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Food & Beverage

Beijing Yanjing Beer chairman detained by Chinese authorities

Detention comes as China's third-largest brewery struggles amid market shifts

Chinese drinkers' growing fondness for luxury brews is one trend that Beijing Yanjing Beer has struggled to keep up with.   © Reuters

DALIAN, China -- Zhao Xiaodong, chairman and president of Beijing Yanjing Beer, has been detained by authorities, the country's third-largest brewer announced on Thursday.

Zhao, 48, is being investigated on suspicion of violating the law in connection with his duties, the company said.

The detention comes with the company's business performance deteriorating.

Yanjing Beer's net profit in the first half of 2020 dropped 47.5% from a year earlier to 269 million yuan ($40 million) as sales fell 13.9% to 5.5 billion yuan. The tumble came amid a growing affinity in China for mid-grade and luxury beers. The brewer also lags its rivals in terms of online marketing, according to sources.

In addition, Yanjing's sports event tie-ins have also stalled.

Meanwhile, No. 1 China Resources Beer and No. 2 Tsingtao Brewery logged record net profits for the first half.

China's total beer sales dropped about 9% by volume in 2019 from five years earlier as consumer tastes shifted toward wine and other alcoholic beverages, according to British market research company Euromonitor International.

Meanwhile, beer sales in value terms jumped 34% over the same period, lifted by the popularity of midrange and luxury beers. Brewer earnings vary depending on how well each beer maker responds to market changes.

Investors, however, expect an earnings recovery. Its share price had risen almost 60% since mid-March before falling 2% on Friday.

China's Minsheng Securities said in a report issued on Thursday that Yanjing's beer sales are on the mend. It also said the detention will not have a significant impact on the brewer's management.

Xie Guangjun, the brewer's vice chairman, will fill in for Zhao for the time being.

Zhao's detention will have no material impact on the company's management, the brewer said.

According to Chinese media reports, Zhao started working at Beijing Yanjing Beer in 1998 and assumed the post of chairman in 2017.

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