João Torres Martins, International Manager of Unicer Bebidas de Portugal, SGPS, SA

One Beer, One Road to China

With China now being its largest export market, Unicer Bebidas de Portugal, SGPS, SA, the largest Portuguese beverage company and responsible for Super Bock beer, continues to probe what makes the perfect beer for the Chinese consumer, João Torres Martins, the International Manager of the company tells Business Daily, also explaining the challenges of entering the Chinese market and the rise of the craft beer market

How did you get involved with Unicer?
I have a bachelor in food engineering and an MBA. I entered Unicer in 1993, when it had a small international presence, already exporting small amounts to Macau. I made a path through the commercial and distribution areas of the company in Portugal and helped develop two importers in the MSAR, at a time when distribution to mainland China was insignificant. Afterwards, I worked in Spain as General Director, going to Asia to help in a project for non-alcoholic beers in Saudi Arabia, which turned into a production agreement with the leading local brand Moussy. I also helped in the first steps of entering the Chinese market, with Unicer Macau being created at the beginning of this year.

How did the company’s Asian expansion progress?
We’ve been in Macau for a long time and we have an interesting presence in the city, not just in terms of beer, but in water products such as Água das Pedras, Vitalis and Caramulo.
As a business, we can’t allocate investment without having profits, so we make small market tests. No company survives without having some leverage that can support its costs.
At the moment, Carlsberg owns 40 per cent of Unicer, with a Portuguese core that owns the majority of the capital and makes the international strategy decisions.
Obviously, as a Portuguese company, we direct ourselves a lot to countries with large Portuguese communities, with the main Asian target markets, in this aspect, by importance being Macau, Hong Kong, East Timor and Australia. We target what we call the ‘homesickness market’ using small businessmen to supply these niche communities.
Then we have our internationalisation exercises, when the brand gets out of the niche Portuguese community market, having a communication strategy towards local consumers, with mainland China and Taiwan as examples of that strategy.

What were the largest challenges in entering the Asian market?
I believe the largest obstacle to be the cultural differences. These projects involve working in cooperation with other local companies, and these companies have a ‘specific DNA’ in the way they are managed.
Unicer is over 120 years old, so we have a very specific culture. We’re a Porto (aka Oporto, Portugal) company with mainly capital from that city; our shareholders are from that area and they constantly accompany our decisions.
Portuguese have a very sui generis (unique) identity, with mixes from Africa, the Middle East, South America, India and parts of Asia, while the Chinese culture is very defined, and those cultural differences end up conditioning business cooperation.
You just need to see the number of large international companies that still have difficulties coming to Asia to understand that much more than good will is necessary to be successful here.
In mainland China there are many difficulties such as brand registration, counterfeit and copied products, the work method of local companies and the level of ethics.
The Taiwan market is relatively dominated by its state-owned beer brand Taiwan Beer. It’s a very protectionist market with high entry taxes that limit the competitiveness. However, every market has entry barriers, an aspect where Macau and Hong Kong have advantages by having no entry fees.

What’s your level of exports to those countries?
Just in Macau, our export level of beer and water is already significant, at around 1 million litres this year. Hong Kong receives a more reduced level of around five containers.
The Portuguese community in Australia is large, so our export level can reach around 10 to 15 containers per year, with Taiwan receiving the same amount.
Taiwan has had a long-term distribution relationship by us, with the help of friends from Macau who moved to the country and helped establish a distribution network.
We’ve established a large guanxi (personal connections) network with a great focus on mainland China too, by multiple presences at fairs in Shanghai in order to get to know the local business community.
At this moment, mainland China is the largest exporting market for Unicer, but I can’t reveal the exact amount of volume exported there.

How important is Macau for your Asian strategy?
Business success is based on the capacity for integration and Macau for us is an essential experience, as a unique city in Asia with its own personality. It helps us connect with mainland China and it’s an important part of our internationalisation strategy in the country.

Last year, mainland China replaced Angola as the largest export market for Unicer. In your view, what is the essential element for a company to break through into the Chinese market?
A businessman looking to enter the Chinese market needs to have a lot of patience, capacity for adaptation, [and] have a good local partner. He also has to have thick skin because he will be beaten up constantly. Otherwise he won’t be able to survive in this market.
The beer business requires a large supply and distribution network of on-trade. In Asia, people tend to drink beer on the street with their friends, so we need a structure that can go door-to-door in bars and restaurants.
Therefore, there is a need to have a company responsible for the daily management of the supply chain, delivery and communication. With all those factors, there is the possibility of creating a successful market test. If there’s a successful reception of the brand and of its concept by the local consumers, the right communication will do the rest.
For us, the most important is to know the Chinese consumer and communicate with him in an efficient way.

How would you describe the average Chinese consumer?
It’s a complex question and there are many variables. It’s a country with brutal economic growth and a one-child generation who really likes to go out with their friends and lose their inhibitions. Being an only child is not really a good socialising environment, so nothing better than a couple of beers to help loosen up a bit.
If you look at the Chinese beer market, you’ll see a decrease in volume of the mainstream low-cost beer brands, with an increase in the premium and super-premium sectors. That increase has also been registered in imported beer brands.
It’s a normal phenomenon, as the Chinese economy improves and people want to consume more quality, imported products, since the country always had an issue with the quality of products produced inside its borders.
In terms of food and beverage, consumers always want products that have characteristics similar to the ones they’re used to. Chinese consumers are used to simple tasting beverages, easy to drink with their type of food, therefore they will go for beers that have ‘easier’ tastes. I believe Super Bock is a very easy beer to drink.

What are the international beer brands with the strongest presence in China at the moment?
China is an extremely competitive market, with some international brands that have positioned themselves in the country for many years having some predominance. The four main ones are InBev – a company created by the merger of Belgium-based company Interbrew and Brazilian brewer AmBev – which has been present in the country for many years in a massive way; then C.B. Miller, Heineken and Carlsberg.

What advantages do the beers produced by Unicer have over other brands?
Super Bock has the advantage that it is all produced in the same factory, in the district of Leça do Balio, in Porto. Having a capacity of production of around 500 million litres, this industrial beer site produces all the beer that is consumed in Asia. When compared to the factories included in the Carlsberg universe, it is one of the most advanced in terms of technology, efficiency and quality of production.
Unicer has a very vast portfolio of beers, producing stout beers, lemon flavoured beers, craft beers, and our beers are produced with malt grown in the Portuguese Alentejo region. We also have Super Bock 1927 which is almost a gourmet product, used by Michelin restaurant chefs, and made with special characteristics to accompany certain dishes. It’s a niche market that forces the production to be smaller.
Our mineral water, Água das Pedras, is referenced worldwide for its gas being 100 per cent natural, and it has special mineral characteristics that allows it to compete with internationally known water brands like Dom Perignon.
Our flavoured mineral waters also are unique because they include pasteurised juice extracts with no sugar or preservatives, which, with the already present minerals, make it an extremely healthy product for children or even people suffering from diabetes. We only export our mineral water to Macau, since China is not a market that has the habit of drinking mineral water, although they like it flavoured.
Flavoured mineral waters are extremely popular in Macau and I would say that, the day my importer can maintain a decent supply to this market, it will be a success case.

How do you see the worldwide growth of the craft beer market?
It is a market trend that I think is related to the search for differentiation between beer brands. Consumers want to differentiate themselves and look for products with a unique identity. You can see that trend in car sales in Europe, with people looking to purchase more customised cars.
There’s a quality-cost balance to be considered, since a product that is produced in bulk has lower production costs due to the industrial aspect of its production, while a smaller craft production has higher production costs.
There’s a tendency to transform certain types of beer into a commodity, and a need by the sector to develop those offerings in a way that makes that offer lose its commodity status.
For example, the craft beer movement originated in the United States some years ago when Budweiser and Miller were market leaders, with the appearance of small regional factories. Nowadays, those small craft brands can be found in places like Hong Kong, with produced volumes that are as large as Unicer.
With its size, no craft beer company would be able to supply the entire Chinese market. The companies would have to construct a mega-factory.
However, Super Bock and its different variants are considered a craft beer in China when compared to American brands present in the country.