Numbers
Numbers
December 22, 2016

I like Numbers. Not the TV crime drama, that show sucked. I like actual physical numbers. We use them for loads of stuff. When you deal in a consumer commodity like beer, your industry lives and dies by numbers. Consumption statistics, revenue, volumes produced vs. volumes sold, you know, numbers. Fucking A.

Recently my industry, which I love, has been being very stupid with numbers. Reports have come out that there are 3,500 craft beer bars in China. Another presentation was given in Germany in which a guy that should know better said there were somewhere between 2,500 and 7,000 craft breweries in China at the moment. Yeah. Those numbers seem big to you? Well instead of me yelling and screaming, let’s play a game with numbers.

Anyone want to name the five most famous craft beer brands that you can currently get in bottles in China? No, it doesn’t matter if its imported or not, just throw me some brands that are well known. Anyone? Brew Dog? Sure. Rogue? Keep it coming. Panda Brew? Yep. Agreed. They have beer in bottles. Master Gao? Yep, you can get that at 7/11. That’s legit. Anyone else? Yeah, I’m struggling too. Let’s just say four – two local brands and two imported brands.

Now, when asked about the 3,500 craft beer bars in China, those that support that statistic will say that it also includes bottle shops and small bars with craft beer on the menu. So, if we’ve got 3,500 craft beer bars in China, then that means that they are selling beer, right? I know, sounds silly, but I’ve been given a lot of dumbshit responses as to why people are lying about things, so let’s start at the beginning. We’ve named four pretty famous brands and so we can also assume that since these places a) exist and b) need to make money, then that means that c) they need to sell things in exchange for goods and services. So lets say these 3,500 craft beer bars are selling one, if not all four of the aforementioned brands.

Bar owners like to make money. So in order to make money, they should be aiming to cover costs. Then after said costs are covered, make a little more money and we call that profit. The average bar in Beijing has a rent of between 15,000 RMB to 100,000 RMB a month. So just to do idiot math here, let’s assume that bars across China – property values being adjusted for first to fourth tier cities – cost about 15,000 RMB a month to rent. Average. Like China was one great proletariat state and everything costs the same. 15,000 RMB a month times twelve and divided by 365 gives us a base property cost of 493.15 RMB per day. Just for rent. So how the fuck does a craft beer bar cover the rent? By selling craft beer you say? I like the song you are singing. So let’s round up to 500 RMB a day. 500 RMB a day means we need to set a sales price of about 35-50RMB per bottle, with the cost per bottle for the bar being between 12-18 RMB per unit. The rule of thumb in the bar business is cost should be 33% of your price. So in order to cover their rent, craft beer bars need to sell between 10-14 bottles a day to break even. Let’s call it 12 for the sake of brevity. Everyday.

So, you’ve got our four bottles of fermented genius available on the menu. Let’s assume that, because we have four brands and we are a proletariat state of equality, three bottles of each brand are sold. That is three bottles of beer for Brew Dog, Rogue, Panda, and Master Gao. Three beers times 3,500 bars times 365 days is how much? 3,832,500 bottles of beer per brand every year. That’s how much. You know how else you can measure that? In hectoliters (HL), a nice European brewery unit for volumes sold. So that’s 12,775 HL per year, per brand, sold in China. Now I need that to be true, desperately. Especially for Master Gao and Panda Beer. They are my peers in China. They need to be successful so we can all be successful. But, sadly, it’s fucking impossible. Impossible to the point of being a joke. Because, keep in mind, these are just numbers that help those bar owners cover rent. Just rent. You can assume rent is a quarter of your costs, but you can also assume that there are more than four brands of beer for sale at most bars. I hope everyone understands that if Brew Dog or Rogue are selling 12,775 HL of beer per year in China that means there is a forty-foot container of one of these brands waiting to clear customs every FOUR days. If China had that kind of a consumption market, you think that I could really only struggle to name four brands that have craft beer in bottles at a national level of attention? If Brew Dog was clearing that much product in China, then there would be no need for me to write this blog because James Watt would be telling me and Michael Jordan about it every time we saw him at international beer events. I wouldn’t have to be skeptical of the math.

Now, how about some more numbers? How about the statement that there are between 2,000 and 7,000 craft breweries in China right now? Because I was in the audience and immediately started laughing at the number to the point where it interrupted the speaker and he asked me directly if I had a problem with his analysis. I said I did, and the result was he settled on a number of 4,000 craft breweries. FOUR THOUSAND craft breweries in China. I personally started northern China’s first craft brewery in 2010. I was all alone. How amazing is it that in a short six years China is now a mere 600 craft breweries short of having more breweries than the 4,600 that America boasted of having this year. Now. Math. Numbers. Again with this shit. Bear with me. Let’s just say that there are 172 cities in China that have more than a million people. Not a stretch. I think Oprah said that once, so it must be true. Now, if there are 172 cities in China with a million people or more, then that means that in the proletariat wonderland we are living in, each one of those cities would have about 23 breweries each. EACH. That seems like a fair number, yeah? Beijing and Shanghai currently boast about 50 breweries total, and the combined population of those two cities are 50 million. So that number is doable, I guess. But when was the last time any of you were in Changzhou, Baoding, or Xuzhou? Tick a lot of the local breweries off your list? Must’ve been rough, since by this speaker’s calculations those three cities together have more breweries than the city of Chicago. Those are all on the high-speed rail system and they all have more than a million people. Seems to be a pretty idiot-proof metric as to whether or not China has that many craft breweries, right?

The problem with the math is that there aren’t 3500 craft beer bars in China. And there sure as shit aren’t 4,000 craft breweries. Will there be? Yes, through an immense amount of hard work and sacrifice. But currently these are dumbshit numbers that were pulled directly out of thin air by an over enthusiastic reporter and/or market analyst who has never tried to sell a bottle of beer for profit in their entire life. And before you get the idea that there is this secret movement of craft beer consumption that only true China hands know about and that is represented by brands you’ve never heard of and is enjoyed by a consumer that no one has ever seen, let me say this. Get your head out of the fantasy that China is this big enigma of consumption. The number one crime against the Chinese craft beer consumer is a lack of variety of quality products. This fantasy bullshit about how if you look hard enough you’ll find the next Sierra Nevada being quietly enjoyed in a third-tier city is just that, a fantasy. Quality is immediately promoted, noticed, and celebrated in China. There is no secret consumption, there is only what we have right now. An industry of eager yet unproven brands that are trying to convince a skeptical and unfamiliar market. The only success that we will ever have will be one bottle at a time, on the bar stool and at the lazy Susan. Stop making shit up. You are embarrassing yourself.

Numbers.

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