The Fosters Brewing Group (FBG) first moved into China in 1993 with a plan to establish three joint ventures on China’s eastern seaboard, said FBG spokesperson, Jo Ford.

“One was to be in the north at Tianjin, another in the centre at Shanghai and a third in the south in Guangdong,” she said. “Local brands were developed and the breweries upgraded. The intention was to manufacture Fosters in each location.
“However, we eventually realised it was not necessary to operate breweries in all three locations -- with the associated costs that separate operations entail.”

Fosters was one of the many foreign brewers that moved into the Chinese market during the 1990s and suffered significant losses. Rationalisation came in the late 1990s when Fosters’ sold its Guangdong and Tianjin joint-venture breweries.

The company now operates only one brewery in China – in Shanghai – where it produces Foster’s Lager (“to the same strict standards as elsewhere in the world”) for distribution across China. The plant also produces three local brands: Guangming, Shanghai Dragon (for local and export consumption) and Sub Zero.

FBG said its experience showed clearly that China demands “a significantly different approach to expansion plans” to those used with success in other world markets.

Throughout China, local beer drinkers like their brews sweeter and less hoppy than in Australia. They frequently serve beer at room temperature.

And while all brewers round the world use products such as cane sugar, oats, sugar beet and corn for brewing “adjuncts” – fermentable sugar which complements malt sugars in the fermentation – in China Fosters follows common local practice and uses rice.

China’s taste for a good beer is evidenced by the fact that it is the world’s largest importer of malting barley. In the past, more than 75 percent of Australian malting barley exports have gone to the Chinese market.

But Australian cereal sales – mainly barley – actually slumped by 50 percent between January and November 2002, blamed on “supply problems” at the Australian end – mainly generated by the national drought. Sales fell by $170 million but Australia’s recently privatised single-desk barley exporter, Grain Australia, said there was enthusiasm for an agreement worked out with Biosecurity Australia. Under this agreement which China no longer requires a certificate stating freedom from fungus and a form of roundworm for every shipment of wheat and barley.

Chinese consumers are also developing a taste for grape wine, attracting another successful Australian beverage company, the South Australian winemaker BRL Hardy.

Last year BRL Hardy signed a distribution deal with leading Chinese wine producer, Dragon Seal Wines, which will import Hardy’s products for distribution through its own 20-city network. BRL Hardy said it identified its two biggest challenges in doing business in China as (1) choosing a partner and (2) getting paid.

While BRL Hardy itself had not experienced payment problems, the company emphasised the need for Australian exporters to start out by establishing clear and unambiguous payment arrangements and – in the initial stages of a new venture – arranging for upfront payment or letters of credit.

Australian senior trade commissioner in Beijing, Kym Hewett, says Chinese consumption of grape wine is growing and a number of companies are active in the market. However, the Chinese market is not mature for wine and it is still difficult to move the product within the retail supermarket sector.

“Most wine is consumed in upmarket bars, restaurants and hotels,” Mr Hewett said. “Even though wine tariffs have dropped in line with commitments for WTO, the cost of distribution, marketing and supermarket ‘shelf fees’ still make an average bottle of wine an expensive item in China.

“Chinese regulations require labelling in both Chinese and English although a lot of product is still available that doesn't adhere strictly to these requirements. If the regulations are followed completely it means substantial expense on the part of exporters in revising their packaging.”