(Bloomberg) -- Budweiser Brewing Co APAC plans to expand sales of more expensive beers beyond restaurants and bars in China, as weak consumer demand for regular products amid the country’s economic downturn weighed on its earnings. 

The company this year wants to widen distribution of Budweiser and “super premium” offerings like Corona and Blue Girl to more cities, Chief Executive Officer Jan Craps told Bloomberg in an interview in Hong Kong. The group also plans to accelerate retail sales as consumers increasingly shift to drinking at home. It’ll use existing partnerships, like one with Swire Pacific Ltd.’s beverages arm, he said. 

Budweiser and super premium beverages were a bright spot for the company as it announced fourth quarter results earlier Thursday, recording double-digit revenue growth in China — even as normalized net income missed estimates.

The company reported a volume decline of 3.1% in China mostly in cheaper beers during this period, citing weaker consumer demand.

“There’s this big momentum of ‘premiumization’ happening in China, which we don’t think will change in the future because it’s an accessible luxury,” Chief Executive Officer Jan Craps told Bloomberg in an interview in Hong Kong. “Beer is a resilient category.”

Status Beer

Budweiser, despite producing some of the US’s most popular and affordable beers, is considered a status product by label-hungry Chinese drinkers. The company has been making a push to sell a range of premium beers — like its gold-canned Budweiser Supreme featuring a rich malt flavor. 

“Budweiser APAC’s bifurcated sales results in its China business —double-digits 4Q sales growth in its premium category while recorded weaker volume in its economy segment — confirms our view that the Chinese consumers are becoming increasingly selective in their purchase amid dampened consumer sentiment,” said Bloomberg Intelligence consumer analyst Ada Li.

But even as Budweiser APAC still holds the top position in China’s premier beer market, it’s facing surging competition from local brewers. The country’s liquor market has remained resilient despite weak sentiment, with sales for alcohol and tobacco growing 8.3% on-year in December — outperforming China’s overall retail sales growth. 

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Budweiser APAC’s Hong Kong-listed shares slumped as much as 8.3% on Thursday following its results. The stock has underperformed major Chinese competitors Tsingtao Brewery Co., Beijing Yanjing Brewery Co. and China Resources Beer Holdings Co. so far this year.

Price Wars 

Consumer brands in China have also been engaged in price wars as they try to lure wary consumers with the lowest possible prices. 

Read More: China Price Wars Break Out Among Consumer Brands as Growth Slows

Budweiser APAC beers Corona, Hoegaarden and Budweiser offered the steepest discounts of brewers selling on Alibaba Group Holding Ltd.’s e-commerce platform Tmall in the last week of January — with average price cuts of up to 52% — according to a Bloomberg Intelligence price tracker. Rival makers Tsingtao Brewery Co. and Carlsberg cut prices by just 28% and 20%, respectively, in the same period. 

Craps said Budweiser APAC typically doesn’t discount premium products, though he said there might be some cuts on e-commerce channels — which account for a small amount of overall Chinese beer sales — or during certain periods he didn’t specify. The company doesn’t plan to roll out more discounts this year, he said.  

At least three brokerages have cut the company’s price target this year, citing China’s weak consumer sentiment. The mainland contributed 75% of Budweiser APAC’s net revenue in 2022, followed by just 19% from South Korea, according to a BOCOM International research note.

--With assistance from Felix Tam.

(Updated throughout)

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