Carlsberg banks on Anhui craft beer plant for bigger presence

Carlsberg China's first craft beer production center started operations on Wednesday in Anhui province in East China as part of the Danish brewery's plan to further invest in the country's high-end beer market, given the sharp increase in consumption of the beverage here during the past few years.

Carlsberg has invested 110 million yuan ($15.6 million) for the Craft and Specialty project in Tianchang city, Anhui. The hub has an accumulated investment of 187 million yuan, with production lines for its Draught Master products, craft brewing and packaging.

The brewing and fermentation capacity of the brewery is 100,000 hectoliters. The center is designed to produce products including Draught Master beer, the 1664 series and Tuborg.

The craft beer produced from the hub in Anhui will also be sold to markets in Southeast Asia.

Carlsberg China has grown 6 percent in terms of volume in the third quarter and 20 percent in net revenue, its third quarter report said.

In China, the revenue for its premium products increased 8 percent, driven by expansion in big cities and the successful premium development of local brands.

Globally, the brewery's organic revenue growth is 3.1 percent year-on-year. Its operating profit growth is around 10 percent.

"We're pleased that we've been able to deliver solid revenue growth for the quarter despite tough comparables from last year. In particular, the Asia region continued its very good performance," Carlsberg CEO Cees't Hart said in a statement.

He added: "The top line in Western Europe was solid in spite of challenging comparables from the very warm and dry summer last year, while we had difficult comparables in Russia and faced challenges that negatively impacted our market share year-over-year."

The CEO said the company's earnings upgrade earlier this week is further proof of its improved geographical footprint, "as solid earnings performance in China and Western Europe more than offset the challenges in Russia."

The National Bureau of Statistics said beer production volumes in the country in the past five years since 2014 have declined. Beer imports though have risen to 821,141 kiloliters, up 14.7 percent, according to Qianzhan.com.

Though craft beer only takes up about 1 percent of the consumption volumes in China in 2018, its annual growth has reached 40 percent. It is estimated there are nearly 800 craft beer brands nationwide.

Zhu Danpeng, a food and beverage analyst, said the rising incomes in China encouraged the development of a big market for craft beer in the country.

"Craft beer is expected to see fast growth at 40 percent at least in the next five years," said Zhu. Therefore, it is crucial for Carlsberg to get into the craft beer category in China and expand its high-end beer presence, he said.

Carlsberg's high-end product 1664 Blanc and medium range beer brand Tuborg have posted quick growth in China in the past few years.

Zhu said: "The new investment in production capacity has shown Carlsberg's confidence in speeding up its presence and penetration in the medium and high-end beer sector in the country."