The Company is mainly engaged in the production and sales of beer, the production, sales and domestic trade of beer.
1Q results for the 3 months ended 31-03-2019. No dividend was declared. (Announcement Date: 29 Apr 2019)
Business Review - For the year ended December 31, 2018
In 2018, in the context of steady domestic economic development and the distinctive trend of consumption upgrade, the development of the beer market has stabilized gradually. Its capacity and product structure have been further optimized and industrial competition has seen improvements. In 2018, the total beer production nationwide reached 38.12 million kl (Data source: National Bureau of Statistics above-scale enterprises production capacity), a slight year-on-year increase of 0.5%, which marked its first positive growth since 2014.
During the Reporting Period, the Company has continued to follow the “Development Strategies based on Capacity and Brand” established by the Board, and remained steadfastly confident in its strategy, brand, products, and team. The Company has vigorously promoted its transition from old growth drivers to new ones and the upgrading of its product structure. It has proactively expanded its domestic and foreign markets through a combination of measures, including “maintaining growth, adjusting structure and enhancing cost-effectiveness”. Total annual beer sales volume reached 8.03 million kl, a year-on-year increase of 0.8%; annual operating revenue reached approximately RMB26,575 million, a year-on-year increase of 1.13% (Note: Due to the Company’s implementation of new revenue standards during the Reporting Period, the year-on-year increase of operating revenue was 5.15% on a comparative basis); net profits attributable to the shareholders of the listed company was approximately RMB1,422 million, a year-on-year increase of 12.60%. In summary, the Company has shown a sound development trend with profit growth greater than revenue growth, and revenue growth greater than sales volume growth.
During the Reporting Period, the Company has faced severe challenges in the form of competitive pressure and continually rising costs caused by overcapacity in the beer industry. In light of such challenges, the Company has remained steadfast in its strategic and operational capabilities, and concentrated on its work policy of “achieving quality- and profit-based growth through transformation, upgrading, dual increases, dual adjustments with a focus on the present; unleashing the dual benefits of old and new growth drivers through innovation-driven and assuming responsibilities boldly while keeping the future in mind”. The Company has harnessed the brand and quality advantages of Tsingtao Beer, and further refined a multi-dimensional, structured, and layered nationwide market strategic layout. The Company has also wielded the synergistic effects of production and sales, by focusing on advantaged markets, relying on the existing production bases, as well as fanning out to further establish a strategic market and urban market base. It has placed an emphasis on resource investment based on market layout and persisted in enhancing the market competitiveness of its products through its strong brand and product mix, to achieve breakthroughs in the regional market and drive the growth of its peripheral market. At the same time, the Company has maintained its market share, while keeping a close watch on the market to adjust its structure and prices. These actions have resulted in increased profitability.
The Company has continued to promote and improve its marketing model of “Key Account + Micro Management”, harnessed its advantages in production and sales networks covering major markets across the country, further reinforced market expansion and channel development, refined its distribution network, intensified terminal operations, continued optimizing its division of work along the marketing value chain, enhanced its sales capabilities in regional and subdivided markets, and driven growth in market sales and market share. At the same time, the Company has further optimized its expense management system to enhance the effectiveness of promotional expenses and marketing efficiency. In addition, the Company has proactively explored and practiced the deep integration of real economy and “Internet+”, improved its e-commerce channel system, satisfied the purchasing requirements and consumption experiences of consumers in the Internet era through several channels, and accomplished the innovative transformation of featured new business models.
In light of the emerging trend of upgrades in the industrial consumption structure, the Company has continued to promote its brand strategy of “Core Brand Tsingtao Beer + Secondary Brand Laoshan Beer”. It has remained committed to its “Four in One” promotional model for its brand and vigorously expanded interactions and communications with consumers through sports marketing, music marketing. During the Reporting Period, the Company has taken the opportunity of the Shanghai Cooperation Organization Summit in Qingdao and the 2018 FIFA World Cup in Russia to carry out further global brand promotional activities for Tsingtao Beer, thereby expanding market coverage further and boosting sales. In December 2018, Tsingtao Beer was selected as an official sponsor of the Beijing 2022 Winter Olympics and Paralympics. This marked another cooperation with the Olympic Games, following Tsingtao Beer’s official sponsorship for the 2008 Olympic Games in Beijing. The upcoming event shall further accelerate the internationalization of the Tsingtao Beer brand.
In terms of the international market, the Company has continued the proactive expansion of Tsingtao Beer’s global marketing network through the advancement of the country’s “Belt and Road” Strategy. The Company has adhered to the concept of “High quality, high price and high visibility” for promotion in overseas markets, gathered resources to develop regional influential markets with market potential and brand popularity, and continued to diversify its product lines to accommodate the preferences of consumers in different regions, especially the younger consumers. Furthermore, the Company has elevated its brand influence, and continuously built and enhanced the highend brand positioning and product image of Tsingtao Beer. The Company has taken active steps to facilitate the implementation of various market strategies and brand strategies. It has continued to optimize the channel structure of overseas markets through a combination of means, including featured market promotions and richer consumer experiences and interactions such as the Chinese New Year and Mid-Autumn Festival activities, as well as the inaugural “Tsingtao Mini” Beer Festival in the Americas, Europe, Oceania and Asia Pacific regions. In addition, it has strengthened brand communications and promotions through concerted online and offline promotional activities on global mainstream social media platforms, hence providing overseas consumers with the best brand and product experiences. In 2018, Tsingtao Beer products sold to over 100 countries and regions around the world.
Thanks to first-class domestic R&D platforms, the Company has developed popular differentiated products based on the consumers’ demands. In recent years, a number of new special products have been successfully developed and launched, including “Classic 1903, whole-barley Weissbier, raw stock, Tsingtao Pilsner and Tsingtao Beer IPA”. These products have boosted the optimization of the Company’s product structure and the layout of strategic new products and new special products. The Company has expedited the transformation and upgrading of high value-added products represented by canned beer and craft beer. While promoting the supply-side reform and leading the consumption trend, the Company has also improved its profitability. In 2018, the Company’s total sales volume of its core brand, Tsingtao Beer, reached 3.914 million kl, a year-on-year increase of 3.97%, including a total of 1.733 million kl in high-end products such as “Augerta, Hong Yun Dang Tou, Classic 1903 and draft beer” etc., a year-on-year increase of 5.98%, thus maintaining its leading position in the mid- and high-end market.
During the Reporting Period, the Company was widely recognized by domestic and overseas consumers for its excellent quality. Tsingtao Beer products received the Gold Medal at the “World Beer Championships” and was awarded the “2018 European Beer Star”. In 2018, Tsingtao Beer has maintained its top position in terms of beer industrial brand value in China with a brand value of RMB145,575 million (published by World Brand Laboratory). The brand value of “Laoshan Beer” reached RMB27,258 million (published by World Brand Laboratory).
During the Reporting Period, the Company has completed the general election for a new session of the Board and Board of Supervisors, improved its corporate governance structure, as well as laid a solid foundation for the continued progress of its future strategic development goals and sound sustainable development. At the same time, upon review by and approval from the 2017 Annual General Meeting, the Company has amended the Articles of Incorporation, implemented the legal position of Party organizations within the Company’s corporate governance structure, organically integrated the core role of the Party and corporate governance, and further guaranteed the standard and effective operation of corporate governance.
Business Outlook - For the year ended December 31, 2018
The Company shall continue to implement its “Development Strategies based on Capacity and Brand”, focus on the transformation of the development model, accelerate structural optimization and adjustment, build and reinforce strategic markets and its core base market, achieve breakthroughs in emerging markets and continuously increase its shares in both domestic and foreign markets. At the same time, the Company shall innovate to stimulate its development, harness the brand and quality advantages of Tsingtao Beer, accelerate R&D, marketing and upgrading of various strategic new special products, improve its customer-oriented differentiation competitive advantages, and persist in making new progress in the domestic medium- and high-end market by relying on its competitive strategy on differentiation.
Along with the continuous development of China’s economy, the recovery of the beer industry and the upgrading of consumption shall lead to greater opportunities for various domestic beer enterprises with corresponding brand and scale advantages. The Company shall seize the opportunity, harness the brand and quality advantages of Tsingtao Beer, achieve high-quality development through transformation, upgrading, enhancement of product structure, cost reduction and increase in efficiency, and strive to achieve sales volumes that are higher than the average growth rate of the domestic beer industry.
The Company shall take further steps to expand its domestic and foreign markets, continue to improve the utilization ratio of its existing capacity, enhance product and structural optimization and upgrading, establish a normalized price adjustment mechanism, and maintain its leading position in the domestic medium- and high-end markets. Furthermore, the Company shall proactively explore the application of Internet of Things, Big Data, Mobile Applications and other new information technologies, drive the transition from traditional production model to the “Internet + Industry” model, and satisfy various market needs in terms of a wider variety, higher efficiency, higher quality and lower costs.
The Company shall continue to focus on market resources, improve marketing channels and networks and create new marketing modes. It shall accelerate the integration process of the sales network, and set up the most competitive channel network and sales operation model. In addition, the Company shall persist in the implementation of its product differentiation strategy and speed up the transformation and upgrading into high value-added products by continuously optimizing the brand and category structure; the Company shall also promote the development of modern channels, reinforce the strength of e-commerce channels, achieve online and offline sharing of resources and mutual complementation of advantages, strive to enhance marketing efficiency and synergy, and drive the sustained growth of sales volume and revenue.
The Company shall continue to implement its 1+1 brand strategy of “Core Brand Tsingtao Beer + Secondary Brand Laoshan Beer”, use the brand to drive the development of categories, and establish the “Four in One” marketing model. With a focus on in-depth sports marketing and music marketing, the Company shall optimize resource allocation, expedite the development of core products of the core brand by developing popular differentiated products, and thoroughly improve the brand’s international, young and fashionable image.
In 2019, the board and the management layer will lead and organize all employees to positively promote and deepen the reform of state-owned enterprises and the transformation of new and old kinetic energy. According to the Company’s established development strategies, various advantages in the quality, brand and technology will be fully taken to improve the core competitiveness and the sustainable development of the company, creating higher vale for the shareholders.
Source: Tsingtao Brewery (00168) Annual Results Announcement