Beer To Stay

DRINKS INDUSTRY:How beer is going down a treat in Asia's expanding markets, particularly China

PINTS OF Guinness in their hands, a group of well-groomed young Singaporean men and women in business suits are discussing the global financial crisis beneath an antique advertisement for PJ Carroll cigarettes in Molly Malone's pub.

In Face bar in Jakarta, young Indonesian entrepreneurs wind down from a busy day by sucking down a few bottles of Bintang beer.

In Shanghai, patrons of a street corner noodle stand are having a Tsingtao beer with their bowls of noodle soup.

These scenes are repeated all over the continent, from India to Vietnam and beyond, as beer drinking gets more popular because of a growing population of young people who are out to party.

"Beer consumption is growing. We opened Molly Malone's 14 years ago and there were a handful of quality western pubs in Singapore - today there are thousands," said Colin MacDonald, a Mount Merrion native who is managing director of McCraic Holdings, which operates Molly Malone's Irish pub and BQ Bar, "Beer is more acceptable now, it's gone up the demographics. The international brands are coming in. It used to be just Tiger beer, but now people call for different brands," said MacDonald.

Sales are growing in Singapore with drinkers crowding the city-state's microbreweries and lounge bars. And despite the impact of Singapore's worst ever recession, from which it is slowly emerging, foreign beer companies are still moving in.

In such a vibrant market, the merger and acquisition sector has been busy, based on expectations of strong growth for beer and spirits in years to come. Market research firm Euromonitor International says Asia is the most dynamic region globally in volume for beer, with average annual growth of 8 per cent between 2003 and 2008.

"Asia Pacific is generally attractive to brewers as the region has relatively low per-capita consumption rates, increasing incomes and young populations - all indicators of growing markets for beer," said Euromonitor International's industry manager for alcoholic drinks, Marlous Kuiper.

As well as being the most dynamic region in terms of volume - with average annual growth of 8 per cent between 2003 and 2008 - at 16 litres per capita, consumption of beer is well below the global average of 28 litres in 2008, she said. The Philippines, Singapore, Thailand and Vietnam all had healthy beer sales in 2008.

As in so many areas these days in Asia, China is driving beer volume growth in the region. The Chinese market accounted for 47 per cent of actual global volume gains between 2003 and 2008. Domestic brewers dominate China, the largest beer producer in the world, with domestic economy lager accounting for 90 per cent of total volume sales in the country last year.

Diageo, the world's biggest spirits maker, said in June it had teamed up with Chinese white spirit producer Shui Jing Fang to make a premium vodka in China. It is also in talks to pick up a stake in India's United Spirits.

Eight out of the top 10 brewers in China have some level of foreign ownership, ranging from majority ownership to minority holdings.

These include China's Snow beer, which is now the world's second-biggest beer brand by volume, replacing Anheuser-Busch brands, Bud Light and Budweiser. It is brewed by SABMiller and its Chinese partner China Resources Enterprises Ltd.

China's beer market was valued at almost €21 billion in 2007 compared with €8.3 billion back in 2001. Meanwhile, India's €8.4 billion alcohol market has been experiencing annual growth of 12-15 per cent annual growth.

"Although the Indian alcoholic drinks market is currently dominated by domestic brands, with imported brands being out of the reach of the masses due to high prices and restricted availability, imported brands are viewed as aspirational products and thus have huge growth potential," said Kuiper.

Spirits are big business in India, and the country is now the second-biggest market for Ciroc, Diageo's "super-luxury" vodka, while its Black Label whiskey is ubiquitous.

India has a young population, with a median age of only 25 years. Per capita consumption is low at one litre per annum and 48 per cent of alcoholic drinks volumes are made up by beer.

In May, Heineken, the world's third-largest brewer, reached a deal with India's largest brewer, United Breweries, to bottle and distribute its brands in India. However, regulatory issues persist in India and this could affect profitability in the short term.

While beer sales stagnate in western Europe and North America, China has the lowest per capita consumption of the 10 largest beer markets, which shows the market is a long way off saturation and has strong potential for future volume growth.

Indonesia is the world's largest Muslim country, but most practice a very moderate form of Islam and will have a beer every now and then. The country is Guinness's sixth largest market globally and is locally produced, although the key flavoured extract is brought in from Ireland.

High duties on imported alcoholic drinks, 300-500 per cent, as well as duties of 100-200 per cent on local booze, means a large part of the market is smuggled and below ground. This may have been a contributory factor to the death of an Irish citizen, who was one of four killed from consuming local liquor in Bali this year.

"Guinness has had a strong presence in the Southeast Asian region which we can trace back to exports to the region from the mid-18th century, according to a Straits Times advert from 1868. Alongside a significant presence in Singapore and Malaysia, Indonesia is the largest market in Asia and the sixth largest in the world," said Diageo's local representative John Galvin.

The Indonesia beer market is dominated by Heineken, owner of Bintang, which was the Dutch brewer's first brewery outside The Netherlands in 1929.

This local favourite has half the market, while the San Miguel-dominated Anker has around a quarter and Guinness has one-sixth.

As the market matures, beer sales in Japan are declining - currently the beer market is valued at about €29.7 billion, but its size has been steadily declining from about €35.6 billion in 2004.