Domestic

Battle of the beers comes to a head

By Wang Chao (China Daily)
Updated: 2010-06-02 07:50

Trouble brews as Yanjing asserts its territory, some Snow beer sellers claim

If two breweries fight a price war, it's hardly novel.

But in the capital, the entrance of a new beer brand has led to fisticuffs over fizz.

The brawl, figuratively and literally, erupted between Beijing Yanjing Brewing Co Ltd, the biggest brewery in the capital, and Snow, a new competitor to the local market.

Lin Fei (not his real name) has been distributing Yanjing beer for four years. He lived peacefully in a one-story house, which also serves as his office and beer storehouse in the Shijingshan district. That was until he began selling Snow beer earlier this year.

Immediately, Lin said, he received warnings from Yanjing: "Stop selling Snow or we will stop providing any stock to you."

Lin didn't take the warning seriously. On April 27, 30 Yanjing workers swarmed into his office and smashed everything, he said.

"It was horrible!" said Lin, who was slightly injured in the attack. Now he keeps three dogs in his yard to watch for strangers.

METRO contacted a Yanjing sales manager, surnamed Mao, to inquire about the incident. Mao said he knew nothing about it.

"Many distributors say Yanjing has sent people to watch their stock and keep track of where the beer goes so they can follow them to the retailers," Lin said.

Technically, distributors can sell any brand they desire. Because Yanjing sells out quickly, distributors usually keep stock of Yanjing on hand.

Some of Yanjing's major distributors say the company has prohibited them from selling competitors' beer.

"When Tsingtao first entered the Beijing market in 2003, Tsingtao officials claimed they would take over the market within three years; however, they only seized a market share of 10 percent after seven years," said Wang Tao, a sales manager for China Resources Snow Brewery Beijing Co, which produces Snow.

Wang called Yanjing's domination a monopoly that is hard to break.

Yanjing itself was developed from a brewery in the Shunyi district in 1980. Now it controls a market share of more than 80 percent in Beijing, which means 800,000 tons of Yanjing beer is consumed every year.

That chokehold has given the company leverage to assert its might, said Gao Shan, assistant to the general manager of Snow.

"Yanjing bought out Snow beer and replaced it with their brand," Gao said.

When Gao asked where his company's beer had been sent, retailers told him Yanjing employees exchanged two boxes of Yanjing beer for one box of Snow beer.

"They then store the Snow beer somewhere and sell it at a lower price in neighboring cities such as Tianjin," Gao said. "A case of 12 Snow beers worth 21 yuan at wholesale will be sold for 14 yuan, which disturbs our pricing system."

Yanjing executives emphatically denied the claims. "Snow is just making sensational news to draw attention from the media," said Mao, the sales manager. "We never maliciously buy out Snow beer."

Ten days ago, 290 cases of Snow beer were found in a distributor's yard in Anxiangli, Chaoyang district.

"The distributor said Yanjing paid him 500 yuan to store the beer at his place," Li Qingjiu, a market supervisor from Snow, told METRO. When Li found the beer, it had been stored outside near a trash field and a public bathroom.

"If Yanjing sells these contaminated beers to consumers, it will destroy Snow's reputation," Li said.

Yanjing dwarfs Snow, which sold 70,000 tons of beer in Beijing last year.

"Although we sell more beer in China, we are a new arrival in Beijing," Gao said. Last year, Snow rang up national sales of more than 8.4 million tons, followed by Tsingtao with 6 million tons, and Yangjing with about 4.2 million tons.

"Maybe they want to nip our business in the bud," Gao said.

Beijing wasn't a major market for Snow until the beginning of this year, when top executives decided to explore the biggest domestic market and increased its Beijing payroll to 400 from 100.

Yanjing's pioneer product is newly developed wheat beer. It features Beijing opera mask as the brand, and taste different from Yanjing beers.

Snow Beijing company did a survey among the customers and got quite positive feedback.

However, Gao and his group soon found these beers sold a little too quickly; in some cases a store's entire stock was depleted within a day. It was abnormal.

"Later, we found 700 boxes of Snow being sold in Tianjin," Gao said.

"I protested to Yanjing, but didn't get any reply," said Gao, who noted he was unsure whether senior managers or sales staff of Yanjing adopted this strategy.