Premiumisation remains the overarching theme in China’s beer industry. In a year  marred by sporadic regional COVID-19 outbreaks, leading beer brewers in China have  been advancing their premiumisation strategy in an unwavering manner, which underpinned their robust profit growth despite lacklustre industry volume recovery vs pre-pandemic level. 

We remain constructive on the China beer sector following a year of de-rating, and we  believe the secular premiumisation trend should underpin solid profit outlook, while potential  upside surprises in 2022 could stem from price hikes and normalised input costs.

Strong pricing power underpins price hike actions; CRB could see largest 2022E EPS accretion. Significant input cost inflation in 2021 has propelled leading brewers to  implement ex-factory price hikes as large as ~10%. Our analysis points to beer’s strong  pricing power among F&B categories in China, given high industry concentration and  substantial channel/retail mark-up. We estimate price hikes of CRB’s Brave the World  could potentially generate the largest EPS accretion of 10% in 2022, followed by  Chongqing Brewery’s Wusu.