Broo signs distribution agreement to sell lager into China’s surging beer market

Beer manufacturer Broo Limited (ASX: BEE) has signed a binding distribution agreement with Beijing Jihua Information Consultant to market and distribute Broo lager products throughout China for the next seven years.

The deal is predicted to bring Broo about A$120 million in revenue for the seven-year period for 1.5 billion litres of Broo’s premium lager products.

Beijing Jihua has an extensive distribution network across China and Broo’s lager products will be sold through supermarkets, retail chains and hospitality branches.

Additionally, Beijing Jihua has committed to marketing and advertising to expedite the growth of Broo’s products throughout China.

“There has been an extensive period of product assessment and negotiation,” Broo founder and chief executive officer Kent Grogan said, adding the company was “delighted” to reach an “agreement with such a high-calibre Chinese distribution partner.”

“Beijing Jihua’s distribution reach in China will see Broo premium lager penetrate the Chinese beer market and expand into a major brand over the coming years.”

With China’s market in its sights, Broo is now targeting other international markets and domestic expansion.

China’s beer market

China is the world’s largest beer consuming country, downing almost double the amount of beer than drinkers in the United States.

China’s beer imports sky-rocketed more than 1000% between 2010 and 2015 from 46.4 million litres in 2010 to 538.4 million litres by 2015, according to Euromonitor International data.

In the same period, beer consumption in the country rose from almost 44.7 billion in 2010 to 47.4 billion in 2015.

However, total beer sales volumes declined almost 4% to 45.6 billion litres in 2016.

Beer consumption in China is driven by the country’s younger generation, with multiple domestic and international manufacturers investing in marketing strategies to target this generation such as beer festivals to cultivate a beer-friendly culture.

In 2016, the country imported 484.4 million litres of premium lager, with total lager sales reaching CNY509 billion (A$101.39 billion) that same year.

Meanwhile, Business Wire predicts, China’s beer market will be worth CNY683 billion (A$136 billion) by 2019.

Shares in Broo were up more than 30% to A$0.39 in mid afternoon trade.