David Brancaccio: Brewing companies are trying to foster some snob appeal among beer drinkers in China. Bloomberg News reports that local beer in China tends go for the equivalent of about 30 cents a can. So there’s the push is on for super fancy high end beer like… Budweiser. And you thought Bud was a down-to-earth brand?
Joining us is Tom Pirko who follows these things at BevMark. Hello, Tom.
Tom Pirko: Good morning.
Brancaccio: So I’m trying to understand this — Budweiser is to beer in China what Lamborghini is to cars here in the U.S.?
Pirko: That’s not exactly true. But Budweiser’s defined globally by where it’s sold in the culture, and they try to increase consumption. The whole approach of AB InBev when they bought Budweiser was largely centered upon international expansion. So they were looking at China when they spent $52 billion for Budweiser.
Brancaccio: It reminds me of a liquor store in Britain where they had a fancy display advertising this fine foreign vintage wine. I’m not making this up — it said “Thunderbird, the American Classic.”
Pirko: You’re so cruel. In point of fact, you can define a brand anyway you like. The Chinese beer market is the biggest beer market in the world. Basically, people have not been making a great deal of money because beer is so cheap. But as the market grows, incomes have risen on average 10 percent a year. The Chinese want the status of having international brands. So they’re paying more for them, and the international brewers are just trying to close the gap on price.
Brancaccio: You know I’m glad you made that point, though, about just how they’re trying to change the market over there. I think that’s a very interesting trend.
Pirko: Markets are open by definition. You define a market as the market defines the products. The people in China, who are, as you said, buying Lamborghinis, are interested in being seen drinking certain kinds of products. So the value, the status goes up and up as the lifestyle goes up and people have more disposable income.
So everything in China is really about — It’s not about beer, it’s about the Chinese. And with about a fifth of the world’s population, they want the power and the self-esteem that is associated with being wealthier. So they’re going to drink brands that cost more.
Brancaccio: Tom Pirko, BevMark, thank you very much.
Pirko: Yeah, thank you David.