Challenge 1: category contraction or decline in consumption
Challenge 2: Product health and safety
In the past 20 years, the accelerated pace of urbanization in China and expanded scale of China's middle class have promoted to the rapid development of the beer industry, per capita consumption of beer soared to 35 liters from 7 liters in 1990. In terms of the production, China is now the world's largest beer market, which is twice of the United States. However, if measured by per liter of turnover and profits, China is far below the global average. In early 2000, China's beer market had a lot of excess capacity; the annoying thing was that those brewery manufacturers in leadership positions rather to build new brewery in undeveloped areas, and they were unwilling to buy the existing brewery of the market. Thus, the situation of the beer industry in the past three years was the continuing, escalating competitiveness, volatile market environment, lack of the outstanding management personnel and professionals, the unrealistic earnings and growth expectations, but also ubiquitous knockoffs. In this context, different from the past year, the first challenge this year is category contraction or consumption decline.
Over the past 20 years, the situation in the beer industry is: "If you can produce, the consumers can buy." Such situation is even more obvious from 2012 to this year, namely too many suppliers produced the same products with the same idea. However, in beer industry, brand differentiation and consumer relevance is a prerequisite for the growth. There are too many fishermen would like to use the same bait to catch the same fish. However, people who can catch the big fish must be those ones that have selected the right bait, and they are with enough patience, dedication, perseverance. The second challenge is the product hygiene and safety. In a very short time of the past year, there were two sensational food safety incidents that had an impact on beer industry. One was the plasticizer storm of the Chinese liquor industry in the end of last year, the other was the incident just happened, heavy metals were discovered in the raw material the rice of a brewer through the test. For the Government, food and beverage health and safety is a priority, which means that there will be followed more stringent inspect. This brewer, rather than raw material supplier, will become the object of resentment of the consumers. If they are not fully prepared, their business would be bound to be affected. Consumers always make product manufacturer to be responsible for the safety, rather than those middle parts and suppliers hide behind manufacturers.
Furthermore, we must keep sensitive to Chinese government’s concerns at any moment. The minor adjustment of monitoring and new regulations may be likely to bring to the market shocks, such as the implementation of strict drunk driving laws, anti-corruption and austerity measures and others, which all have made the wineries to reflect how to survive and develop themselves.