Singapore: The crowds drinking beer in the bustling bars of Mumbai and Shanghai underscore the motive behind a flurry of recent merger and acquisition activity in Asia, with forecasts of strong growth for beer and spirits in years to come.
In China and India, as well as smaller markets in South-East Asia such as Singapore, Thailand and Vietnam, beer drinking is becoming a popular past time due to rising disposable income and relatively young populations, who are embracing the party scene.
“I’m a firm believer in the Asia growth story and when there’s growth there’s going to be increased consumption,” said Singapore’s Timbre bars director Edward Chia. “My analysis of trends is that people tend to start drinking beer as the first form of alcohol, then move to wines and spirits. That (applies) to both age and maturity of industry.”
Bustling bars: The Wink bar at Taj President Hotel in Mumbai. Beverage firms are focusing more on China and India as growth is expected to be rapid due to rising disposable incomes in the two countries. Ashesh Shah / Mint
Market research firm
Euromonitor International says Asia is the most dynamic region globally in volume for beer, with average annual growth of 8% between 2003 and 2008.
China is the world’s biggest beer market and India’s $12 billion (around Rs58,000crore) alcohol market has been enjoying 12-15% annual growth.
So it’s no surprise that beverage firms, facing slowing sales in mature markets in Europe, Japan and the US, have heightened mergers and acquisitions activity in the past few months.
Analysts suggest there will be more to come, given the outlook for rising alcohol consumption across Asia.
In China, per capita consumption of alcoholic drinks is expected to rise to 53.4 litres by 2013 from 37.8 litres in 2008, according to Euromonitor. It sees consumption in Singapore and Thailand rising to 23.1 and 61.4 litres, respectively, by 2013 from 21.1 litres and 48.4 litres last year.
“Expect more activity in the years to come as the major brewers establish or reinforce existing operations in the region, in particular outside the mature markets of South Korea and Japan,” said Euromonitor’s Marlous Kuiper.
Beverage firms are focusing closely on China and India as growth is expected to be rapid due to rising disposable incomes in the world’s third and 12th largest economies, respectively, dented by the downturn but still holding up with forecasts for annual GDP growth of 8% and 6.3%, respectively.
“The beer market (in China) is set for double digit (revenue) growth in coming years. Its growth will be much stronger than other liquor or wine,” said general manager and director of Chinese brewer Kingway Brewery Holdings Ltd Jiang Guo-Qiang.
In line with this sentiment, shares in China’s Tsingtao Brewery Co. Ltd have soared 65% this year, outpacing a 29% gain in Hong Kong’s main index. China’s beer market was valued at almost $30 billion in 2007, compared with about $17 billion in 2001.