China's Snow Breweries poised for growth on east coast

The company, 41-per cent owned by international brewer SABMiller, said yesterday that it has agreed to buy Yinyan Brewery in Zheijiang province for US$42.3 million.

It will also acquire the brewing related assets of the Xiangwang Brewery in nearby Anhui province for US$10.1 million.

The Yinyan Brewery gives CR Snow access to a number of major east-coast cities including Shanghai, Hangzhou, Suzhou and Ningbo while the Xiangwang brewery adds to the Snow brand's presence in Anhui province.

"The two acquisitions play a crucial role in the strategic development of CR Snow in these areas," said Mark Chen, managing director of SABMiller's partner, China Resources Enterprise.

The Chinese beer market is highly fragmented, with the Snow brewery holding just 13 per cent.

But it is has now entered a phase of consolidation with some of the industry's more ambitious players looking for bigger market share by acquisitions and creating strong brands.

Snow Breweries is one of these, and is competing with Tsingtao for the leading position.

In April Snow Beer reported that its sales volumes had increased by almost 50 per cent during 2005, suggesting it had already overtaken Tsingtao in volume terms.

In a statement yesterday Andre Parker, managing director of SABMiller Africa & Asia, said: "We have a profitable and growing presence in Zheijiang and Anhui.

Therefore these acquisitions will not only effectively reinforce CR Snow's market position in these provinces, but provide a larger platform to expand our national brand Snow in these strong growth areas."

The company already has two breweries in Zhejiang Province and five in Anhui Province, with 2005 sales volumes of 2.9 million hectolitres and 4.9 million hectolitres respectively.

The company will incorporate Yinyan Brewery's net debt of US$6 million and invest an additional US$1.8 million to boost capacity from 1.8 million hectolitres currently to 2.4 million hectolitres.

It will also spend US$7.4 million on the Xiangwang Brewery to upgrade capacity from 930,000 hectolitres to 1.6 million hectolitres.

The brewery's main brand Xiangwang has a dominant market share in Huaibei.

China Resources Snow Breweries operates about 40 breweries in China with a total sales volume of about 39.5 million hectolitres in 2005.