Beijing, March 7 - Tsingtao Brewery Co Ltd, China's best-known beer brand, expects more than 11 percent growth in sales and profits in 2008 despite rising raw materials costs, its president said on Friday.
Higher costs for barley and hops would bite into profits from this month, even though the company had seen a 40 percent jump in profit and 30 percent sales growth in January from the year-ago period, said Jin Zhiguo, the company's president.
The brewer, established a century ago in the port city of Qingdao, sold 5 million tonnes of beer last year, ranking second in the country with a 13 percent market share behind China Resources Enterprises Ltd, which sells the premium Snow brand among others.
Tsingtao would raise prices on its high-end products while expanding sales of low-end products to make up for the raw material costs, said Jin.
High raw material costs would speed up industry restructuring and force many of China's 400 lesser-known brands to close down.
"High costs will force many (smaller) breweries to close, which will provide a good chance for us to expand our market share," Jin told reporters on the sidelines of the annual meeting of the National People's Congress.
The company is looking for barley from South America and Ukraine after drought reduced supplies from Australia, the world's largest exporter, said Jin.
Reduced supplies from Australia and elsewhere have pushed up barley prices by 150 percent in the last year. Domestic hops prices have risen by almost 500 percent.
Tsingtao, which is 27 percent-owned by top U.S brewer Anheuser-Busch Cos Inc, is one of the third-tier sponsors of the 2008 Olympics, to be held this August in Beijing. It expects the Games to raise its brand recognition worldwide.
The company's brewery in Thailand will begin production in 2009. If that plant is successful, Tsingtao will set up more oversees plants or buy overseas brewers, Jin said.
"Countries with similar cultures to China will be our priority ... and also major beer consuming countries, like East Europe."
China's beer demand is expected to grow by 8 to 10 percent per year in the next five to 10 years, in line with economic growth, as its huge rural population shifts to drinking beer from hard alcohol, said Jin.
"The 800 million people in rural areas have begun to drink beer, just like the 300 million in cities."