Opening a Bar or Microbrewery in China
By Kimberly Wright
As the world’s largest beer market, China offers a lot of opportunities for beer aficionados and the seasoned brewer alike. Beer consumption has been steadily increasing in the country, with per-capita consumption rising at an annual rate of 5.1 percent from 2008-2013. As the Chinese middle class develops tastes for heavy lagers and IPAs, there has been a significant increase in demand for foreign imports, with U.S. beer imports to China more than doubling between March 2013 and 2014.
These trends have prompted many investors to start considering ways in which they can tap into China’s beer market, whether it be importing beer or opening up a bar or microbrewery in China. The process for opening a bar, entertainment venue, or microbrewery is in many ways quite similar to the process for opening a restaurant or café. However, there are some additional licensing procedures and considerations that investors need to be aware of before embarking on their business operations.
Step 1: Finding the Right Location
Like finding a location for a café or restaurant, finding the right location for your bar or microbrewery can be a very tricky task. In order to avoid renting out a location that will be denied business registration, investors should take extra precautions to find a business location that can pass inspections. It is encouraged that investors first ask for consultations from the Environmental Protection Bureau, Hygiene Bureau, and local department of the Ministry of Commerce and the Administration of Industry and Commerce (AIC) to verify whether or not the location will pass regulations. For bars, it can be particularly important to make sure they can pass stringent regulations regarding fire safety.
Step 2: Licensing and Registration
For bars and microbreweries, this step will be very similar to the requirements for licensing and registering a food and beverage business. Essentially, the owner will need to obtain the following permits:
- A “Notice of Company Name Reservation” from the Administration of Industry and Commerce (AIC)
- Relevant health and food hygiene licenses. Bars will be required to obtain a Catering License (餐饮服务许可证), but other licenses may be required depending on the nature and scope of the business operation. Microbreweries will need to obtain a Food Production License (食品生产许可证).
- Environmental Protections Approval
- Approval from the local fire department
Step 3: Unique to bars, microbreweries, and entertainment venues
Alcohol Permit Registration
A permit to sell alcohol must be obtained from the Alcoholic Drink Circulation Administration Office.
Exception: Bars in Shenzhen are not required to obtain an alcohol permit in order to sell beer, but the alcohol purchased must be from a company with a License to Sell Alcoholic Drinks Wholesale.
Registration of Entertainment Venue
Depending on the nature of the entertainment services provided by the bar, it may be necessary for investors to set up their business operation as an entertainment venue at the local Bureau of Culture. According to the Ministry of Culture, an “entertainment venue” is a place that is: open to the public, makes profits, and either allows customers to participate in performance and singing activities, provides a space specified for dancing, or provides game-playing devices for game play. In addition, an entertainment venue may use performances as a means of profit-making, or sell tickets for entrance. Venues providing these services cannot be registered as bar and must be registered as an entertainment venue. In addition, the city of Changsha, Hunan has a special policy that requires all bars to register as an entertainment venue. It should be noted that entertainment venues are not able to be registered as wholly foreign-owned enterprise (WFOE) and can only be registered as a joint venture (JV) or as a Chinese-owned company.
As part of the approval process, authorities will investigate the business owner’s background to make sure that he or she has not committed any serious crimes (such as drug use, gambling, and money laundering).
Opening up a Microbrewery
Microbrewing is legal under Chinese law, but there are some restrictions that owners need to be aware of before opening and operating a microbrewery, the most important one being that microbrews are legally only allowed to be sold in kegs within the owner’s venue. Some microbreweries can get around this regulation by having the beers bottled or canned abroad and then imported into China for sell, but this will add costs to the production.
In addition, there are certain restrictions on the bottling and canning of alcoholic drinks. Breweries that bottle or can beer products need to acquire approval from the State Council of China and the National Development and Reform Commission of China. To acquire approval, breweries must produce at least 12,000 bottles/cans per hour, and there are limits placed on breweries with production lines that produce less than 18,000 bottles/cans per hour. Furthermore, bottled and canned beer is restricted from containing yeast or other microbiological agents that are often used in ales.
While beer may not be the first thing that comes to people’s minds when they think of China, it is undeniable that there is a large opportunity for investment in the industry. There has been an increased demand for quality beer in China as the taste buds of the Chinese middle class have changed to prefer sophisticated craft beers and foreign imports over weak domestic beer products. Investors are encouraged to familiarize themselves with regulations to ensure the success operation of their enterprise.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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