Budweiser beer merchandise manufactured by Anheuser-Busch InBev NV sit on show throughout a information convention in Hong Kong, China, on Thursday, July 4, 2019.

Kyle Lam | Bloomberg | Getty Images

The world’s largest brewer is making a giant push for China and different components of Asia — however it might show difficult for Anheuser-Busch InBev to topple native beers which have lengthy dominated their residence markets.

After itemizing its Budweiser APAC in Hong Kong final week, AB InBev mentioned will probably be seeking to develop in Asia, particularly in China, South Korea, India and Vietnam.

But in China — the place premium beers are in style — AB InBev is in third place with a 16% market share, in accordance with Euromonitor. Across Southeast Asia, the corporate shouldn’t be even in the highest ten locations.

“Local Chinese beer companies have very strong control on the local regional share market so it remains to be seen what Budweiser’s strategy (is) going forward from here,” Bank of Communications International’s chief strategist, Hao Hong instructed CNBC.

Analysts say massive gamers have already been shopping for up smaller beer corporations in Asia, and that may very well be one of many methods for AB InBev.

However, native beers nonetheless dominate in Asia.

China’s brews

China is the world’s largest beer market by gross sales however companies have discovered it difficult amid fierce competitors between native brewers and world beer giants.

China Resources Beer has greater than 25% market share in the Chinese market, in accordance with Reuters. Its vastly in style Snow beer is the top-selling beer in the world by quantity.

The firm is the biggest native brewer by market worth, adopted by Tsingtao Brewery and Chongqing Brewery, Refinitiv knowledge exhibits.

While the native Chinese brewers have a robust presence in the regional share market, the beer market in China continues to be largely fragmented, Hong mentioned.

He added that China’s tipple of selection continues to be the baijiu, a conventional drink constructed from fermented grain that holds sway in the nation.

“The segment that is really doing well is the baijiu … so it remains to be seen how much further growth the company can get from the Chinese market,” he mentioned, referring to Budweiser APAC.

About half of all beer consumed throughout the globe are offered by AB InBev, Heineken, Carlsberg and China’s Snow.

In addition to Budweiser, AB InBev additionally owns different in style beers comparable to Stella Artois, Corona and Hogaarden.

Southeast Asia beer offers

Southeast Asia might show to have higher prospects, as it’s projected to be a key driver for growth, in accordance with analysis analyst at Euromonitor, Jarred Neubronner. Key markets could be Vietnam and Philippines, he added.

“(AB InBev) is still not among the top 10 players in the Southeast Asian region in 2018 due to the dominance of local beer players,” he mentioned. “In order to grow further, the company needs to make a breakthrough in Southeast Asia countries such as Vietnam and Philippines.”

Some gamers have already performed so by buying home manufacturers in a few of these markets.

Employees organize bottles of Moutai baijiu on the Kweichow Moutai manufacturing unit in the city of Maotai in Renhuai, Guizhou province, China, Dec. 14, 2017.

Qilai Shen | Bloomberg | Getty Images

Thai Beverage, as an illustration, purchased over Vietnam’s largest beer firm Sabeco (Saigon Beer Alcohol Beverage Corp) in a $4.eight billion deal in 2017. “(That) immediately catapulted Thai Beverage to become the number one beer player by volume in Southeast Asia,” mentioned Neubronner.

Across Asia-Pacific, the corporate, which is listed in Singapore, ranked sixth in 2018 in phrases of market share at 3.9%, in accordance with Euromonitor.

“Many leading beer players in Southeast Asia are local players with strong local knowledge and distribution networks, so acquisitions of local beer companies is possible if AB InBev wishes to increase its market share in the region and tap on the expertise from established local players,” Neubronner mentioned.

In China, Heineken took a 40% stake in China Resources Beer final 12 months, in a problem to AB InBev place in the premium lager market there.

However, beer could be dropping floor to spirits, wine and different alcoholic drinks.

Beer consumption in China is about to drop nearly one billion liters by 2023, as shoppers change to different alcoholic drinks comparable to spirits, in accordance with Euromonitor.

Cheers to alcohol shares

Demand for alcohol-related shares in Asia has been robust, in accordance with KraneShares Chief Investment Officer Brendan Ahern, whose agency operates 16 China-focused ETFs with $2.5 billion property below administration.

Commenting on the Budweiser IPO, he mentioned: “Alcohol stocks have been a favored sector for Asia investors of late, which the company is tapping into.”

Under the KraneShares Bosera MSCI China A ETF, the distillers and vintners sub-sector shares are up 101%, whereas brewers are up 33% 12 months thus far, in accordance with Ahern.

“Revenues and (earnings per share) growth for the underlying companies have been very strong as demand from Chinese consumers continues to grow,” he mentioned. “The companies have been able to expand production while maintaining pricing due to the strong demand.”

Ahern flagged ultra-premium Chinese baijiu distiller Kweichow Moutai — thought of a bellwether amongst China’s client shares, and mentioned the corporate’s revenues and earnings per share have doubled between 2015 and 2018.

— CNBC’s Yen Nee Lee and Reuters contributed to this report.

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