Bud hits the road with Olympic bicycle tour

The real race is expanding beer sales in China's interior

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BEIJING--Anheuser-Busch Cos. (A-B) took 1,500 cyclists on the road in China over the past month in a nationwide tour that touted Budweiser’s sponsorship of the 2008 Olympic Games. The tour is also a major step in the U.S. beer giant’s program to expand Budweiser in China’s interior.

The bicycle tour, co-sponsored by China’s General Administration of Sport, began July 7 in Guangzhou in southern China and ended in Beijing on Aug.6. The schedule allowed A-B to connect its cycling tour with other celebrations taking place this week in the Chinese capital marking the one-year countdown to the start of the games, which kick off on Aug.8, 2008.

The tour was divided into two groups with cyclists from factories, schools and government organizations in Guangzhou. One traveled through cities in western China, like Kunming, Chengdu, Changsha and Xi’An.

The second group took an eastern route passing through Shantou, Wenzhou, Hangzhou, Shanghai and Nanjing. Each team was accompanied by a red Budweiser van, dubbed Big Rigs, transporting Chinese pop stars, who entertained at each city stop at beer gardens set up by A-B with Olympic branding. The 11-city tour attracted over 10,000 Chinese observers, according to Rex Wong, A-B's VP, marketing for China in Shanghai.

At the tour’s closing ceremony, the St. Louis-based company unveiled a 2,008 square-meter red flag at the foot of the Great Wall site in Mutianyu near Beijing. Chinese athletes speaking at stops in the cities included Xu Haifeng, China’s first Olympic gold medal winner; Yang Ling, an Olympic shooting champion; Luo Wei, a gold medal winner for Taekwondo; and well-known singer Sun Nan.

The tour earned A-B two Guinness world records, for a bike tour with the largest number of participants and for the largest red flag. Both were notarized at the closing ceremony. A-B developed the tour in-house with assistance from local event organizers and China’s General Administration of Sport. It does not work with a multinational creative agency in China.

China’s interior isn’t the only new territory A-B encountered with its cycling tour. A-B signed up as the official international beer sponsor of the 2008 Olympic Games in Beijing, marking the first time it has officially supported a summer games held outside the U.S. Its deal with the International Olympic Committee (IOC), inked in 2004, gives A-B the right to use the games' logo for promotions in China and 29 other countries. The Olympic logo can appear on packaging, point-of-sales materials, sales promotions, branded merchandise and other marketing materials.

In a move bound to cause confusion for Chinese consumers, the Beijing Organizing Committee for the Olympic Games signed up two domestic beer sponsors in 2005, Qingdao-based Tsingtao Brewery Co., and Beijing Yanjing Brewery Co., so there are now three official beer sponsors for the next summer games.

Despite the local competition, and the fact that the summer games are now just one year away, the bike tour is the first major event created by A-B in China to promote Budweiser’s support of the Beijing Olympics. To date, it has only launched a series of beer cans with Olympic branding.

While it hasn't moved quickly as an Olympic sponsor, Budweiser sales already account for about half of China’s premium beer sales in large cities like Beijing and Shanghai, but the fight for market share, for both local and foreign breweries, isn’t in those international cities. Instead, it’s raging in second and third tier cities.

“The beer market in China is extremely fragmented. Almost every city and province has its local brand,” said Darryl Andrew, managing director, China at research firm Synovate in Shanghai, “though very often these brands lie in the mass or low-end segment. The few nationally successful brands are Tsingtao and Snow, who are very aggressive in the market and setting up breweries in a number of cities.”

A-B owns a 27% stake in China's largest beer producer, Tsingtao, while Snow is produced by a joint venture with SAB Miller, the world’s second largest brewer after A-B.

China is already the largest beer market in the world in terms of volume, with consumption of 35 million tons of beer in 2006, according to government figures, with sales and retail prices growing by double-digits annually.

Beer revenue in China, estimated at nearly $11 billion in 2006, and per capita consumption--25 liters annually--remain far below developed markets. Consequently, A-B and global rivals like SABMiller and Carlsberg are pouring resources into the mainland.

A-B announced earlier this year that it plans to double distribution of its brands in China from 100 cities today to over 200 within five years. Besides its flagship Budweiser brands and variations like Bud Ultra, formulated with a light, refreshing taste that appeals to Chinese palates and is sold only in the mainland, A-B’s strategy includes beers produced at the 14 local breweries it owns in China like Tsingtao Brewery Co. and Harbin Beer in northeastern China. It also controls imports of the Mexican brand Corona in China.
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