The beer industry is currently experiencing a significant transformation, and one of the most prominent players, Anheuser-Busch InBev, has recently adjusted the pricing of several of its popular beer products by raising the supply cost by approximately 3 to 7 yuan per boxThe question arises: why implement a price increase during a traditionally slow sales season?

The backdrop to this decision is a sobering reality within China's beer market as the high-demand second and third quarters of 2024 saw a stark decrease in salesConsumer habits have shifted, competition has intensified, and demand has falteredOnce a leader in the high-end beer market, Budweiser now faces a new executive landscape with the hope that this fresh leadership can reverse the company's fortunes.

On November 18, 2024, Budweiser will officially increase supply prices on several brands including Budweiser, Corona, and Hoegaarden, with some products seeing a rise of 7 yuan per case, such as the 275 ml bottles of Hoegaarden and Corona

Meanwhile, other Budweiser products like the 275 ml and 330 ml bottles, along with the canned versions, will see modest increases of 3 yuan per caseThe rationale behind these adjustments can be traced to significant rises in energy prices, raw materials, labor, and transportation costs, all contributing to increased production costs.

Close sources to Budweiser revealed that this price adjustment reflects routine market conditions rather than an ad-hoc strategy—a subtle acknowledgment of the brand's original pricing strategy amid an increasingly competitive landscape.

Historically, the fourth quarter is not considered a peak period for beer salesDespite the upcoming major sporting events in summer 2024, such as the UEFA European Championship and the Paris Olympics, domestic beer sales appear to be stalledReports from various beer companies for the first half of 2024 indicate a decline in revenues and profits, highlighting that Budweiser Asia's revenue and net profit both experienced a drop

• Global Monetary Policy Enters Rate Cut Cycle
• Budweiser Hikes Prices in 2024
• Honor's Public Offering Faces Multiple Challenges
• US Treasury Yields Push Toward 5% Amid Ongoing Impacts
• Fed to Cut Rates by Only 75 Basis Points in 2025

Similarly, other brands like China Resources Beer reported only modest gains.

Market analytics reveal a concerning trend: Budweiser's sales volume in China declined by 10.3%, with competitors like China Resources Beer and Tsingtao also reflecting negative growthThe troubling news continues into the third quarter, where Budweiser Asia reported a simultaneous drop in revenue and profitThe reasons for this downturn are multifaceted, involving unexpected summer rainstorms that discouraged consumption, ongoing weaknesses in the dining sector, and a significant shift in consumer purchasing behaviors.

Data from the "2024 Market Analysis" indicates that average prices for both bundled and non-bundled beer products in China have decreased compared to the same period in 2023, reflecting a broader trend of price deflation in an oversupplied market.

Budweiser's income per 100 ml has shown fluctuations over the years, with a revenue increase of 7.9% in 2021, a decrease of 1.2% in 2022, followed by an 8.1% rise in 2023. Yet, in the early months of 2024, there's been a downturn of 4% in the Chinese market

It raises a fascinating inquiry: how effective will Budweiser's decision to raise prices be in the context of slumping sales and weakening market demand?

Expert analysts like Cai Xuefei, managing director at Knowledge Consulting, believe that amidst excessive production capacity and inadequate demand, Budweiser's unilateral price hike will be hard-pressed to stimulate an upswing in terminal prices in the near-termHowever, he emphasizes that Budweiser’s long-standing brand strength in the premium beer segment could enable it to upgrade its product offering and pricing if it executes a robust marketing strategy.

The current state of overcapacity is one of the significant challenges facing China's beer production industryAccording to the National Bureau of Statistics, the total output for large-scale beer companies fell by 1.5% in the first eleven months of 2024. Additionally, the sluggish performance of the dining sector has only added more pressure to the overall beer market, which traditionally relies heavily on restaurant sales.

Despite a year-on-year increase in the dining industry's revenue of roughly 5.7% in 2024, the growth has significantly waned when compared to a striking 19.4% increase over the same period in 2023. This deceleration has reached the broader beer market, as seen in the notable declines in sales of high-end products

Reports indicate declines for brands focusing on premium offerings, including Tsingtao and Chongqing Beer, further signifying that the anticipated rise in sophisticated consumption has not yet materialized.

On October 31, 2024, Budweiser Asia executives unequivocally stated that the current consumption climate has heavily impacted the entire beer market, primarily affecting premium categoriesBudweiser's market share in China's high-end beer sector peaked at nearly 50% in 2015 but has since dwindled to around 40% as other brands have successfully begun eschewing Budweiser’s historical monopoly.

Financial analyses reveal that Budweiser, which once thrived on high-end products—almost half of its portfolio—has recently seen revenue slump sharply in its domestic marketPreliminary figures for the first three quarters of 2024 indicate that Budweiser's revenue fell by 8.3%, with net profit declining by a striking 15.2%. China—once its most lucrative market—reported a 14.1% decrease in net income, standing out as the most severe drop across Budweiser’s operational territories.

Despite the prevailing challenges, Budweiser remains cautiously optimistic, asserting in the recent analyst call that the share of high-end and ultra-premium beers in China still lags behind more mature markets, suggesting untapped potential for growth in premium consumption.

Currently, Budweiser is working diligently to release more high-end and ultra-high-end beers, including the launch of low-alcohol varieties, which reflect a growing trend in consumer preferences for luxury products

The firm has also made strategic moves to enhance its product mix while seeking to protect its pricing structure.

In an interesting twist, Budweiser has undergone an extensive reorganization; with executive appointments intended to revitalize the brand and steer it through today's turbulent watersFabio Sala, taking charge as the president of Budweiser China—after a three-year vacancy—brings a wealth of experience to the companyMeanwhile, previous executives like Zhou Zhen have been promoted to global strategic roles, signifying a shift towards a more coordinated operational strategy within the company.

In an industry marked by the clear trend towards premiumization and evolving consumer behaviors, Budweiser's ability to adapt in this rapidly changing landscape will likely determine its futureThe fourth quarter, a noted slow season for beer sales, poses a significant challenge for everyone within the industry