Tsingtao Beer Q3 revenue fell by 3%, deducting non-net profit slightly increased by 0.25%, the future growth rate is uncertain?

In the short term, Tsingtao Beer's revenue and non-net profit growth rate in the third quarter are weak. In the long run, even if the unit price of products has been increased through high-end strategies, before the brand influence and product pricing power of high-end products have increased significantly, the space for Tsingtao Beer to increase sales revenue through price increases is relatively limited.

Tsingtao Beer's revenue and net profit growth rate in the third quarter are weak?

On October 28, Tsingtao Beer released the third quarter report of 2021. According to the financial report data, Qingdao Beer achieved operating income of 26.771 billion yuan in the first three quarters, an increase of 9.62% year-on-year; achieved a net profit of 3.611 billion yuan, an increase of 21.25% year-on-year; and achieved a non-net profit of 3.216 billion yuan, an increase of 20.09% year-on-year.

Beer consumption is greatly affected by temperature, and the second and third quarters are the traditional peak seasons for beer sales. However, Tsingtao Beer did not continue its previous good growth rate in the third quarter. According to the financial report, in the third quarter, Tsingtao Beer achieved operating income of 8.48 billion yuan, down 3.01% year-on-year, and net profit of 1.195 billion yuan, an increase of 6.43% year-on-year; net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 1.057 billion yuan, a slight increase of only 0.25% year-on-year.

It is worth noting that the financial report data shows that in the first three quarters of 2021, Tsingtao Beer achieved a total of 7.082 million hectoliters of product sales, an increase of only 2.02% year-on-year. Compared with the revenue growth rate of Tsingtao Beer in the first three quarters, it can be seen that its revenue growth mainly depends on the increase in product unit price rather than sales growth.

The beer industry is in a period of deep adjustment, and the sales ceiling has become a reality

The industry generally believes that the beer industry is currently in a period of deep adjustment. As early as 2013, China's domestic beer market peaked, and since then beer production and consumption have shown a downward trend year after year. Coupled with the slowdown in the growth rate of the main consumer population aged 20 to 50, negative growth is likely to occur in the future, reflecting that the incremental space of the domestic beer market has been very limited, and the industry has entered a period of stock competition.

According to the data, Tsingtao Beer achieved product sales of 8.03 million kiloliters, 8.05 million kiloliters and 7.82 million kiloliters from 2018 to 2020, respectively. Among them, the main brand Tsingtao Beer achieved sales of 3.914 million kiloliters, 4.051 million kiloliters and 3.879 million kiloliters, respectively. This shows that Qingdao bottle wine has been extremely difficult to rely on increasing sales to achieve growth.

In this regard, domestic beer manufacturers, including Tsingtao Beer, have chosen a high-end strategy to increase the unit price of products, in order to achieve the growth of sales revenue and profits. In recent years, Tsingtao Beer has successively launched high-end products such as Centennial Tour, Amber Lager, August, Hongyun Dangtou, Classic 1903, pure draft beer and so on.

However, the high-end process of Tsingtao Beer is not smooth. According to the data, of the 782 kiloliters of Tsingtao Beer's annual sales in 2020, high-end products achieved a total sales volume of 1.792 million kiloliters, down 3.5% year-on-year.

High-end product pricing power is not high?

In the domestic beer market, "foreign beer" has long controlled most of the high-end market. The latest known data shows that as of 2019, only the "foreign beer" Budweiser has a share of 46.6% of the high-end beer market. Although Tsingtao Beer ranked second, it only occupied 14.4% of the market share, less than one-third of its rivals.

The market share of Tsingtao Beer's high-end products is significantly lower than that of competitors, and the brand influence is slightly weaker, resulting in low pricing power of its high-end products.

Since the beginning of this year, beer raw materials have put pressure on the cost side of beer. According to data, as of the end of April 2021, the price of cans increased by 44% compared with last year, and the price of glass also increased by 64% year-on-year. Theoretically, beer companies would raise prices to absorb rising costs. In May this year, several budweiser brands raised prices.

However, so far, Tsingtao Beer has only been rumored to have raised prices, and the industry has only expected it to have a large price increase at the end of the year. To some extent, this reflects that the pricing power of Tsingtao Beer is not high.

It is worth noting that beer is different from liquor, and even high-end beer is classified among mass consumer goods. The possibility of large and high-frequency price increases for mass consumer goods is very small, and even if the brand successfully raises prices, there is a possibility that the new pricing will be transmitted to the consumer end and will not be accepted by the market.

Therefore, even if the unit price of products has been increased through high-end strategies, before the brand influence and product pricing power of high-end products have increased significantly, Tsingtao Beer has limited space to increase sales revenue by raising prices. In the future, there is still some uncertainty about whether Tsingtao Beer can maintain the existing revenue and net profit growth rate.