Craft beer opportunities and challenges in China

Nimbility's Ian Ford

There is a huge market for craft beer in China if brewers can solve the logistics issues according to a leading Shanghai-based drinks consultant.

Ian Ford, a partner in consultancy Nimbility, told James Atkinson on the Drinks Adventures podcast that the biggest beer market in the world in China is underserved.

“You absolutely have a significant proportion of those consumers who would like to drink craft beer. And they’re not being served,” Ford said, admitting he had looked into opening a brewery there.

“I’ve looked at this several times and to me there’s a massive market opportunity there that needs to get figured out.”

Craft beer in China

The interview highlighted the challenges facing the growth of craft beer in China with rigorous standards requiring brewers to achieve scale to package.

“To get a QA certificate and a QA licence to produce and bottle craft beer at a small scale is almost impossible,” Ford said.

“The requirements to be licensed to get what’s called a QS stamp, which basically certifies the product to be fit for human consumption and is required on packaged food and beverage products.

“To get that the scale of the brewery has to be massive relative to what a normal craft brewer would set out to do.”

Ford said that for anybody other than AB InBev the requirements make it very, very difficult to brew and bottle at the scale of a craft beer brand in China.

He said brands that started as brewpubs distributing in keg had shown the greatest success, but even they struggled to get beer into package.

Challenges with imports

While this provides opportunities for imports, Ford said freshness can be an issue.

“The problem there of course is freshness and shelf life, and lead times and the supply chain in China, where it’s not very efficient, it’s not very timely to market,” Ford said.

He explained that it is very difficult to get beer produced in Australia, bottled, shipped to China, cleared through customs, put into the supply chain and bought by a consumer within six months.

“You also have to worry that the beer has been handled properly throughout all that.”

Ford said he knows serious craft brewers who have come out to Asia and had their own beer in a bar or in a venue in Hong Kong or Shanghai and been horrified at the state that the beer was in.

Authenticity the key

Ford said that for brands that succeed, authenticity, credible storytelling and uniqueness – and not kangaroos – are the keys to success in the China market.

“There’s no one profile or style or positioning of a brand that I think is necessarily suited,” Ford said.

“Very often what we look for and what we seek out with the clients that we’re working with is authenticity, credible storytelling, something that is unique and authentic and real.

“It could be a story about your grandfather who founded the winery, or it could be a particular really interesting production technique that you employ.

“But I think authenticity is something that for the Chinese consumer in particular is very often what they’re looking for.”

Not good news for Broo

While Ford, who closely watches the market, said brands such as Little Creatures and Goose Island had presence in the Chinese market, he had not heard anything of Australia’s Broo.

Broo announced in 2017 it had signed a binding ‘take or pay’ agreement for 1.5 billion litres of Broo Premium Lager beer products over seven years period with its partner paying a fixed rate per litre. Broo said the deal was due to start paying on the AUD $120 million deal later this year.

Despite that promise, Ford said he could see no presence for it in his travels.

“I hope that Broo has more going for them than just the kangaroo on the label,” Ford said.

You can listen to the entire conversation that also looks at the broader drinks market, COVID-19 and the lessons learned from the earlier SARS outbreak in China below.

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