The American brewing industry is such a shitshow these days that I sometimes forget there’s a vast world of international drinkers out there who have barely reached adolescence in their craft brewing careers. But such rank chauvinism stops today, reader, because today, we turn our collective Western gaze eastward. Over there, past Hawaii, the international date line, and the Great Pacific Garbage Patch, lies a nation of 1.4 billion people, the majority of whom are over legal drinking age. China’s thirst for American craft beer hasn’t yet peaked (unlike Americans’ own) and its drinkers’ interest is piqued.
My own interest in the current state of Sino-American IPA relations was piqued by a recent report from the market-research firm IWSR, which noted that after the past few years of pandemic-related challenges, Chinese drinkers were returning to premium-price-point beers. “China’s higher-end beer market also returned to growth in [the first half of] 2023 vs 2022, boosted by strong performances from local brands, and from international products in the reopening on-premise.”
Higher-end international products, you say? With American demand posting small but concerning year-over-year declines as omnibibulous domestic drinkers quench their boredom with all manner of alcoholic and non-alcoholic beverages, the idea that U.S. craft brewers have over 500 million potential customers just a hop, skip, and a two-week container-ship ride away is tantalizing to consider. Some already have.
“It’s consistently a top-five market for us,” says Steve Parr, the Export Development Program (EDP) manager at the Brewers Association. U.S. craft brewers (as defined by the BA) shipped some 12,000 barrels of beer to China in 2022, according to data assembled by the trade group. That makes up just over 6 percent of this country’s overall craft beer exports last year. Chinese craft beer imports from the U.S. trail Canada (25.2 percent), the United Kingdom (7.3 percent), and Sweden (7.1 percent); the country has a slight lead on Japan (4.2 percent). All in, American craft brewers collectively exported $71.1 million worth of beer last year, and the Chinese drinking public is a growing contributor to that not insignificant bottom line.
It’s possible that China’s uptake on American beers would comprise an even bigger slice of the overall export pie if not for the pandemic. The country’s beer business was not exempt from the dramatic effects of its Covid policies — and imported American beers weren’t, either. “In 2018, there were about 21 breweries exporting to China,” Parr tells Hop Take in a recent phone call. “Fast forward to this last year, it was 27 breweries.” That’s a 30 percent increase, which seems pretty promising! “But if we compare to 2019, when we really saw China picking up for us and we were really investing in the market, we saw those 21 breweries jump to 32,” he says, a high-watermark of participating U.S. firms that trails today’s figure by 15 percent.
Covid’s kick in the teeth forced many American breweries to focus on shoring up their core business rather than invest in market-development abroad, and the Chinese market specifically was locked down. Exports to China suffered apace: Shipped volume declined 27 percent between 2019 and 2022.
“Importers [of U.S. beer to China] took a hit and things really slowed down,” Parr says, but now, they’re picking back up.
“We started importing American craft beers in 2021, but since it was still during Covid, we were on a small scale,” says Luca We, owner of BBM, a Shanghai-based importer, in an email exchange. (The firm has imported European craft beers since its founding in 2018.) “This year, we attended the GABF in Denver, and met with a lot of great breweries. We are hoping to expand the brands we work with by the dozens in the coming year.”
We tells Hop take that hazy and West Coast IPAs are among the most popular styles BBM imports. His assessment of the most popular brands among Chinese drinkers reads like a who’s who list of hop-forward American heavyweights, including Russian River Brewing Co., Tree House Brewing Co., and Other Half Brewing Co. Those trendier brands join major established marques that have been wise to China for years, like Sierra Nevada Brewing Co., Left Hand Brewing Co., and Founders Brewing Co.
Parr agrees that IPAs are “the clear leader” of the styles that American firms ship to China (typically from a West Coast port to Shanghai.) But more flavor-forward, adjunct-driven stuff plays there, too. “Fruited sours, sweeter stouts, and even wheat berries are more popular among the Asian markets,” he says. Of course, more complex beers mean more challenges to shipping them halfway around the world. Adjuncts can cause questions and delays at customs, and even once it’s arrived at retail, a beer can sit.
“In China, beer is often sold in the absence of refrigeration,” says Parr. “The expectation is that [imported beer] will come with a long shelf life, that it’ll last for 12 months. I’ve been in China and found two-year-old IPAs sitting on the shelf.”
Exporting any product to any market comes with challenges. We says keeping BBM’s margin around 15 percent “could be the biggest challenge we have,” though he notes that there’s no base cost for partner breweries. “We try to contain those costs ourselves. The [most] we could do right now is to ask for the best price,” he says.
Parr is emphatic that he doesn’t want craft breweries to sell their beer in China, or anywhere else, unless it makes good business sense. “Brewers need to consider whether they have the capacity, the product range, the pricing, and the resources to support all those things like regulatory compliance, marketing, a trade relationship when that could otherwise be supporting your domestic market,” he says. But the potential upside is considerable. “China is certainly a huge market … [and] despite the economic challenges, there’s a segment of the population that has the money to pay for premium products.”
On this, American craft beer may have an advantage in the Chinese marketplace, particularly as the country’s middle class retrenches amid gloomy economic forecasts. “Despite the overall downturn, there is still evidence of premiumisation in H1 2023, particularly in spirits and beer,” said IWSR’s chief operations officer of research Emily Neill in the firm’s report, which notes beer’s resilience to broader economic price points at higher price points in Asian markets. “Beer may be a category that benefits as consumers trade down from other categories.”
And what of Chinese microbrewers, which have carved out their own niches for full-flavored beer in a field dominated by titans like Snow, Tsingsao, and Harbin? Are American craft beer exporters crashing a party, or helping to take it to the next level? “From consumers’ or local retail outlets’ point of view, the two segments together provide more options, and thus complement each other,” says We. “From importers’ perspective, it’d be more of a competition between the two segments.”
But with Chinese craft beer culture still developing, there’s still a sense of camaraderie in the marketplace. “Whether competition or not, we enjoy working with the breweries and bringing good beers to more people,” says We. Or as American craft brewers were fond of saying a decade ago, a rising tide lifts all boats.
The craft-beer business is tough sledding right now, with the segment shedding volume and dollars as the (legal-drinking-age!) kids turn their attention to spirits-based canned cocktails, wine-based riot punch, and maybe even sobriety. So of course struggling breweries are seeking out growth from unorthodox partnerships. But new reporting from Kate Bernot at Good Beer Hunting suggests that there’s at least one partner brewers should think twice before signing a deal with: Bevana. The start-uppy firm has a mixed record scaling brands into chain retail across markets like it says it can, as well as alleged quality-control issues that in one instance forced it to dump $500,000 of bad beer. At least one brewery, Georgia’s Pontoon Brewing, claims Bevana’s failure to pay its bills forced it to close and file Chapter 11 bankruptcy. All right, maybe think thrice.
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