Bitter truth for Chinese craft beer: expats are out, local tastes are in

For Great Leap Brewing, one of Beijing’s first craft beer brands founded in 2010 to serve the expatriate community, adding Sichuan-style spicy chicken to the menu does not seem immediately intuitive – but Allen Lueth, the company’s chief executive, has his reasons.

“The dish goes really well with our beer,” he said. “It’s a big hit, especially among our Chinese customers.”

Like Great Leap, many of the city’s foreign-run restaurants and microbreweries that started out with menus catering to Western tastes are now shifting strategies and marketing to locals.

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The change comes as the number of foreigners living and working in China has plummeted over the past couple of years, and continues to drop. Pandemic restrictions, geopolitical tensions, and an economic slowdown in China have all contributed to dimming job prospects.

Between 2020 and 2021, the population of expats in Beijing has fallen by more than 40 per cent to about 63,000, according to data from the American Chamber of Commerce China.

“Because of an exodus of expats, the addressable market for [foreign-run] businesses is shrinking, and competition increases,” said Alfredo Montufar-Helu, head of the China Center for Economics and Business at the Conference Board, a global think tank. “So it makes sense for the restaurants to recalibrate their strategy and address the demand of Chinese consumers.”

Across China, the number of foreign-born residents totalled just 1 million, or less than 0.1 per cent of the population, making the world’s second-largest economy one of the least international among its peers.

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In Japan, known for its restrictive immigration policies, foreigners make up 2 per cent of the population, and 3 per cent in South Korea, according to data from the United Nations. Nearly a fifth of Germany’s population is made up of immigrants.

“Of course, we still want to have that American who loves to have a full-flavoured, very bitter IPA [India Pale Ale], but that’s not the main customer that’s going to be driving the future growth of Great Leap or the craft beer industry,” Lueth said, referring to the hoppy-style drink that is popular with many Western craft beer drinkers. “So now we’re looking at 25- to 40-year-old, educated, first- and second-tier-city Chinese consumers.”

Nadia Meliani, owner of La Maison Lyonnaise, a French restaurant located in the embassy area of Chaoyang district along Beijing’s Second Ring Road, said her approach to attracting young locals is to curate more cultural events.

“Since our cost is constantly rising, reducing prices would put us in a tight spot,” she said. “[Instead,] we offer cooking classes, table manner classes, and special foreign holiday activities at the restaurant.”

Experience-led consumption – which includes moviegoing, visiting museums, and attending sporting events – has gained popularity among young Chinese consumers since the end of pandemic shutdowns that kept people at home, according to a recent report by Mintel Group, a consulting firm.

The report also showed that China’s slumping property market and record-high youth unemployment made consumers re-evaluate their priorities, with many preferring more affordable experiences over splurging on big-ticket items or buying a home.

Lueth said a few other craft beer joints told him they have seen their average customer spend decrease by up to 20 per cent, despite good traffic at the restaurants. “This could be a real problem for the craft beer industry across China,” he said.

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It remains to be seen whether localisation of foreign-owned restaurants will succeed in the long run, but owners are sure of at least one thing: staying competitive in the Chinese market means they can no longer rely on targeting only foreigners.

“You could do that fifteen years ago, because there were a lot more expats, and they had more purchasing power than locals because they had higher incomes,” Alex van Kemenade, a Dutch expat who has lived and worked in Beijing for more than two decades, said over a very bitter IPA. “But now, everything has changed.”