AB InBev to expand beer capacity as competition heats up

Anheuser-Busch InBev, the world's largest brewer by production volume, plans to expand plant capacities in China next year to drive growth.

AB InBev is seeking to compete with both domestic and foreign brewers in China, said the group's top executive.

The Leuven, Belgium-based company opened a new brewery with an annual production capacity of 1.5 million metric tons of beer, in Putian city of Fujian province plant earlier this month.

The brewery is AB InBev's largest facility in Asia, and can produce 160,000 cans of beer per hour.

Carlos Brito, chief executive officer of AB InBev, said China is currently considered to be not only the largest consumer of alcohol beverages in the world but also set to become the world's largest beer market by this year-end.

Competition in China's beer industry has always been fierce, which the company believes is great for the industry to grow and evolve.

He said since the group's entry into the China market, a lot has changed. One of the significant changes has been the rise of e-commerce. This has revolutionized the way a lot of companies, including AB InBev, sell beer.

Supported by more than 26,000 employees in China, AB InBev has invested more than $3 billion in the country since 1995.

Brito was appointed as a 'River Chief' by Putian municipal government earlier this month to promote both brand awareness and river water quality in China.

The move came after the State Council released "The Opinions on Adopting the River Chief Policy" last year. Local governments have acted on the call and achieved positive results.

AB InBev, maker of Budweiser, Harbin, Corona and Stella Artois brands of beer, along with cases of other beers, has led its over 40 plants across the country to launch the river protection campaign. The Putian city of Fujian province is key to this campaign.

Under the deal, AB InBev will adopt the Shouxi, which is one of Putian's main rivers, and multiple river sections in the city, and assist the administrative River Chief in river management.

Thanks to strong growth in China, the United States, Mexico and Columbia, the company's sales revenue grew by 3.6 percent year-on-year in the third quarter of 2017, while its revenue in China grew by 4.6 percent from the same period a year earlier, according to the company's financial statements.

The company has also invested in making alcohol-free and low-alcohol beer, as it wants to broaden its portfolio further.

Brito said AB InBev launched its premiumization strategy in China ahead of other market players as it anticipated the potential of the China market. This strategy has helped AB InBev through some of the beer industry's downturns in China in recent years.

"We see growing appetite for premium and craft beers and have expanded by investing in Boxing Cat Brewery in Shanghai.

"The China market is traditionally dominated by lower-price beer, but recent years have seen rapid growth in more expensive international brands and a decline in cheap domestic brands," said Zhao Jian, a professor at Beijing Technology and Business University.

He said this is particularly true for the country's western and northeastern regions where economic development has spawned higher incomes, better quality of life, lifestyle aspirations, all of which are resulting in, or are likely to lead to, rising consumption of quality beer.