  • is also levied, making beer the most highly-taxed alcoholic beverage in Japan , above whisky and brandy, which is typically taxed at 37.6%. Although tax on alcoholic drinks and sales tax account for such a high proportion of the retail price of beer, there is still sufficient margin left for manufacturers to make a profit. Recommended retail prices are rarely adhered to, with the exception of outlets such as convenience stores, where good location and long opening hours allow retailers to charge full price. Most retailers are able to discount beer and remain competitive, while taking around 10% of the price as a profit margin. In Taiwan, under a new tax law, all alcoholic drinks are liable for 5% VAT. All imports entering Taiwan through one of its five ports are required to pay 0.4% in "harbour construction tax". Goods entering Taiwan by air freight or parcel post are exempted from this tariff. Dependent on bilateral trade agreements between Taiwan and other countries, import tariffs may or may not be levied on foreign alcoholic drinks after the new alcohol tax laws come into force. In Singapore, a specific rate of duty is applied on beer imported into or manufactured in Singapore. The rate of duty is expressed on a specific amount per unit of weight, volume or quantity of dutiable goods, such as S$30.00 per litre. In addition to the import duty, a Goods & Services Tax (GST) is payable at 3.0% of the sum of duty and Cost, Insurance & Freight (CIF) value of liquors released for local sale. In Indonesia , an importer of alcoholic drinks must pay import duty, VAT as well as an additional sales tax on luxury goods. In addition, excise duty on alcoholic drinks is also applied on the basis of the retail selling price per litre and/or the content of ethyl alcohol. In Vietnam, import and excise duty is 100% for all brands of beer. This rate is levied on a Customs `check price' for the particular brand involved. According to Decision 68/2007/QD-BTC, issued by the Ministry of Finance, all brands of imported beer have a check price of US$0.80 per litre. Tax duties were lowered by an average of 20% from January 2004. However, any savings at consumer level was offset by the imposition of VAT, which was applied at the same time. Table 1 Sales Tax/VAT on Beer by Country 2007 % sales tax/VAT % India 20. China 17. Malaysia 15. Indonesia 10. Philippines 10. South Korea 10. Vietnam 10. Thailand 7.

Unsurprisingly, both China and India have differing licensing policies from region to region. While in China the application process and requirements regarding the selling of alcoholic drinks vary according to each individual province, there is a degree of homogeneity across the country as a whole. In India , however, where the retail environment is considerably more complex, each individual province can have very different requirements. In Japan , recent campaigning for the abolition of vending machines selling alcoholic drinks resulted in the Japan Liquor Merchants Association proposing a complete ban on this type of vending by 2005. Leading brewers such as Asahi and Suntory have thus started to reduce their reliance of these machines, re-focusing on other channels for the sale of beer. As a result of this development, sales through "other" outlets (which includes vending as well as home delivery, among others) fell in Japan during the review period. Singapore is one of the countries with the most comprehensive legislation regarding the distribution of alcoholic drinks in Asia-Pacific. In practice, Singapore is also the country where the law is most likely to be strictly enforced, which may not be the case in countries such as China and Indonesia , where widespread corruption makes enforcement difficult. In Singapore, legislation stipulates that every importer of alcoholic drinks has to be registered with the Trade Development Board (TDB). The importer, or their appointed agent, is also required to apply for a Joint TD Import Permit/ Customs Goods Services Tax (GST) Payment Permit through the TradeNet System. An enterprise intending to sell intoxicating liquor through retail or wholesale channels must apply for a liquor licence from the Liquors Licensing Board (LLB). The legislation governing the sale of liquor is known as the Liquor Licensing Regulations. Specifically, the Liquor Licensing Board issues two types of licence: one is for the retail sale of alcoholic drinks for consumption on the premises, while the other is for the retail and wholesale sale of alcoholic drinks for consumption off the premises. In addition, a licensee may apply to transfer his liquor licence to another person for the same premises. The fee payable for the transfer of a liquor licence is S$10.00. A licensee may also apply to extend the operating hours of licensed premises. In Malaysia, there are two types of distribution licences: for the sale of beer through a public house and sale of beer through a retail store. Retail outlets are not allowed to place alcoholic drinks next to other products such as soft drinks, which are commonly bought by customers below the legal drinking age. Importers are also required by law from 1 April 2005 to place a sticker on the back of all alcoholic drinks' products stating the alcoholic content of the drink. As a Moslem country, Indonesia has very strict legislation regarding the distribution of alcoholic drinks. Law No. 22/2004, approved in 2004, states that district authorities (below the level of provincial government) can independently regulate the distribution of alcoholic drinks in their area. This allows for a degree of autonomy in so far as deciding the alcoholic drinks' quota and licences to be given to retail or horeca outlets. Some local governments have already begun to set annual quotas and apply their own levies to alcoholic drinks. This new approach to regulating the market can be seen as a way of distributing income from beer sales to local authorities, whereas previously revenue went straight into central government's pockets. The full implementation of this legislation is expected to take until May 2009. Age Restrictions By law, it is illegal for persons under the age of 18 or 20 (depending on country) to purchase alcohol in Asian-Pacific. However, in practice, the law is not strictly enforced or observed by retailers and catering establishments. In fact, teenage drinkers were one of the fastest-growing consumer segments during the review period. Taiwan provides an example of such unregulated selling. Despite the legal age being 18 for the purchase of alcohol, industry sources estimate that teenagers consumed around 25% of total alcoholic drinks by volume sold in the country in 2007, and the number of teenage drinkers is still growing. Beer is the alcoholic drink of choice among Taiwanese teenagers. The use of pop stars and other celebrities to endorse beer drinking on TV and in newspaper advertisements, combined with a lax attitude towards the sale of alcoholic drinks to minors among retailers, has been blamed for this disturbing trend. In China licensed premises are - in theory - not accessible to youngsters under 18; however, this law is not often enforced. Consumers and shop owners largely ignore the law, and karaoke bars are even known to employ under-age girls as barmaids. In Vietnam, sales of alcohol to teenagers is officially frowned upon, and parental control remains a relatively effective deterrent.

BEER IN ASIA-PACIFIC:

Beer Asia-Pacific: Market Background – Consumer Expenditure on Beer Beer is the most popular alcoholic drink in Asia-Pacific, where a predominantly hot climate is prevalent across most of the region. An all-year-round tropical climate in countries such as Vietnam, Taiwan, Singapore and Thailand encourages substantial beer consumption at home as well as in hotels, restaurants and bars (horeca). Unsurprisingly, retail spending on beer took half of total alcoholic drinks in most countries in 2007, representing the highest proportion of expenditure, partly for reasons of economy. Compared to Eastern Europe, for example, Asia-Pacific consumers spent less on alcoholic drinks as a proportion of total consumer expenditure, with expenditure in most countries less than 1%. The Vietnamese spent the most on alcoholic drinks as a proportion of total consumer expenditure. The country also spent the highest proportion on beer in the region, which accounted for around 87% of total alcoholic drinks retail expenditure in 2007. Beer is a very popular drink in Vietnam, especially in the southern part of the country, where there are more urban residents who tend to have higher disposable incomes. There is also a strong influence from Western lifestyles in the south. In addition, the southern regions have a warm climate, thus contributing to greater demand for cold drinks. The fact that average disposable income is low in Vietnam makes eating and drinking out less common than it is in Singapore, for example, concentrating sales through the retail channel, where prices are lower. China , the most populous country in the world, spends a relatively high proportion of total retail consumer expenditure on alcoholic drinks (just over 1%). However, retail expenditure on beer, at around 47% of total alcoholic drinks' expenditure, was lower than the average for the region, indicating substantial potential for future development. Japan had the highest per capita consumption of beer in the region, although retail expenditure on beer was just average for the region as a whole. This suggests that the average Japanese consumer is more affluent, as much more is spent on beer through the horeca channel (proportionally) than through the retail channel. Table 2 Retail Consumer Expenditure on Beer 2003- US$ million 2003 2004 2005 2006 a Japan 15,700 13,426 11,625 10,067 11, China 2,100.7 2,518.8 2,701.1 2,769.3 2,871. Thailand 2,293.4 2,623.2 1,955.2 1,376.6 1,558. South Korea 849.9 934.6 851.0 594.0 754. India 489.1 531.2 587.6 622.0 702. Taiwan 565.2 595.9 615.2 649.5 610. Vietnam 422.7 510.4 556.2 539.3 593. Hong Kong 368.5 427.5 473.4 463.4 486. Philippines 301.8 317.7 291.3 243.4 280. Singapore 163.1 174.8 168.5 141.3 148. Malaysia 136.2 160.4 141.1 92.6 89. Indonesia 49.8 56.7 80.2 39.8 67. TOTAL 23,440 22,277 20,045 17,598 19, Source: Euromonitor from National Statistics Note: a estimate Table 3 Retail Consumer Expenditure on Beer as % of Total Alcoholic Drinks' Retail Consumer Expenditure: 2003- % 2003 2004 2005 2006 a Vietnam 81.7 81.1 83.5 87.3 86.

Hong Kong and Thailand between 2003 and 2007. The numbers of female drinkers are also rising in key markets such as Japan and China. Chinese business culture dictates that business deals are typically concluded during a formal dinner, which is invariably accompanied by alcohol. Unsurprisingly, then, China , Hong Kong, Taiwan and the Chinese community in Malaysia and Singapore share some similar drinking patterns. Traditional Chinese attitudes do not encourage women to drink alcohol, the consequence being that women tend to drink less than men, especially in public. However, there is a growing trend for women of younger generations, especially those from middle-income households - mainly students and young career women - to drink more. Chinese culture generally allows for infrequent drinking amongst men of all classes, although tradition does include occasional drinking to excess in order to celebrate an event or special occasion, often to do with business or family. The drinking culture is not then focused on regular drinking of moderate amounts, and thus most men have a relatively low alcohol tolerance. In China , alcohol is typically drunk with meals outside the home, although more families now have some beer stored in the fridge so that the parents - typically the father -can have a beer with the evening meal. In the vast rural areas, few Chinese will drink beer outside the meal setting, and there is no established tradition of drinking in pubs or bars. In large cities, however, younger Chinese are becoming more used to the idea of going out to a pub for a social drink. Men tend to go out to drink more than women, and this is usually associated with entertaining in a business context. Indeed, late night drinking among Chinese men is increasing, and is becoming a significant social problem. In terms of the wider range of alcoholic drinks, more developed national markets such as Singapore and Japan witnessed an increase in the consumption of wine over beer as a result of changing lifestyles and the increasing sophistication of drinking habits during the review period. Drink driving legislation also has an influence on drinking habits. In Taiwan, for example, the recent imposition of tougher drink driving laws had an effect on drinking patterns, which were imposed due to an alarming increase in the number of fatal drink driving accidents. As the media focused on the drink-driving problem, amidst widespread public outrage, many beer drinkers reduced consumption during social gatherings, which is the typical drinking occasion in the country. Local drinking culture encourages aggressive toasting and drinking games during most kinds of social functions, be they weddings, funerals or political rallies. As the world's largest Muslim nation (in terms of population), Indonesia has a restricted market for alcoholic drinks. This in itself has created a buoyant market for soft drinks. The open consumption of alcoholic drinks is not acceptable, either legally or socially. This restriction is relaxed in popular tourist destinations, such as Bali. Alcohol is not therefore part of general social intercourse in much of Indonesian society. Despite this, beer retains a certain popularity, with several local brands as well as international bottled lagers available. Wine and spirits are less popular and are generally comparatively expensive, especially when consumed in restaurants. Industry observers believe that the increase in beer consumption in 2007 was more the result of new drinkers beginning to drink than an increase in current consumption by regular drinkers. Japanese people usually drink with their co-workers. The section head treats the staff to a drink after work to maintain harmony and a homely atmosphere in the office. In Japanese society it is also acceptable to get very drunk; as this is seen as an expression of how much you enjoy the company. In public, Japanese people are typically formal, although they relax considerably during informal drinking parties. BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Market Background - Per Capita Consumption Per capita consumption of beer in Asia-Pacific grew by 1.5 litres between 2003 and 2007, having reached over nine litres by the latter year. Generally speaking, growth was encouraged by rising levels of disposable income across the region, as well as changing drinking habits. In addition, slow population growth in some national markets - particularly China , where the 'one child per family' rule is strictly enforced - was also partly responsible for the rise in per capita consumption, as China is a key influence on regional growth. With the most stringent population control policy in the region, combined with an enlarged production capacity, per capita consumption in China , at almost 14 litres in 2007, saw the most significant growth in terms of future potential.

Japan , the economic superpower in Asia-Pacific, featured the highest per capita consumption in the region, at over 53 litres in 2007, almost six times more than the average figure for the region. As the beer market matured in Japan during the early years of the review period, per capita consumption contracted by around half litre between 2003 and 2007. This pattern was also seen in other relatively developed economies across the region, including Hong Kong, Taiwan and Singapore. The highest levels of growth in per capita consumption were recorded in countries such as South Korea , China and Vietnam. South Korea saw the fastest growth of all, with per capita consumption up by nearly 8 litres over the 5-year period. Table 4 Beer Consumption by Country 2003- Litres per head 2003 2004 2005 2006 2007 Japan 53.8 53.6 53.4 53.4 53. South Korea 29.7 30.6 30.1 31.8 37. Hong Kong 34.3 35.3 35.4 33.8 33. Taiwan 24.4 25.0 23.3 24.1 21. Thailand 10.6 12.1 14.8 19.2 18. Singapore 15.1 15.1 15.1 13.8 13. China 10.1 11.2 12.4 13.0 13. Philippines 11.3 11.1 11.0 10.8 10. Vietnam 4.8 5.9 6.8 7.8 8. Malaysia 5.7 6.1 6.3 6.2 5. Indonesia 0.9 0.9 0.9 0.6 0. India 0.4 0.4 0.4 0.5 0. Other Asia- Pacific 1.8 1.9 2.1 2.5 2. AVERAGE 7.6 8.0 8.3 8.9 9. Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor estimates BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Market Background - Advertising Restrictions on alcohol drinks' advertising are relatively few in non-Muslim countries, with various forms of advertising being possible. TV is the most popular advertising medium in many countries, including Japan , China , and Singapore. In Japan , advertising expenditure on beer stood at Yen 68.4 billion in 2007, a decrease of 5% over the previous year. Television accounted for 66% of total adspend, reflecting television ownership rates of almost 95%. Newspapers also featured numerous advertising campaigns, specifically targeting businessmen. Japanese advertising campaigns for beer featured a number of famous celebrities. Female consumers are an increasingly targeted consumer segment. The Singaporean government does not impose any strict restrictions regarding the advertising of alcoholic drinks. Most advertisements are on television and/or radio, in newspapers, leading lifestyle and nightlife magazines and on billboards. Sponsorship of certain TV programmes is also a common way of ensuring effective exposure to a target audience, and often these programmes are sports-related. Taiwan saw a change in advertising legislation during the review period. Advertisements for alcoholic drinks were banned in Taiwan between 1994 and 2002. A relaxation in advertising regulations in 2003 helped stave off a decline in alcohol sales. Nevertheless, there are still some restrictions for advertising through certain types of media. While manufacturers and importers can advertise their products freely in newspapers and magazines, alcoholic drinks advertising is only allowed on cable television between 9.00pm to 6.00am, and 9.30pm and 6.00am for radio and terrestial television. Religion is an important factor in forming official attitudes to alcoholic drinks advertising. As a principally Catholic country, the Philippines established minimum requirements regarding the advertising of liquor in both print and broadcast media in

looting. Constrained by religion and the lack of an established drinking tradition, Indonesian beer drinkers drank less in quantity as well as in frequency compared to some of their regional neighbours. Growth in 2007 was partly the result of the emergence of new drinkers rather than an increase in consumption by regular drinkers. Thailand , Malaysia and Taiwan suffered a decline in beer sales 2007 as a result of a number of factors. In Malaysia, for example, the decline was caused by an increase in import and excise duties, which was passed on to consumers who, being price sensitive, reduced consumption. In Thailand , the boom in economy lager failed to compensate for a steep fall in sales of standard lager, which was affected by the repercussions of the financial crisis. Table 5 Sales of Beer by Country 2003- Sales by volume and value 2003 2004 2005 2006 2007 Million litres China 12,241 13,768 15,268 16,478 17, Japan 6,757.4 6,750.2 6,740.6 6,758.3 6,736. South Korea 1,341.3 1,391.3 1,382.9 1,467.8 1,744. Thailand 618.2 709.7 877.4 1,153.6 1,120. Philippines 769.0 775.8 784.0 787.8 792. Vietnam 357.4 441.3 519.1 610.6 695. India 352.2 373.3 412.3 450.9 503. Taiwan 519.1 536.1 505.5 526.5 481. Hong Kong 210.9 222.8 230.1 222.3 224. Indonesia 179.4 169.0 175.3 132.7 151. Malaysia 118.8 128.8 136.1 137.9 128. Singapore 51.3 54.3 56.0 53.3 55. Other Asia- Pacific 839.5 902.0 1,064.1 1,242.0 1,169. TOTAL 24,356 26,223 28,151 30,022 31, US$ billion Japan 63.7 55.8 50.2 46.0 50. China 10.0 11.4 12.8 13.9 14. South Korea 2.8 6.2 5.3 3.5 4. Taiwan 2.8 3.0 2.7 2.3 2. Hong Kong 1.5 1.6 1.7 1.6 1. Thailand 1.2 1.3 1.3 1.2 1. Malaysia 1.6 1.7 1.6 1.1 1. Singapore 0.9 1.1 1.1 0.9 1. Philippines 1.0 1.1 1.0 0.8 0. Vietnam 0.4 0.5 0.7 0.8 0. India 0.6 0.7 0.7 0.7 0. Indonesia 0.9 0.9 0.8 0.2 0. Other Asia- Pacific 1.4 1.5 1.6 1.6 1. TOTAL 88.8 86.8 81.5 74.7 81. Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor estimates Table 6 Sales of Beer by Country: % Analysis 2003-2007 % sales by volume and value 2003 2004 2005 2006 2007 % volume analysis China 50.3 52.5 54.2 54.9 56. Japan 27.7 25.7 23.9 22.5 21.

Other Asia-

% value 2006/2007 CAGR Total % local currency constant value

  • South Korea 5.5 5.3 4.9 4.9 5.
  • Thailand 2.5 2.7 3.1 3.8 3.
  • Philippines 3.2 3.0 2.8 2.6 2.
  • Vietnam 1.5 1.7 1.8 2.0 2.
  • India 1.4 1.4 1.5 1.5 1.
  • Taiwan 2.1 2.0 1.8 1.8 1.
  • Hong Kong 0.9 0.8 0.8 0.7 0.
  • Indonesia 0.7 0.6 0.6 0.4 0.
  • Malaysia 0.5 0.5 0.5 0.5 0.
  • Singapore 0.2 0.2 0.2 0.2 0.
  • Pacific 3.4 3.4 3.8 4.1 3.
  • TOTAL 100.0 100.0 100.0 100.0 100.
  • Japan 71.7 64.3 61.6 61.5 62. analysis
  • China 11.3 13.1 15.7 18.6 17.
  • South Korea 3.1 7.2 6.5 4.7 5.
  • Taiwan 3.1 3.4 3.3 3.1 2.
  • Hong Kong 1.7 1.8 2.1 2.2 2.
  • Thailand 1.3 1.5 1.6 1.7 1.
  • Malaysia 1.7 1.9 2.0 1.5 1.
  • Singapore 1.1 1.3 1.3 1.2 1.
  • Philippines 1.1 1.2 1.3 1.1 1.
  • Vietnam 0.5 0.6 0.8 1.0 1.
  • India 0.7 0.8 0.9 1.0 1.
  • Indonesia 1.0 1.1 1.0 0.3 0.
  • Pacific 1.6 1.8 2.0 2.1 2. Other Asia-
  • TOTAL 100.0 100.0 100.0 100.0 100.
    • Table 7 Sales of Beer by Country: % Growth 2003/ Source: Euromonitor
      • 2003/2007 2003/ % growth by volume and value
  • South Korea 18.8 6.8 30. % volume growth
  • Vietnam 13.9 18.1 94.
  • Indonesia 13.8 -4.20 -15.
  • India 11.6 9.3 42.
  • China 6.5 9.4 43.
  • Singapore 3.9 1.9 8.
  • Hong Kong 1.2 1.6 6.
  • Philippines 0.6 0.8 3.
  • Japan -0.30 -0.10 -0.
  • Thailand -2.90 16.0 81.
  • Malaysia -6.70 2.0 8.
  • Taiwan -8.50 -1.80 -7.
  • Pacific -5.90 8.6 39. Other Asia-
  • TOTAL 4.4 6.5 28.
  • India 15.4 8.7 39. growth
  • Vietnam 13.8 24.4 139.

The non-/low-alcohol beer sector performed poorly, with sales declining marginally in

  1. As was the case in stout, the vast majority of consumers across the region are not interested in the product. One of the reasons is the relatively high price of the product in comparison to soft drinks, which are the natural alternative for people who wish an alcohol-free drink. As a consequence, the sector saw appreciable volume sales in only a few countries, such as South Korea , the Philippines and Japan during the review period. Japan , a key influence on regional growth patterns, accounted for over 90% of total regional volume sales of this type of beer in 2007. As a consequence, the decline in sales of non-/low-alcohol sector in Japan caused a fall in sales at a regional level. Table 8 Sales of Beer by Sector: 2003- Sales by volume and value 2003 2004 2005 Million litres Lager 23,917 25,771 27,
  • Premium lager 2,593.0 2,710.0 2,811.
  • Standard lager 9,129.1 9,475.3 9,855.
  • Economy lager 12,195 13,586 15, Dark beer 215.5 223.0 224. Stout 145.0 149.5 153. Non-/low-alcohol 78.1 79.2 80. beer TOTAL 24,356 26,223 28, US$ billion Lager 83.8 82.1 77.
  • Premium lager 23.6 21.7 20.
  • Standard lager 48.6 47.7 42.
  • Economy lager 11.7 12.7 14. Dark beer 2.1 2.0 1. Stout 2.0 2.0 1. Non-/low-alcohol 0.8 0.7 0. beer TOTAL 88.8 86.8 81. 2006/9 % 2006 2007 growth Million litres Lager 29,570 30,892 4.
  • Premium lager 2,860.8 2,960.6 3.
  • Standard lager 9,759.8 8,847.4 -9.
  • Economy lager 16,949 19,084 12. Dark beer 225.6 229.7 1. Stout 145.8 144.8 -0. Non-/low-alcohol 80.8 80.7 -0. beer TOTAL 30,022 31,347 4. US$ billion Lager 70.9 77.1 8.
  • Premium lager 19.1 21.3 11.
  • Standard lager 35.1 36.0 2.
  • Economy lager 16.7 19.8 19. Dark beer 1.7 1.8 7. Stout 1.5 1.6 6. Non-/low-alcohol 0.6 0.7 11. beer TOTAL 74.7 81.3 8. Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,

Euromonitor estimates Glass was the most important packaging format in most Asian-Pacific countries, holding over 68% of total regional volume sales in 2007. In India , glass bottles represented nearly 100% of beer sales in 2007. As glass bottles are the industry standard for beer packaging in India , other formats have little chance of challenging its position in the near future. Despite this, the can format became more fashionable amongst affluent consumers during the review period, as it is used principally for expensive imports. Unsurprisingly, most Indian consumers stay loyal to the bottle format. In some countries in Asia-Pacific, such as Japan , China , the Philippines and India , returnable glass bottles are still the dominant packaging format. In China , however, recently some local authorities have changed regulations in order to eliminate the circulation of sub-standard glass bottles. It is interesting to note that in relatively developed national markets such as Hong Kong, Taiwan and Singapore, an increasing number of predominantly younger consumers see drinking beer from a glass bottle as being more fashionable than drinking from a can. In horeca channels, bottled beer is particularly popular, which affected the keg format. Cans was the second most popular packaging format in the region, increasing its share in many countries, including China , Japan , Thailand and the Philippines. Japan featured the highest proportion of total sales taken by cans, where the format accounted for over half in 2007, mainly due to the format's advantages regarding durability, recyclability and storage. The keg format is mostly used in horeca channels, taking around 8% of total volume sales in 2007 at a regional level. Singapore featured the highest proportion of beer sold in kegs in 2007, with the format accounting for over 61% of total volume sales. Eating and drinking out is commonplace among Singaporean consumers, and draught beers are mainly served in catering establishments, where they continue to be popular, despite the growing availability of premium beer in glass bottles during the review period. While the plastic format saw negligible sales across the region throughout the review period, formats included in "others" took a small share in China and the Philippines. In China , lager sold loose proved popular in some coastal cities during the Summer. Some manufacturers set up mobile stands in residential areas and distributed free samples to consumers in an attempt to stimulate demand. Table 9 Sales of Beer by Country and Packaging Format: % Analysis 2007 % volume analysis Plast Can Glass ic Keg Others Total China 12.0 80.5 - 7.0 0.5 100. Hong Kong 45.0 37.0 - 18.0 - 100. India 0.4 99.6 - - - 100. Indonesia 29.0 62.2 - 8.8 - 100. Japan 51.0 39.2 - 9.8 - 100. Malaysia 24.0 63.0 - 13.0 - 100. Philippines 23.0 70.5 - 2.0 4.5 100. Singapore 29.0 10.0 - 61.0 - 100. South Korea 20.0 60.0 - 20.0 - 100. Taiwan 42.6 56.4 - 1.0 - 100. Thailand 25.0 70.0 - 5.0 - 100. Vietnam 15.5 58.7 - 25.8 - 100. Other Asia- Pacific 22.7 68.3 - 8.6 0.4 100. TOTAL 22.7 68.3 - 8.6 0.4 100. Source: Euromonitor The beer market in Asia-Pacific is fragmented, mostly between regional and domestic brewers. Overall, Japanese brewers maintained a certain dominance, while Chinese producers increased share at a regional level in 2007. The two leading brewers in Asia-Pacific were the two leading manufacturers of beer in Japan. However, in 2007, the state-owned Chinese

horeca channel in countries such as China and Thailand. However, Heineken's sales at the retail level remain minimal, due to its high price. Private label Private label brands were present in relatively developed national markets such as Japan and Hong Kong. However, the role of private label remained relatively marginal at a regional level due to constant price reductions in branded products during the 2003- period. In Japan , for example, the launch of economy brands from the top domestic manufacturers - with the exception of Asahi - put pressure on private label brands. The Japanese consumer can readily purchase crates of bottled beer, and the empty bottles can be returned to the outlet and a deposit refunded. Bulk buying in this manner means that consumers get a substantial discount over the standard price, thus further reducing the attractiveness of private label products. Private label products do not generally command sufficient consumer loyalty to make this method economically viable. Table 10 Company Shares of Beer 2003- % share 2003 2007 Kirin Brewery Co Ltd 7.4 7. Asahi Breweries Ltd 6.6 6. Tsingtao Brewery Co 1.5 2. Hite Co Ltd, The 2.5 2. Sapporo Breweries Ltd 2.8 2. Beijing Yanjing Beer Group 1.7 2. San Miguel Corp 2.3 2. Doosan 2.0 2. Suntory Ltd 1.6 1. China Resources Enterprises Co Ltd 1.3 1. Beer Thai (1994) 0.4 1. Guangzhou Zhujiang Brewery Co Ltd 1.1 1. Anheuser-Busch Cos Inc 1.3 1. Sichuan Blue Sword Group 1.1 1. Heineken NV 1.4 1. Chongqing Brewery Group 1.3 1. Taiwan Tobacco & Wine Board 1.4 1. Boon Rawd Brewery 2.4 1. Carlsberg A/S 1.0 1. Private label 0.1 0. Others 58.8 55. TOTAL 100.0 100. Source: Euromonitor BEER IN ASIA-PACIFIC: Beer Asia-Pacific: Distribution - Retail vs Horeca Trends Asia-Pacific, in comparison with other emerging regions such as Eastern Europe, featured relatively high levels of horeca sales, the channel accounting for over 40% of total volume sales in 2007. Socialising in catering establishments either for the purposes of business entertainment or family gatherings is part of the culture in many Asian countries, particularly China , Hong Kong, Singapore, Taiwan and Malaysia. Cheap labour across the region and low costs enable horeca outlets to offer affordable prices to consumers across most countries.

The extreme in Asia-Pacific was represented by Singapore, with the highest proportion of horeca sales in 2007, at over 82% of total volume and nearly 95% of total value sales. The improved economic health and attractive marketing promotions held in catering establishments were the main reasons for such high levels of horeca sales. As the economy recuperated from the regional currency crisis, a higher proportion of beer was consumed in coffee shops, drinking stalls in markets and pubs than in 2006. Horeca outlets have also increased their total volume market share as a result of successful promotions. The high density of pubs and bars in central locations, long operating hours (they are typically open until 03.00hrs), plus the widespread institution of "happy hour" in an attempt to keep sales volume up, sustained the dominance of the horeca channel throughout the review period. Moreover, well-established tourism in Singapore is another factor behind the high proportion of horeca sales. Interestingly, Japan featured the highest proportion of retail sales, but relatively low beer sales through horeca channels. There are several factors behind this. Firstly, the retail market for beer in Japan is well developed, aided by the high penetration of vending machines which - until very recently - further served to maintain retail sales. Secondly, there is a long tradition of drinking beer at home in Japan , particularly with meals. Companies such as Asahi even market snack products such as Beer Partner, specifically to accompany beer drinking at home. Lager is the most popular type of beer, and many households purchase bottled beer in bulk from local suppliers who deliver to the door and collect any empties. Finally, despite the fact that corporate entertainment is an integral part of Japanese business life, average consumers are put off from expensive entertainment areas such as hostessed snack bars or karaoke rooms due to very high prices. As was the case in Eastern Europe, foreign imports were normally first introduced to many Asian countries such as Taiwan, Thailand and China through the horeca channel. In China , for example, the retail market was dominated by standard and economy products, mainly produced by domestic brewers, while premium products took a higher proportion of horeca sales in 2007. The rapid development of bars selling beer in large cities attracted younger consumers and affluent businessmen, who are more adventurous in experimenting with less well-known products. Constant promotions by premium lager manufacturers, importers and distributors also had a positive impact on horeca sales. Heineken claims that it is the fastest growing premium brand in the horeca channel in China. Vietnam has one of the highest proportion of horeca sales in Asia-Pacific. This is the result of well-established local drinking habits, where Vietnamese men tend to gather with friends at restaurants and drink beer with their meal. Drinks are frequently only slightly more expensive than through retail channels, in a deliberate attempt to attract customers into the restaurant. Low price strategies and prompt door-to-door delivery service to horeca outlets adopted by famous brands such as Tiger and San Miguel also served to boost horeca sales. Finally, an increasing level of disposable income, especially in urban areas, coupled with the increasing influence of Western lifestyles has also contributed to the growing popularity of beer in Vietnam. Table 11 Retail versus Horeca Sales of Beer by Country: % Analysis 2007 % analysis of sales by volume and value Retail Horeca TOTAL % volume Singapore 17.6 82.4 100. Vietnam 19.6 80.4 100. Malaysia 30.0 70.0 100. Indonesia 37.2 62.8 100. Taiwan 50.2 49.8 100. Thailand 51.0 49.0 100. China 54.8 45.2 100. South Korea 55.0 45.0 100. Hong Kong 57.8 42.2 100. India 70.1 29.9 100. Philippines 72.3 27.7 100. Japan 77.6 22.4 100. Other Asia-

increasingly busy lifestyles. Nevertheless, on-line sales are unlikely to threaten other retail formats, due to a well-established preference for "physically" examining a product prior to purchase. Table 12 Retail Sales of Beer by Distribution Format and by Country: % Analysis 2007 % retail volume SH OF SP DI Others TOTAL China 31.0 52.0 17.0 - - 100. Hong Kong 52.0 22.0 - 26.0 - 100. India - - 100.0 - - 100. Indonesia 15.0 50.0 0.5 2.5 32.0 100. Japan 13.8 10.5 18.4 15.0 42.3 100. Malaysia 24.0 57.0 1.0 - 18.0 100. Philippines 23.0 65.0 4.0 2.0 6.0 100. Singapore 61.0 29.0 4.0 - 6.0 100. South Korea 72.0 - - - 28.0 100. Taiwan 50.0 30.0 15.0 5.0 - 100. Thailand 45.0 20.0 5.0 20.0 10.0 100. Vietnam 5.0 28.0 27.0 - 40.0 100. Other Asia- Pacific 19.0 35.3 18.6 3.2 23.9 100. TOTAL 27.6 34.8 17.2 5.3 15.1 100. Source: Euromonitor Key: SH = Supermarkets/hypermarkets OF = Other food outlets In volume terms the beer market in Asia-Pacific is expected to grow slightly faster than it did during the review period, with a CAGR of nearly 7% predicted over the 2007- forecast period. All national markets will achieve positive value growth in real terms as a direct result of national economies recovering across the region. Some national markets, such as China , are predicted to come out of deflation during the early years of the forecast period. The 2007 World Cup, jointly hosted by Japan and Korea , is expected to boost consumption of beer, particularly in horeca channels across the region. Positive performances from key national markets such as Japan , China and Thailand will be instrumental in shaping regional forecast growth patterns. Increasing levels of purchasing power coupled with further opening up of the beer market - including the possible reduction in duty in many countries, notably China , Thailand and India should serve to boost overall consumption of beer across the region as a whole. China , the most populous country in the world, will unsurprisingly remain the most important national market in volume terms throughout the forecast period, accounting for over half of total volume sales by 2012. The Chinese beer market is expected to grow substantially, with a CAGR of around 6% in volume terms and 5% in constant value terms between 2007 and 2012. Growth will continue to be driven by consumer trends favouring drinks with a lower alcohol content, a trend which was greatly encouraged by the government during the review period. The opening up of the country's vast rural regions will expand the potential consumer base for beer in the years to come. China 's imminent entry to the WTO will bring new opportunities to both domestic players and the leading multinational breweries, although this will result in intensified competition. Beer prices are expected to stabilise as a result. The potential reduction in import tax will allow domestic players to upgrade their equipment (buying in from abroad), expanding production and improving product quality. In value terms, Japan will remain the most important national market, with sales totalling over US$53 billion by 2012, over half of total value sales in the region. The market in Japan , which is mature, will however see only incremental growth during the forecast period. Price sensitivity will continue to influence beer purchasing patterns, with happoshu lager showing healthy growth, though not quite to the same extent as recorded during the review period. As the most influential country in terms of product innovation in the region, Japanese brewers will help boost the penetration of new products such as additive-free and all-malt beers, as well as low calorie lagers, to other national markets across the region.

Thailand is expected to be the fastest growing beer market over the forecast period, with a CAGR of around 19% in both volume and local currency constant value terms. As the economy recovers and the beer market opens up further, demand for beer will be further boosted. In a similar vein to what is expected to happen in China , a potential reduction in import tax should help domestic players to compete and stimulate demand by improving product quality. The promotion of tourism by the government and the continuing influx of foreign brands are expected to underpin rising demand for premium products, particularly through the horeca channel. Growth in India will be affected by factors similar to those present in Thailand , but sales growth will also be underpinned by the changing lifestyles of the more affluent sections of the country's middle class, where social drinking is increasingly acceptable. Changes in legislation, such as the possible removal of restrictions on the expansion of production capacity, will also help underpin an expected rise in demand. In the longer term, a slow shift in social attitudes towards beer drinking

  • from viewing it principally as an intoxicant to accepting it as an accompaniment to food
  • will fuel growth. Relatively developed national markets, such as South Korea , Singapore, Hong Kong and Taiwan, will see moderate overall growth between 2007 and 2012. The maturity of the beer market in these countries will be the major contributing factor to influencing levels of growth. Competition in these countries will be focused on the premium end of the market, as brewers concentrate on boosting value growth, mainly by intensive advertising and promotion of more expensive premium brands. Table 13 Forecast Sales of Beer by Country: 2007- Forecast sales by volume and value 2007 2008 2009 Million litres China 17,544 18,516 19, Japan 6,736.2 6,803.1 6,873. Thailand 1,120.5 1,322.2 1,560. South Korea 1,744.2 1,957.0 2,215. Vietnam 695.7 796.4 891. India 503.0 552.3 616. Philippines 792.5 797.4 803. Taiwan 481.8 489.9 479. Hong Kong 224.9 232.2 240. Indonesia 151.0 168.3 187. Malaysia 128.7 131.4 135. Singapore 55.4 57.7 60. Other Asia-Pacific 1,169.2 1,408.8 1,735. TOTAL 31,347 33,232 35, US$ billion Japan 50.4 50.9 51. China 14.4 15.0 15. South Korea 4.5 5.0 5. Thailand 1.4 1.7 2. Taiwan 2.2 2.2 3. Hong Kong 1.7 1.7 1. India 0.8 1.0 1. Vietnam 0.8 0.9 1. Malaysia 1.1 1.1 1. Singapore 1.0 1.0 1. Philippines 0.9 0.9 0. Indonesia 0.4 0.4 0. Other Asia-Pacific 1.6 1.9 2. TOTAL 81.3 83.6 87. 2010 2011 2012 Million litres China 20,840 22,233 23,