Move Over Mature Markets and Africa there is a New Player in Stout – China
For many years stout has been an uninteresting category dominated by one brand, Diageo’s Guinness, with the health of stout as a whole dependent on how this brand performs. This meant how Diageo managed the decline in the brand’s core markets of the UK and Ireland and tried to develop Guinness in emerging markets, with Africa, particularly West Africa and Nigeria, key to that success. This is now changing with the rise of China as a major force in the category.
Little more than a minor niche in the Chinese beer market, accounting for 0.2% of total volumes in 2014, stout in China is nevertheless having a major impact on the global stout category with its rapid growth. From barely scraping into the top 30 leading stout markets in 2009, in 2014 it was the world’s eighth biggest market by volume and, more importantly, it will be the world’s leading stout consumer in 2019.
Volume Sales of Leading Stout Markets 2009-2019
Source: Euromonitor International
The category is benefitting from a mixture of extra interest from consumers, particularly young ones, and greater emphasis on the category by brewers, not just Diageo, but also local Chinese brewers such as Tsingtao and smaller German players such as Paulaner.
The most important factor has been the intense efforts of manufacturers as well as on- and off-trade players to push the category. The owners of brands like Tsingtao have held a series of stout festivals across the country, joined, on a smaller scale, by German brands promoting stout’s history.
However, it still required interest and demand from consumers, and this has been found among young Chinese consumers, especially men, who are increasingly interested in new and fashionable delivery formats and new flavours. Stout, with its strong flavour combined with unique packaging, such as Tsingtao Stout’s 296ml black glass bottle, taps into that trend perfectly.
Equally important is the pricing of the brands, with the majority of brands priced at around the same level as premium lager. This helps the category appeal to the young aspirational consumer. For example, a 296ml bottle of Tsingtao Stout costs RMB7.90 (US$1.23), while Guinness, which only has a 3% volume share, costs RMB10 (US$1.55) for a 330ml can – both priced at similar levels to premium imported lager. Other brands, such as Yanjing Stout – at RMB4.60 for a 330ml bottle – are priced at a similar level to domestic premium lager.
This premium positioning means that volumes are concentrated in the more affluent regions, most notably East China (Shanghai), with 39% of volumes in 2014, followed by South China (Guandong), and then North and Northeast China.
All three regions will be the key growth drivers during the forecast period, especially East China, which, in 2019, will be the world’s fifth biggest market by volume, overtaking Ireland. Despite this rapid growth and its impact on the global category performance, stout will still remain a small, if premium, niche in the Chinese market, accounting for only 0.6% of total volumes – offering potential for international and local players alike to drive value growth.