Strong economy boosts China's taste for beer


Letter from China: A dozen tall beers bottles, empty, make for a regular table top in a traditional Beijing restaurant. The Chinese appear to have an Irish ability to consume beer. China doesn't have a pub culture however, so most of the drinking is done at home or in restaurants and a stroll through Beijing's narrower streets suggests to the outsider that this is a nation of restaurant-goers that likes to drink, writes Mark Godfrey.

But that's changing, as more and more western-style bars open in Chinese cities. Originally designed to cater for the ex-pat community, Beijing's bars are filling their coffers more and more from the local trade, as increasingly affluent Chinese spend their evenings in cafés and bars. Students and returning Chinese emigrants have in particular contributed to the bar scene, flocking to small, neon-framed bars with bohemian sounding names like Buddha Bar, Yan Club, Passby Bar. Probably intended, the Greenwich Village effect is obvious.

Set in a lakeside neighbourhood of traditional housing, Houhai is home to Beijing's fastest-growing bar commune. Favourite resting spot of students and wandering artists, the No Name Bar is the cornerstone. Beer prices here are not cheap, however. For the whiff of polluted lake water and mouthfuls of exhaust fumes that flavour a humid evening, an alfresco half-pint of beer is bad value at 25 or 30 Yuan (€2.66-3.20). The profit margin is more impressive: bar owners buy the bottle for about 2 Yuan (€0.21).

Many of the bars in Houhai look depressingly similar - bohemian minimalist - and the smell of paint and varnish permeate most, as entrepreneurs dodge planning laws and sanitation regulations to cash in on the locals' craving for western bar culture.

Pub owners eye lakeside dwellings, keen to convert aged cottage housing into cramped little bars with Euro-Asian sounding names and a mandate to make money fast. This is the premium end of China's burgeoning beer market, the minority of Chinese who can afford a night on the tiles in places like the No Name Bar.

China's beer market that has grown steadily, if not spectacularly: at 6 per cent per year the increase is the world's highest, according to UK-based beverage industry analyst Chris Brook-Carter. A strong economy has created the disposable income that allows Chinese beer drinkers claim second position in world consumption rankings, closing fast on their US counterparts.

China's drinkers consume 22 million tonnes of beer per year, according to figures published recently by China's National Statistics Bureau.

China is already the world's largest manufacturer of beer, brewing 24 million tons, compared to the US which brewed 22 million tons in 2002. Its status as the largest importer of beer has drawn brewers and distributors from North America and Europe to invest in China, placing more pressure on local brewers less equipped to progress in an ever-demanding market.

Reflecting perhaps the major income divides in Chinese society, drinking habits vary wildly between cities and the much poorer rural areas. China's big drinkers are city dwellers: rural drinkers typically average less than 10 litres per capita with their urban counterparts consuming three times more. Beijing's beer drinkers consume an average of 45 litres, , a considerable figure considering the world average per capita beer consumption rate sits at 22.1 litres per person.

China's breweries, like other enterprises, are adapting slowly and painfully, to market values. By the early 1990s Chinese drinkers were supplied by nearly 900 breweries. Mostly small state-owned enterprises, the quality of the breweries' output varied greatly. By 2000 more than half China's breweries had been shut down. Despite these changes the industry is still fragmented.

Experts complain that too many brewers are operating in China's beer market, dragging down standards and profits.

Beer prices in China are, for European customers, enviously low. A half-pint bottle of the best can be bought in any local supermarket for less than 5 Yuan (52 cent). And here the price of beer is falling rather than rising. Intense competition and excess output have squashed retail prices by 5-10 per cent. But there's a conundrum: breweries are attempting to cut costs by for example using lower-quality malt. In a more affluent society with access to ever-cheaper foreign imports, consumers are however demanding better-quality products. Chinese brewers uniquely use rice and corn in the brewing process, helping to achieve the clear-coloured, lightly foamed beer Chinese drinkers prefer. "There's a lot of bad beer in China so people think the lighter the colour of the brew the better the quality will be. If it's too dark people suspect bad ingredients or bad hygiene in the brewing," said Da Li, a three-bottles-a-day removal company worker.

Beer remains China's preferred alcoholic beverage but wine has been slowly creating a market for itself. As with local beer, quality varies hugely.

Secondary school teacher Zhang Yuan Yuan started drinking wine recently: "I drink dry red wine like Great Wall or Changyu. It shows that you have a high standard of living, that you have culture. It's also good for your health of mind and body."