German Beer Made in China

Qing Li is an entrepreneur. During the course of his career so far, he has gradually developed a fondness for craft beer, with a particular admiration for German brews. Which is why he first of all began to import them, but very soon this had lost the attraction of novelty. And so the idea was born of building a German brewery in China: TBT Urbräu – with a Steinecker brewhouse, Krones process technology, a Krones bottling line, a beer brewed to a German recipe under the Urbräu brand, and production under licence of König Ludwig wheat beer and Kaltenberg beer. And, of course, you also need a German brewmaster at the brew-kettle.

The Chinese beer market is currently characterised by a phase of consolidation: the five biggest breweries account for around three-quarters of it – a less-than-easy situation, particularly for the small breweries. “We know that the Chinese brewing industry is struggling with surplus capacities,” is how founder, partner and President of TBT Urbräu, Qing Li, analyses the current situation. “This is the consequence of a weaker macro-economic environment, reduced purchasing power and a steep decline of turnover in the night-life sector. Beer consumption is being directly affected by this – and it is going to change: some market analysts believe that in this situation younger consumers may influence the future direction of the beer market as trendsetters. And this consumer grouping is more interested in individualistic, top-class products. So at Urbräu the initial focus was solely on authentically original German beers, with craft beer added later on. “Thus we create brews that are distinctively different from most of the mass-produced beers. Even though this concept is a new one for China, we believe that craft beer will here develop into a new trend,” says a confident Qing Li. “The situation in China is comparable to that of the USA’s beer market around 30 years ago, with massive concentration and surplus capacities. But in recent years, craft beer has become extraordinarily popular in the USA; its share of the beer market is increasing year by year. The successes that craft breweries are now celebrating over there ought to be possible in China as well. The foundations for craft beer in the Middle Kingdom are still very weak at present, but things are set to progress much faster than in the USA.”

All the technology from Krones

In August 2013, with the TBT Urbräu GmbH as the investor, the contract was signed for building the TBT Urbräu Brewery Park in Handan. Back then, China’s economy was still looking good, achieving double-figure growth rates. Following initial contacts with international component vendors, Qing Li, as the co-founder of the TBT Urbräu Brewery Park, took a swift decision in favour of Krones’ turnkey solution. The first construction work had already begun by the end of 2013, and six months later the first machines arrived from Germany, and in April 2015 the first brew was produced in Handan. The capacity installed by then was 120,000 hectolitres. Krones had supplied the brewhouse, the entire process technology and a non-returnable-glass line for TBT Urbräu, and handled all the engineering work as well.

The first German craft brewery in China

During his former incarnation as a karaoke entrepreneur, Qing Li was already importing beers from abroad. And he acquired a taste for them: he became particularly fond of craft beer, plus English and German brands – but, as he himself freely admits, he had “no idea” about brewing. In this point, he was supported by the specialists from Krones, whom he had contacted for the first time in early 2013.

The TBT Urbräu Brewery Park is located in the city of Handan. This prefecture-level urban region is home to about 10 million people, around three million of them in the city itself. It is located around 400 kilometres to the south-west of Beijing and is still dominated by heavy industry, mostly steel and coal. But the local authorities are keen to attract more light industry, so as to help accomplish the targeted transformation in China’s economic structure. For this purpose, a new Economic and Technological Development Zone was created on the city’s outskirts, which offered TBT Urbräu ideal preconditions for building a plant. And now it houses China’s first German craft brewery.

Production and sales licences for German beer

The Urbräu Brewery Park’s principal brand is called Urbräu. The Chinese designation “Youbulao” is a transliteration of the German name “Urbräu”, which in its turn translates as “original brew”. Although the German name is a bit difficult for the Chinese to pronounce, Qing Li believes he has made the right choice, since for him it epitomises “good beer”. It is currently being brewed in three different variants: Urbräu unfiltered, Urbräu wheat beer unfiltered, and various Urbräu craft beer types.

In addition, the TBT Urbräu Brewery Park has signed a licensing agreement with Prince Luitpold, the President of König Ludwig International, for producing and selling the König Ludwig and Kaltenberg brands. “König Ludwig” is the beer brand of the Bavarian royal family. The Wittelsbach family has for more than 700 years possessed a recipe for brewing royal beer. Under this brandname, products like “König Ludwig Wheat Beer” and “König Ludwig Dark” are sold in many countries all over the world. Urbräu also accepts several contract brewing jobs, especially from Chinese craft breweries, who have come up against the limits of their capacities.

While most of the Urbräu beers are currently being sold only in an area extending 200 kilometres round Handan, TBT Urbräu is attempting to place the high-end licensed products in all of China’s major cities. The brewery utilises all available channels for this purpose: from restaurants and bars all the way through to supermarkets. Online trading is all set to go live as well. A bottle of Urbräu costs the consumer about 1.10 euros, though the König-Ludwig and Kaltenberg   beers are two to three times more expensive. The brewery sells the licensed beers in the classical 500-millilitre returnable glass bottles. For Urbräu itself, the range comprises 330- and 500-millilitre bottles. But in China reclosable 1.0- and 2.0-litre returnable cans for restaurants are likewise proving highly successful. Urbräu is also offering 30-litre kegs filled in the same way.

In order to raise awareness levels for Urbräu among youthful consumers, in particular, the company sponsors top-class motor sport races with Audi and Porsche and in 2016 is the only official partner from the beverage sector for the FMCS (Formula Masters China Series), a competition run by the Volkswagen Group for up-and-coming drivers. As you will have noticed: Qing Li is a motor sport fan. In the Urbräu Brewery Park’s customer entertainment centre, an original Volkswagen Beetle manufactured in 1973 is on show, and as a vehicle for promotional purposes TBT Urbräu uses a classical Volkswagen Caravan from the T1 series. The beer-themed German-style restaurant on site is currently being used only for the brewery’s internal events, but there are plans for further expansion together with the beer garden, and for making these accessible to the public.

Range of beers to be expanded

For Supply Chain Manager Bing Zhu, this brewery construction job constituted a unique experience. Although as a brewmaster he already had 15 years of experience at a Chinese brewery under his belt, responsible for production under licence of an international beer brand, there was one thing missing on his CV: the manufacture and installation of a brewery’s equipment. So he counted himself very fortunate to be involved here at Urbräu right from the start. For example, he chose state-of-the-art equipment for the brewer’s lab, which now even features a gas-chromatograph for measuring fermentation aromas.

Bing Zhu is in particular highly satisfied with the Steinecker brewhouse: “This system provides the requisite flexibility for our needs, and above all works very reliably.” Urbräu is currently producing 15 different SKUs (stock-keeping units). When the brewery has then put in place a broader distribution network, the plan is to expand the range of beers still further. Bing Zhu is thinking, for instance, of a light IPA with around 30 bittering units or a dark ale with a higher alcohol content, plus other craft beer types.

The actual brewing is handled by German brewmaster Axel Gummich. “I feel as if I’m actually in Germany. We’re brewing German beer, without any additives, yes really – even though we don’t emphasise that in the marketing,” he says.

“With Krones’ technology, it’s easy to brew top-quality beer. We’re achieving a hop yield of 32 per cent, for instance, whereas in the textbook 30 to 31 per cent is the maximum possible here. The malt grist is likewise significantly lower than with other brewing lines. Quality pays off, you know. And the Kaltenberg and König-Ludwig beers we brew here taste exactly like they do in Germany.” And that’s the way it’s going to stay, thanks not least to brewing engineer Josef Schraml, who as the licensing executive at König Ludwig International drops by in Handan several times a year to check on the quality of the products concerned.

“What I like brewing best is a wheat beer,” admits Axel Gummich and he never wavers in his conviction: “For a good German beer, you need a German brewmaster at the brew-kettle.”

“Accepting responsibility”

Urbräu had some of the operators for the bottling line and the brewhouse trained at the Krones Academy in Taicang, in order to ensure that all the operators are actually able to handle the machines and systems involved. The Krones subsidiary in Taicang also handles after-sales service and maintenance. “The collaboration with Krones as our single-source supplier was on all levels very amicable and constructive,” says entrepreneur and beer fan Qing Li. “What I found most impressive was that Krones willingly accepted responsibility. I myself didn’t know much about brewing, but I’ve learned a lot from Krones – in terms of both the technology involved and the future strategic focus. What we have in common is a shared commitment to quality and service. I regard Krones as not only a vendor, but also a partner who provides never-failing support.” And since the Chinese love symbolism and flowery language, he sums up his thoughts in a charming simile: “Krones is like a huge tree, in whose shade you can rest easy in your mind. Krones is a very trustworthy company.”

Urbräu: the Chinese seem to like it

Even though colder wind is meanwhile blowing in the Chinese economy and competition between the breweries has visibly intensified, the prospects for the brewing sector as a whole remain auspicious. Euromonitor International is admittedly at the moment predicting somewhat lower growth rates for the years ahead, but in the long term demand is set to recover.

The brewers at Urbräu, at least, are still optimistic – not least because they are serving a lucrative niche with their German beers brewed in-house, with the German royal family beers brewed under licence, and with their expanded range of craft beers. That’s why in the second year of its existence, Urbräu had already had its storage cellar’s capacity upsized by Krones to its present 300,000 hectolitres. After all, expectations are high. In 2016, the target output for the brewery is 270,000 hectolitres of beer. German beer, made in China – the Chinese seem to like it.