On October 19, a video of a worker allegedly urinating in a raw material bin quickly spread online, thrusting Tsingtao Beer (600600.SH), a national beer brand, into a media whirlwind. How much will Tsingtao Beer’s sales and performance be impacted?
Before the market opened on October 23, Tsingtao Beer (600600) released a statement noting that they had become aware of media reports regarding their third factory. The company took the reports seriously and immediately reported the incident to the police. The police are now investigating, and the batch of malt in question has been completely sealed off. The company has explained the situation on its official Weibo account, assuring that all production and operations are normal.
As a result of the incident, Tsingtao Beer’s stock price dropped, reaching a low of 75 yuan. The decrease eventually slowed, closing at 80.79 yuan, near the 52-week low of 79.49 yuan. Data shows that the stock price of Tsingtao Beer has been declining this year, with a total drop of 23.53%. The decline reached 28.11% in the last 120 days and 9.58% in the past 20 days.
The issue has been fermenting for several days. Official responses regarding whether the incident took place in the third factory’s warehouse or if the individuals involved are employees of the third factory have yet to be provided.
On October 23, an official from the Pingdu City Public Security Bureau in Shandong told The Paper reporters that the incident is still under investigation, and a statement will be released soon.
Tsingtao Beer has assured that the batch of malt in question has been entirely sealed off. On October 19, a netizen posted a video claiming that a worker at the third Tsingtao Beer factory in Shandong had climbed into a raw material bin to urinate. Even though the video doesn’t clearly show the location, the mention of the raw material warehouse drew significant attention.
Following a media investigation, a local regulatory body stated that they hadn’t seen the video before, but they are now investigating. This body reported the video to the city bureau, which is now directly handling the issue.
On the same day, Tsingtao Beer released an official statement regarding the video from October 19, stressing their seriousness about the incident and that they had reported to the police. They reasserted that the batch of malt had been sealed off and that they would continue to enhance management measures to ensure product quality, welcoming public supervision.
In the evening of October 20, the Pingdu City Market Supervision Bureau issued a statement saying that they had immediately established an investigation team after discovering the video regarding the third Tsingtao Beer factory. The team has sealed off all the raw materials shown in the video, and any violations will be dealt with according to the law.
On October 21, a media report stated that an insider revealed that the person in the video and the person filming were external contractors. The filming location wasn’t the Tsingtao Beer raw material warehouse, as rumored online, but an open public space, possibly a carrier vehicle compartment from a logistics carrier. The motives for filming and posting the video online remain unclear. Both the person filming and the person suspected of urinating were detained by the Pingdu City Public Security Bureau on the day of the incident.
Despite the report, public opinion didn’t wane, and the discussion continued for the next two days. In response to the escalating public sentiment, Tsingtao Beer issued another statement on the morning of October 23, reiterating their awareness of the media reports about the third factory. They emphasized their seriousness about the reports and confirmed that they had reported to the police, that the batch of malt had been sealed, and that they had provided an explanation on their official Weibo account. They assured again that all company operations are normal.
In the morning of October 23, a reporter from The Paper contacted the Pingdu City Public Security Bureau in Shandong. An official stated that the investigation is ongoing and that a statement would be released soon, but the exact timing and channels of release remain undetermined. Regarding previous media reports that the incident didn’t occur in the third factory’s warehouse and the involved individuals were not employees of the third factory, the official said they were unaware of the specifics.
In this incident, whether the location was indeed the third factory’s warehouse and if the individuals involved were employees of the third factory remain central questions. However, up to now, there hasn’t been any official clarification on these critical issues.
In the first half of the year, Tsingtao Beer’s net profit grew by 20%. How much impact will this have?
As China’s oldest beer-producing enterprise, Tsingtao Beer was established in 1903. It currently has a dual-brand combination of “Tsingtao Beer main brand + Laoshan Beer secondary brand”, covering the ultra-premium, premium, mid-range, and low-end beer segments. They maintain a leading position in the industry.
In recent years, Tsingtao Beer’s growth has slowed. In 2021, the revenue growth rate was 8.7%, and the net profit attributed to the parent company grew by 43.3%. In 2022, the revenue growth rate was 6.65%, and the net profit attributed to the parent company grew by 17.6%.
This year, the beer industry experienced a recovery. Nationwide, large-scale beer production increased by 7% year-on-year in the first half of the year. Particularly in March and April, with a lower base from the previous year, there was a staggering year-on-year growth of up to 20%. Under such favorable conditions, Tsingtao Beer’s growth rate showed signs of recovery in the first half of this year. Financial reports for the first half of 2023 showed that Tsingtao Beer’s revenue was 21.592 billion yuan, a year-on-year increase of 12.03%. The net profit was 3.426 billion yuan, a year-on-year increase of 20.11%. Tsingtao Beer achieved a product sales volume of 5.023 million kiloliters, a year-on-year increase of 6.5%.
The improvement in the semi-annual report boosted confidence in Tsingtao Beer’s future among industry insiders.
On October 13, Wanlian Securities released a research report that gave Tsingtao Beer a “Buy” rating for the first time. Wanlian Securities analysis believes that with the recent cancellation of Australia’s “double-reverse” policy and the drop in packaging material prices, the cost pressure on beer enterprises has eased. At the same time, the consumer market continues to recover, and the demand for beer is improving. As the leader in domestic beer, Tsingtao Beer ranks first in brand value in the beer industry. They possess strong competitive advantages in terms of brand, product, marketing, channels, and strategy. In recent years, they have accelerated their layout in the premium and ultra-premium markets. The space for raising average prices through premiumization and structural upgrades in the future is vast, and the long-term outlook for business development is positive.
In addition to Wanlian Securities, Huaxing Securities, Haitong Securities, Shan Securities International, and other institutions also gave Tsingtao Beer a “Buy” rating.
However, food safety is always the red line for the food industry. Once a company crosses this line, its performance will inevitably be affected.
According to Tianyancha, the Tsingtao Beer Co., Ltd., which is at the center of this incident, was established in 2012 and is located at 56 Dengzhou Road, Pingdu City, Qingdao, Shandong. It produces beer (cooked beer, fresh beer, specialty beer).
According to articles on the official account of Qingdao Brewery No. 3, it is the largest beer production base in Asia, equipped with modern beer production lines and an intelligent 3D warehouse. In 2023, as Tsingtao Beer celebrated its 120th anniversary, the third factory officially embarked on a new journey with a production volume of 1.2 million kiloliters. Up to now, the quality of the third factory ranks first in the BSC system, setting new records for daily production and daily shipments. They completed the goal of reducing costs by 10 million yuan six months ahead of schedule. Based on several direct sales promotions posted on the official account, products sold by the third factory include Classic 1903, Pure Life, White Beer, Pilsner, and Lucky Star.
It’s worth noting that this incident occurred just before the Double 11 (Singles’ Day) shopping festival, which is when all major brands promote sales heavily. Whether this incident will affect Tsingtao Beer’s Double 11 sales remains a concern.
A consumer of Tsingtao Beer told The Paper reporters that they usually only drink Tsingtao Beer and always stock up a few boxes at home. However, after this incident, they temporarily dropped the idea of hoarding and plan to “wait and see.” Some consumers also expressed that they intend to cancel their online orders.
Will this incident impact the future performance of Tsingtao Beer, a leading beer company, or even influence the entire beer industry?
“The impact of this incident on the beer industry is very limited. Its influence on the Chinese beer market is short-lived and mild, and it shouldn’t be over-interpreted,” said Cai Xuefei, a liquor industry analyst. He believes that Chinese beer is evolving from industrial light beer to a diverse and high-end development represented by craft beer. This year, high-end beers like Tsingtao, China Resources, and Yanjing have performed well. This indicates that the overall beer consumption structure is steadily upgrading. Occasional incidents cannot overshadow the quality improvement and brand innovation value of China’s beer industry in recent years.
Cai Xuefei said, “Public opinion has actually magnified the negative impact of this Tsingtao Beer incident, leading to panic in capital and the market. However, Tsingtao Beer’s brand image and reputation remain strong, the product’s reputation is still good, and it will not affect public consumer confidence.”
Zhu Danpeng, a Chinese food analyst, believes that while there might be fluctuations in the capital market, the Tsingtao Beer incident will not “hurt the innocent,” and it will not have a significant impact on other similar brands. However, he also pointed out that if the Tsingtao Beer video is ultimately verified as true, it might have a lasting impact on Tsingtao Beer.