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Research and Markets: China's Leading Brewer Tsingtao Announced in Q406 That Its First Half Volume Sales Figures Had Exceeded Its Optimistic Annual Expectations According to Report 'China Food & Drink Report Q4 2006'

Posted on: Monday, 18 June 2007, 06:02 CDT

Research and Markets (http://www.researchandmarkets.com/reports/c59969) has announced the addition of China Food & Drink Report Q4 2006 to their offering.

The fourth quarter has brought with it mixed opinions about the state of Chinas high-growth beer industry. While it is accepted that the phenomenal growth the industry has undergone cannot last for much longer, we remain optimistic about the outlook for the industry. Our view is shared by a number of the industry's leading players, which are following up impressive half-yearly results with investment in furthering their business activities. However, just as some see the future as rosy, for others the glass is most definitely half full.

Leading brewer Tsingtao - the local partner of US major Anhueser-Busch - announced in Q406 that its first half volume sales figures had exceeded its optimistic annual expectations. Six-month volume sales rose 10.5% y-o-y, against forecasted annual growth of between 7% and 10%, while premium volume sales rose by an impressive 24%. Tsingtaos rival China Resources Snow Breweries, the joint venture of China Resources Enterprises and Anglo-South African brewing entity SABMiller, performed similarly well with first half volume sales rising 28% y-o-y, while volume sales of its flagship Snow brand rose an astonishing 85%.

The six-month performance of these two companies' supports, if not exceeds, our own expectations for the industry. To 2010, volume sales of beer are expected to increase by 27.3%, according to forecasts. This growth outstrips broader alcoholic drinks industry growth, which is expected to stand at 25.6% to 2010. Should Tsingtao and China Resources Snow Breweries continue to post such strong volume sales growth, we would amend forecasts in line with the current climate. However, although volume growth is expected to remain similar for the two firms to the end of 2006, it is unlikely to be sustainable in such a competitive environment and it is not necessarily a completely accurate indicator for the wider industry.

Fellow multinational Heineken expressed doubts over the future of the industry in Q406. It believes that Chinas beer sector suffers from over-capacity. We do not share this view, with investment in production capacity increases still rife across the country for both domestic and export purposes. We do, however, agree with Heineken about some challenges that lie ahead. Rising energy costs will continue to put immense pressure on manufacturers, which simply cannot pass these costs on to consumers in such a price sensitive environment. Eventually this will have to lead to either a scaling back of production or an acute loss of profitability.

Ultimately the customers are present to warrant the capacity in China, it is the financial capacity of the customers that it is doubt. Volumes matter little if the pressure on margins grows too great.

Chapter Outline:

Chapter 1 - Business Environment Chapter 2 - Retail Chapter 3 - Food & Drink Chapter 4 - Tobacco Chapter 5 - Company Monitor

Companies Mentioned: - AEON - Coca-Cola Amatil - Danone - Wal-Mart

For more information visit http://www.researchandmarkets.com/reports/c59969

Source: Business Wire

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