The fizz is going out of China's beer market.

Consumption volume has declined in the last two years, and is set to continue to do so for the next five, according to BMI Research.

The reasons include intense competition, changing tastes, growing health awareness and a slower economy, which is squeezing out lower-income consumers, the research arm of Fitch Group said.

Asahi Group Holdings is looking to exit its 19.9 per cent stake in Tsingtao Brewery after eight years, epitomising the troubles operators face in the market.

Sales of Tsingtao Beer have been falling, but so too have the Chinese company's higher end products such as Augerta and Classic 1903, BMI said in a February 17 note.

"Tsingtao is finding itself in a position of not being premium enough for high earners and not cheap enough for lower income consumers," the note said.

"Further, the company has been around for over a century and Chinese consumers are increasingly trying new options, emphasised by a rise in craft beer options."

Many Chinese breweries were under similar pressure, it said.

Carlsberg was reported to be considering the Tsingtao stake for around $US1.2 billion, but it might not be able to influence the strategic direction of the company, with Tsingtao Brewery maintaining a majority share, BMI said.

"Whether Carlsberg is able to negotiate a stronger decision-making platform within Tsingtao's structure may decide if a deal can be made," it said. Otherwise, Carlsberg would probably "find itself attached to a sinking ship".

Carlsberg already has a stake in Chongqing Brewery, which it has helped turn around over the last year, selling off brewery sites and some subsidiaries and retreating from the east of China, BMI said.

This at least bodes well for the potential purchase of Asahi's Tsingtao stake, provided Carlsberg has a say in how the brewer should best navigate these difficult times.

Bloomberg