Jacco van der Linden said growth in the premium beer market is healthy despite the decline that started in 2014.
Heineken's Jacco van der Linden sniffs out a premium opportunity in China's declining beer market
For Jacco van der Linden, 45, managing director of Heineken China since 2015, the decline in the country's beer market over the past three years represents an opportunity.
In terms of volumes, 500 million hectoliters of beer were sold in China in 2014. That figure dropped to around 460 million hectoliters in 2016, according to consultancy Euromonitor International.
Currently, China accounts for 25 percent of the global beer market volume, but only 10 percent of global revenues and 3 percent of global profit. However, the high-end segment now accounts for about 10 percent of China's beer market and is growing.
Van der Linden sees an opportunity for the Dutch premium brewer in these figures because consumers are known to trade up when sales plateau－that is, they begin to buy better beer.
Not just in China, per-capita beer consumption has stabilized at the current peak across Asia. Typically, most beer is consumed by the younger lot in the 18-35 age group. Consumption among this group is falling in China.
Van der Linden said: "Seeing the beer markeet maturing in China, where more consumers opt for more premium choices, it makes me optimistic about Heineken's future in China because we specialize in premium beer, brewed to the highest quality. Many consumers want to trade up from mainstream beer to premium beer.
"The premium beer market in China is in healthy growth, despite the decline in the overall market that started in 2014 after a growth period lasting 24 years."
Heineken has been a witness to, and a part of, that extended period of growth. It entered the domestic market in 1983. By then, it had already started exporting to China.
Along the coast of China, most consumers were familiar with international brands. Heineken rode that fondness for foreign brands to secure a strong foothold in Putian, Quanzhou and Fuzhou in Fujian province.
Van der Linden said: "We are already in many second and third-tier cities. Actually, we started in many of those smaller cities because we were much smaller than existing big players, so we wanted to avoid competing head-on with them. We now have a very solid base and a large group of loyal consumers, especially in those cities.
"The main challenge in China is to find those pockets in the market that are profitable. The profitability levels are very low for the brewers, so the brands have to be very smart to choose where they want to play, through which channels, with what products and at what prices."
Part of Heineken's "very smart" strategy is to ensure its beverage is always fresh. Van der Linden puts emphasis on clarity and high quality standards.
"Heineken is brewed in horizontal tanks, rather than in vertical tanks. As far as I know, we are the only brand that is brewed in horizontal tanks, and we brew our beer in 28 days. It takes much longer time to brew a Heineken beer versus most other beers, and such process will result in balanced, very refined and refreshing beer."
