Chinese brewer warns of tougher times ahead

China Resources Enterprise (CRE) the brewer of the world’s biggest beer brand, Snow, has warned that trading conditions will remain tough as the world’s economy continues to suffer.

CRE reported that its sales to 30 September had climbed 11% to HK$34.2 billion but actual profit dipped 2.1% to HK$668m from HK$682m over the same period last year.

China Daily reported that the company blamed the “dismal state of the global economy” for the drop, which had, “affected the short-term operating environment on the mainland”.

Actual beer sales to 30 September dropped 1.3% on 2011 to HK9.15bn with a corresponding fall in profits of 5.8% to HK$503m.

China is often regarded as a booming economy that has been unaffected by the global downturn but analysts have been warning for a while now that it is showing signs of slowing down.

The mainland’s economy has been growing at a slower rate over the course of this year, while increases in minimum wages and higher labour costs were also attributed to CRE’s less strident progress.

The consumer confidence index has also slipped of late, it did rise one point to 106 in the third quarter but is still below the 110 points of three months ago.

Nonetheless, as a Haitong Research report noted recently, beer consumption in China is still growing, albeit less “relentlessly”, and so “those brewers who are able to gain leading positions in regional markets should be able to exert pricing power”.