China: SABMiller, InBev seek bigger share in Zhejiang

Foreign beer brands, including SABMiller from London and Belgium-based InBev, are seeking for a bigger share in Zhejiang, a booming coastal province of China, SinoCast Financial Watch Via Thomson Dialog NewsEdge released July 27. China Resources Snow Breweries Co., a joint venture between SABMiller and Hong Kong-listed China Resources Enterprise Ltd. (0291.HK), on July 24 announced the acquisition of a 100 percent stake in Zhejiang Yinyan Brewery Company for CNY 338 million.

With a 13 percent share at Zhejiang's beer market, CR Snow Breweries has always expanded in the province's northern region and expects to grab more share as Yinyan Brewery has been focusing on the northern area of Jiaxing as well as Shanghai, China's economic hub.

Yinyan last year sold approximately 104,000 kiloliters of beer. Beijing-based CR Snow Breweries meanwhile spent no less than CNY 81 million to buy the beer related assets from Huaibei Xiangwang Brewery Co. in the central province of Anhui. The annual production capacity of the latter is designed to rise to 106,000 kiloliters.

Before the deal, the buyer, set up in 1994 and 49 percent- owned by SABMiller, has run five breweries in Anhui and already grabbed a lion's share there. Kicked off in 2002 through the merger of South African Breweries and Miller Brewing, SABMiller is listed at the stock exchanges in both London and Johannesburg. In the year ended on March 30, 2006, it posted roughly USD 2.6 billion in pre-tax profits and a turnover of USD 15 billion.

The acquisitions, thanks to the two targeted companies' locations which are rather near to some majority beer markets, such as Shanghai, Hangzhou, Suzhou and Ningbo, are regarded as a key step in CR Snow Breweries' nationwide expansion strategy. With about 40 breweries in the mainland, it posted a total sales volume of 3.95 billion kiloliters in 2005.

Another industry magnate InBev, together with its partner Wenzhou Jinkeda Group, also agreed to set up a joint venture in Zhejiang with a local beer maker. The Belgium investor is to hold a 40 percent stake, and Jinkeda 32.4 percent. The remaining stake is to be owned by the local beer company, the No. 6 in Zhejiang. It, with an 85 percent market share in Quzhou area, sold 80,000 kiloliters of beers in 2005 based on its three plants and one bottling plant. Still, the total investment of the coming venture has not been given.

The beer market in Zhejiang is estimated to have a capacity of 2 million tons with higher prices than those in other regions, making it attractive to breweries from both home and abroad. InBev's venture, though not receiving the regulatory approval yet, would consolidate its leadership position in the central and southern regions of Zhejiang with a 50 percent share at least, told an insider who declined to be identified. Presently, China's top-three beer makers, Beijing Yanjing Brewery Co. (000729.SZ), Tsingtao Brewery Co. (0168.HK; 600600.SH), and CR Snow Breweries, have enjoyed a combined market share of 36 percent and the figure for the top-ten have hit 61 percent, a great jump from a year ago. The merger and acquisition tide is believed to continue washing the beer industry.

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