Fermentation in the China Beer Industry

We have highlighted how the structure of the China brewing industry affects the nature of competition within that industry. A typology of four configurations was presented, along with the key industry characteristics of each. We argue that because China is such a vast country, competing in China requires that organizations view China as consisting of distinct arenas in which to operate. Organizations competing in rural China require different competencies from those competing in large metropolitan areas. In their continuing search for greater economies of scale, brewers in the China beer market are striving to achieve a high degree of product and process standardization because they face high fixed costs. Brewing is a mature industry where large firms, such as Anheuser-Busch and SABMiller, enjoy significant market shares. While opportunities for differentiation still exist, they are difficult to pursue because buyers are knowledgeable about competing products and costs. Heineken has chosen to achieve sustainable dominance in various regions by adopting local strategies that lower supply-chain management costs and increase its ability to capture local customers. To pursue this strategy, Heineken has acquired local brewers in order to gain a stronger bargaining power over its suppliers, lower its operational costs, and gain market share. [PUBLICATION ABSTRACT]