Budweiser brewing earnings, to bank on market expansion

Major beer brand pushes digitalization, premiumization to drive momentum

Major beer brewing group Budweiser APAC is banking on premiumization, expansion and digitalization to further drive momentum in the Chinese market as it sees revenue growth above its pre-COVID levels, in the first half, said its top executive in the region.

"I am positive about the market growth potential in China. We are confident that our strategies for premiumization, digitalization and expansion will continue to be effective," said Jan Craps, CEO and co-chair of Budweiser APAC, in an interview with China Daily on Thursday.

The company's total volume in China increased by 9.4 percent and its revenue by 15.4 percent year-on-year, respectively. The premium and super-premium segments both grew by double digits in the first half.

The Budweiser brand's revenue increased by more than 20 percent year-on-year in the first six months in China. Its super-premium revenue grew by about 35 percent, supported by nightlife channel recovery and expansion, said the CEO.

In China, the premiumization trend continued its positive trajectory across the market, showing that beer remains a very resilient category and an affordable luxury, said Craps.

"We remain optimistic about our business prospects in China, as there is incredible room for us to continue our growth through premiumization, with the size of China's middle-income households expected to quadruple by 2030, and our business momentum and portfolio setting us up to ensure that we capture an outsized share of that growth," he said.

The company plans to continue to strengthen its leading position with innovations and super-premium brands, including Corona, Blue Girl and Hoegaarden, to advance premiumization at scale in China. China is the biggest beer market in terms of volume, representing one-fourth of the world's volume.

However, today the fraction of the industry in China that is represented by premium and super-premium beer is half that of mature markets, according to Budweiser APAC.

On improving profitability in this segment, the CEO said China's household income growth is expected to drive the next wave of premiumization.

"As a larger percentage of the Chinese population can afford premium and super-premium beers, the profitability pool will expand," said the CEO.

For the beer industry, premium and above will contribute more than 100 percent net revenue and 80 percent gross margin growth in the next 10 years, he added.

Regarding expansion, the company will work closely with wholesalers by prioritizing expansion into regions with consumer demand based on a market maturity model.

Budweiser APAC developed about 200 new first-tier wholesalers for both Budweiser and its super-premium brands since the second half of 2022.

The company has also continued to accelerate its digitalization by adding new products, unlocking new drinking scenarios and developing more digital experiences for consumers, said Craps.

The company has developed its digital platform BEES which helps direct digital connections to consumers and wholesale customers. BEES is now covering more than 220 cities in China, generating more than 45 percent of revenue in June, said the CEO.

Moreover, Bud Space, a consumer digital program launched in China in 2019, is now connected with more than 30 million consumers who interact with their brands. It helps locate nearby restaurants that offer Budweiser products with promotional offerings.

The company has also relied on its digital management system to transform its supply chain.

Creating more offline social occasions is what boosts the vitality of beer consumption. Budweiser has launched the "BUD Ignitor" campaign in 10 key cities to help spur the nightlife economy since May. The brewer has developed a program to support farmers in Sichuan province growing high-quality limes, which provide Chinese consumers with unique Corona Lime Ritual experiences.

The program offers support to farmers involved from seed selection, soil improvement and cultivation to final procurement, contributing to the country's rural vitalization.