I was perusing the internet the other night, as I usually do, and began to notice a trend.  It all started with this headline: “SABMiller Halts Beer Volume Drop on Chinese Demand”.  At first I didn’t think too much of it, so I moved on.  Several minutes later, on a completely unrelated site, I come across this headline “Net profit in China’s major beer producer Yanjing up 25% in first half”.  Now I was convinced something was up, and I wanted to know more.

To my surprise, it turns out that by volume China is the world’s biggest beer consumer.  But, on a per capita basis China’s beer habit appears far less impressive at just 22.1 liters per year, this compares to 81.6 liters per year in the US.  However, both pale in comparison to the Czech Republic, whose residents imbibe an astounding 156.9 liters per capita–that’s roughly 41 gallons of beer per person per year!

This chart shows 2004′s annual beer consumption by volume for the top 15 countries, along with their per capita beer consumption:

Source: Kirin

Once my mind synthesized the headlines I mentioned earlier, and these beer statistics, I realized the global beer industry could be at the dawn of a new age, especially in China.  China’s population is currently estimated at around 1.3bn, compared to just 0.3bn in the US.  China’s rapid economic expansion has created a burgeoning middle class, whose tastes have shifted as incomes have risen.  Not only does this expanding middle class palate now crave things like pork over just vegetables, but also beer.

With this in mind lets run a simple exercise; let’s say as China’s economy develops, its per capita beer intake catches up with its nearby neighbor South Korea at 38.5.  This means China’s total beer consumption would rise to   50,050 ML–more than 2x the total US consumption…  Taking it one step further, if China’s per capita consumption catches up to that of the US, then China’s total beer consumption could equal that of the rest of the world combined.  I won’t event get into what happens if they catchup with the Czech’s, but I hope you have a stockpile!

My point is that the Chinese beer industry’s potential is far from being realized.  In fact a recent report by Citigroup pointed out that China’s beer sector has bucked the recent economic slowdown with volumes up near 10% y/y in May. Major players in the domestic Chinese beer market include Tsingtao, Zhujiang, and Yanjing.  Tsingtao should stand to benefit quite nicely from increased consumption, based on its strong domestic brand name–I’ve thrown back more than my fair share while living there.  Numerous local brewers are also spread out across the country mostly catering to smaller geographical regions; consolidation is inevitable as the industry continues to develops.  Potential for brand-name foreign brewers is also off the charts, whether through local acquisitions or other types of investments.  I can’t imagine anything will slow this trend down, so just in case, here’s how to order a beer in Mandarin:

“Wo yao yi bei píjiu”

In case you need two…

“Wo yao liang bei píjiu”