Getting global recognition
Tsingtao Beer Museum
FOR a long time, Tsingtao's status as the world's top-selling Chinese beer was somewhat hollow because it had gained little acceptance outside China. However, things have changed in the five decades since it began its journey to go international.
Now that it has a toehold in foreign markets, Tsingtao Brewery Co Ltd, based in Qingdao in Shandong province, can now press on for a bigger slice of the pie, particularly in the United States.
“We have enjoyed tremendous success in the US as our beer is sold in many restaurants and outlets. We are now set to carry out a campaign called 'Out of Chinatown To Downtown'.”
Over the decades, he adds, the company has worked extensively with marketing agents and restaurant and supermarket operators to promote and market Tsingtao Lager in the US.
Tsingtao Brewery chief brewmaster Fan Wei says overseas consumers have a good impression of Tsingtao beer and it has become a brand synonymous with the Chinese.
He recalls: “While in the US, I heard a New Yorker saying, 'Tsingtao beer – China's beer' to a Chinese man when they met. I can see that it has a good reputation in the US.
“Tsingtao Brewery must continue to expand and grow as we have a rich history of more than 100 years. We are paving the way for the next 100 years.”
Fan says the company will build on its domination of the domestic market and at the same time, promote the brand internationally.
“We'll continue to improve our management, production, marketing, technical skills and network. Our mission is to use our enthusiasm to brew the beer preferred by our costumers,” he adds.
During the German colonial period (1897-1914) in China, Qingdao – one of the 14 major coastal cities in China – became an important wharf. The Germans have left their mark on the city, and this goes beyond the architecture.
In 1903, the German settlers founded the brewery. Tsingtao Brewery is today funded by the Chinese government and international investors, but it maintains the recipe of its founders.
The old factory in No. 56 Dengzhou Road has been turned into the Tsingtao Beer Museum, where visitors can learn more about the history and production process of the brewery.
“The German influence has taken root in Qingdao. Their brewing and production methods are still evident in our brewery,” says Fan. Much of the machinery and equipment are still imported from Germany.
Tsingtao Brewery imports raw materials from France, Canada and Australia. Fan explains: “This is not to say materials from China are not good. This is simply because the supply from China cannot meet the demand of both the domestic and international markets.
“The Chinese beer industry is growing fast. Beer production in China made up about 14% of the world's total last year. Chinese brewers produced 34 million tonnes of beer, making China the world's largest beer producer. So, when supply cannot meet our needs, we have to import from elsewhere.”
He adds that the domestic supply of raw materials can only cater for 40% of the domestic market's demand. The brewery buys materials from suppliers who can fulfil its needs and offer the best deals.
He notes that there had been revolutionary changes to the company's brewing recipes since 1903 to suit the consumers' preference for light beer.
“The younger generation prefer milder beer and if we produced beer with typical strong German beer, I don't think they would love it. This has affected the sales of German beer in China,” he says, adding that the brewery still produces strong beers for the international market.
Asked about quality control and the spate of negative reports on Chinese products of late, Fan says: “We've exported our beer overseas for so many years and gone through the strenuous tests globally.
“We turn our anxiety into confidence. We have to meet over 1,000 different standards used across the industry. With such standards and our own quality control, I'm upbeat about our overseas sales.”
The brewery began to export its beer to the Britain in 1954 before entering the American beer market in 1972. The beer is now available in more than 70 countries and is the largest beer producer in China.
Tsingtao Brewery operates more than 40 breweries and malt plants in 18 provinces, municipalities and autonomous regions in China, but none overseas. The company was listed in Hong Kong and Shanghai at the same time in 1993. Even though the company has been exporting its beer abroad over the decades, it has yet to invest heavily in any expansion programme outside China.
But now, the company plans to intensify its global marketing and branding campaign. Says Tsingtao Brewery chairman Li Guirong: “Our emphasis is still on the domestic market but our export market remains firm.
“The Chinese market has a big potential and we should put in more efforts to do well in China but I have not given up on the overseas market.”
He adds that the company is studying various ways to bolster its position internationally, such as by setting up factories and diversifying its production abroad.
In the last five years, Tsingtao Brewery has recorded a two-digit annual growth rate in terms of profits and output volume. The company focuses on the integration of its management and production.
Says Li: “We didn't have any big investment in the past five years. Last year, we had a total gross value of 11bil yuan and a sales volume of 4.5 million tonnes, compared with 8.6 billion yuan and 2.5 million tonnes in 2001.
“You can see we still have some progress even though we didn't invest much.”
“At the end of last year, the board of directors made a decision to move ahead with new strategies, following our results for the last five years. By the end of this year or early next year, we will have the capacity to invest in new factories.”
Li predicts that the growth rate of the company in years to come will surpass that of the past five years. “We expect a 15% to 20% growth rate every year.”