(Chinese Version)

Craft beer is gradually catching the heart of young people in big cities like Beijing and Shanghai. It has become a new trend for young people to have a glass of craft beer on social occasions under the dim light.

The beer brands we usually have such as Tsingtao and Yanjing are industrial beer. They are mass-produced and therefore cheap, but taste very plain.

Brands such as Nitro, Pale Ale, Trappist & Abbey etc. represent different flavors of craft beer. Craft beer in some way is a lifestyle and cultural symbol. It’s also a business opportunity. In all beer categories, craft beer has been the fastest growing category among all in the past five years. This trend is global.

Former Chinese Google senior executive Shen Kai saw the opportunity and started his own entrepreneurial journey. In 2016, he signed from Google and established a social app for beer lovers named Jiuhuar. The app allows users to socialize, comment on beer and provides e-commerce features.

The craft beer market is booming

The history of craft beer can date back to the US in the 80s during which period people eventually got tired of mass produced beer as they were light and boring. That’s the time microbrewery or craft brewery started to become popular because people wished that craft breweries could bring about beer of different flavors and taste.

What is craft beer exactly?

According to the definition set by the Brewers Association:

A craft brew should be small, independent and traditional.

Small means the brewery produces less than six million beer barrels annually, which is about 70.2 tons. This amount is about 3% of the total beer sales of America in one year. Independent means non-craft-breweries or commercial organizations hold no more than 25% of the craft brewery’s stock. As for traditional, it means most of the beer must be produced through traditional brewing techniques or innovative ingredients. The light beer we drink are not craft beer.

Among all craft beer brands, Belgium’s Trappist is the most famous one. The craft beer is brewed by friars believing in Trappist inside their monasteries. According to them they produce the beer for charity purpose, and brand their products with Authentic Trappist Product.

Liquor stories like these are not rare. It’s like only maotai produced in Maotai, Guizhou province is truly authentic maotai. Every liquor has its own history.

This unique cultural phenomenon also brings forth business opportunities. The global beer market has the tendency of developing towards the high-end market as the sales of high-end beer, including craft beer, has grown by 160%, accounting for 4% of the global total beer sales and 18% of the revenue. It’s worth noting that craft beer now accounts for 20% of the market share in America. The market is maturing. “China’s beer market is developing towards the high-end market with notable high growth in craft beer,” says an industrial report from Rabobank.

Chinese people on average consume 36 liters of beer, and craft beer can be a very big part of the market. Shen Kai’s team has done a relevant research: “In China, the consumption of craft beer takes up less than 1% of the whole market. Young Chinese consumers share similar consumption lifestyle with their peers in other countries. They show great interest in craft beer. And Caft beer has been very successful commercially in Shanghai, Beijing and Chengdu.”

From IT professional talent to beer brewery owner

However, despite the immense potential, there are also many factors holding the craft beer market back.

1. User education. Most Chinese consumers don’t have a clear understanding of craft beer, and therefore the industry needs to education them about it.

2. The distribution, logistics, and importing ingredients bring forth challenges. The high cost is a big risk and pressure bringer. There are also issues on the cold-chain logistics as well.

3. At present domestic craft breweries are limited in capacity. Even major players like Tsingtao’s craft beer couldn’t win over users.

Shen Kai is hoping to penetrate and change the market from the three aspects mentioned above. That’s why he started Jiuhuar and a Jiuhuar Guild WeChat official account. Shen even acquired a brewery in Anhui province to professionally produce craft beer.

Shen Kai is a IT professional talent. He joined Google in 2005 and was one of the earliest Chinese staff at Google. He built and expanded the AdSense team within three years and was in charge of CPC, Google search and brand strategy. He is a famous Internet marketing master in the industry.

At Google, he participated in almost every product line and became a professional manager: “I have learned a lot of advance concepts and management methods. And I am using Internet to change the development of China’s liquor industry.”

Shen Kai’s family is also related to liquor in some way. Shaoxing Rice Wine Shen Yonghe was founded by his family 200 years ago and it’s a leading rice liquor brand in China. After Shen Kai graduated from Fudan University, he even became an international level three wine taster as he tasted over 1000 wines.

Shen Kai holds an open attitude towards the Chinese craft beer market. He encourages his brewers to add Chinese flavors. Perhaps one day we will be able to drink rice wine flavor craft beer thanks to his efforts. TMTPost also discovered that at Jiuhuar’s office there are several fridges storing hundreds of bottles of beer, and that most of the staff are young people who drink a lot.

“At our company, everyone drinks. Everyday at 4, we will start tasting beer to improve our business kills. So people who are allergic to alcohol won’t find a job here,” Shen Kai told TMTPost. The company’s chief brewing director was a former middle school teacher. He gave up his job following Shen Kai to enter the craft beer industry.

Shen Kai and three colleagues even translated The Craft Beer Revolution, written by Steve Hindy, founder of Brooklyn Brewery. The book will get into circulation in Mid March. The book tells the story of a handful of "microbrewery" pioneers who launched a revolution that would challenge the dominance of the national brands. The book provides great insights for the Chinese craft beer market.

Over the past 40 years, the craft beer segment has exploded. In 1980, a handful of "microbrewery" pioneers launched a revolution that would challenge the dominance of the national brands, Budweiser, Coors, and Miller, and change the way Americans think about, and drink, beer. Today, there are more than 2700 craft breweries in the United States, with another 1,500 in the works. Their influence is spreading to Europe's great brewing nations, and to countries all over the globe.

Shen Kai translated this book in hopes of providing guidance for Chinese craft breweries so that they could avoid some mistakes already made in the past.

Building a community for business entry

From Shen Kai’s perspective, standard craft beer has high requirements for the production ingredients: only natural ingredients such as water, malt, yeast, and hops. To lower the cost, industrial beer brewers would add rice and starch, compromising the taste and flavor.

In America, there are a few mainstream beer-rating social apps, such as Ratebeer, BeerAdvocate and Untappd. Shen Kai is hoping to develop more Chinese-centric features upon the existing functions to crack open the vertical craft beer community. And from that, e-commerce and advertising could be added on in the future.

TMTPost found that on Jiuhuar, there are 6,100 different beers accumulating 30,000 registered users and 15% active users. The app is currently building a bar map in China. One of Shen Kai’s staff biked around the country and visited 20 Chinese cities to find local craft breweries and add them on the map. Jiuhuar will make marketing cooperation with these bars and roll out coupons.

At present, Jiuhuar integrates features such as feature feeds, rating, and socialize. Jiuhuar constantly picks up news on craft beer and feed users in information on beer kinds, reviews, crafting techniques, and competitions etc. It allows users to comment and chat via its community feature and includes offline bar and activities. Besides Beijing and Shanghai, second-tier cities such as Chengdu and Xi’an also have craft beer fans that gather on Jiuhuar.

“Unlike cheap industrial beer, craft beer are more expensive and every customer spends around ￥450 each time purchasing craft beer on average. Frequent craft beer buyers are generally mid and high-end customers with high income. Jiuhuar is exploring the business value of these people, such as e-commerce, online payment,” Shen Kai said.

The booming era for craft beer is approaching. Francois Sonneville, senior analyst at Rabobank once told media: “Whether it’s for international or local craft beer brewers, the best time for development has come.”

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[The article is published and edited with authorization from the author @Sun Cheng, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.