(Yicai Global) Sept. 17 -- The Chinese business of Budweiser Brewing APAC, the Asian unit spun off last year by the world's biggest brewery Anheuser-Busch InBev, fully recovered in the second quarter after extra resources were given to e-commerce and retail as more consumers chose to drink at home during the pandemic, according to its chief executive.
"The first quarter was very difficult, while in May and June, our volume actually grew mid-single digit," Jan Craps, who is also co-chairman of the Hong Kong-listed company, said in a recent interview with Yicai Global. June was our biggest month ever in China.
"By the end of June, 100 percent of our retailers, over 90 percent of restaurants and about 80 percent of nightlife customers had reopened their business," he said.
The swift turnaround can be attributed to Budweiser's decision to invest more in the home channel and accelerate its online growth as people shifted to in-home and retail buying in the aftermath of the coronavirus outbreak. Budweiser's online market share is twice the size of the second-biggest brewery in China on JD.com and Tmall. Its expects double-digit growth in the future.
"We are seeing a very encouraging recovery," Craps said.
"We are very happy with the momentum that we have built in the last few months. And we are committed to China for the long term," he said. "This is a very important market for us, one of our top four markets in the world."
Still, the strong rebound in China failed to boost Budweiser APAC's performance. Its first-half revenue fell 23.5 percent to USD2.575 billion from a year ago, while net profit slumped almost 66 percent to USD222 million. Sales volume fell 22.2 percent to 387.33 million kiloliters.
Excerpts from the interview are published below.
Yicai Global: Have you seen any new trends in beer consumption in China in recent years?
Jan Craps: The trend towards premiumization is very important. We see consumers continue to ask for more premium products and believe it is a long-term trend. Budweiser is actually leading the premium segments and it's important to have a whole portfolio of premium brands.
Then there is a shift to in-home consumption, as people use their home more and more as a center to host guests and to spend more time.
Next is e-commerce and digitalization. We're actually leading the e-commerce channel here in China. And we expect it to continue as a very important channel, growing double digits in the future.
People also want to have healthier options. They want to be able to buy non-alcoholic and low-alcoholic beers, and that's one of the reasons that today we have Smart Drinking, Responsible Drinking Day to celebrate our healthier offerings.
YG: Many sectors were struck hard by the pandemic. What about Budweiser's operations?
JC: The first quarter was very difficult, like for most industries when Covid-19 hit. However, the second quarter was already much stronger. We actually almost fully recovered our volume of last year in the second quarter between April and June.
In May and June, we actually grew in mid-single digit volume. And June was our biggest month ever in China. So we are very encouraged by our recovery. And we actually expect a good summer as well. We are encouraged by the recovery that we have seen in the last few months in China.
YG: What has Budweiser done to achieve this turnaround in China?
JC: We quickly changed our resource allocation. The first thing we did was protect our employees. We changed all the disciplines and routines of accepting people back to work, whether it's in our breweries or in our offices or with our customers. We had zero confirmed cases out of our 26,000 employees in China. We worked with our wholesalers to help them get back to normal business. And we are supporting them through the crisis.
But also when you look at our investments that we did in different sales channels, we decided to invest more in the home channel. Because as I said before, consumers are shifting to in-home and retail modes. So actually in e-commerce, we accelerated our growth. We are already leading the e-commerce channel here. Now, we are more than twice the size of the second-biggest brewery in China in the e-commerce channel.
YG What are your expectations for the second half of this year?
JC: We are very encouraged. Most of our customers have reopened their business. By the end of June, about 100 percent of our retail customers, 90 percent of restaurants and 80 percent of nightlife customers had opened their business. So we are seeing a very encouraging recovery.
We are very happy with the momentum that we have built in the last few months. And we are committed to China for the long term. This is a very important market for us, one of our top four markets in the world
YG: Does Budweiser have more investment plans and will it bring in more products?
JC: We continue to invest in China. We will continue to innovate this year. We brought Bud Light to China. It's one of our top three global brands. And we launched it in Guangdong, which is one of the most premium markets in the whole of China.
We launched Becks, as well, which is a full-malt German heritage beer. We launched fruit beer, Sedrin Lychee Beer, nationally via e-commerce and also in some urban centers. (This was) because there's also a trend where we see more and more females getting into beer consumption.
We know that many, many consumers just love the fruity taste of beer. So we will launch more products in that segment.
Editor: Peter Thomas