SABMiller bites back in China

- Last updated on GMT

SABMiller's Chinese joint venture, China Resources Breweries, has
acquired the Chinese brewing interests of Australian-based Lion
Nathan, which entails three breweries in the populous Yangtze River
Delta Region. After losing out to Anheuser-Busch in the battle for
Harbin earlier on this year, the investment will be seen as vital
to the company's efforts to boost its presence in the China beer
market.

SABMiller confirmed that it had paid $71 million (€58.4m) for the business, as well as taking on Lion Nathan's assumed debt of $83 million. The three breweries, all situated in Jaiangsu province, employ over 1,000 people and have an installed capacity of 5.16 million hectoliters with combined sales of 2.19 million hecolitres.

Over the past year the race has been well and truly on for international brewers to increase their footprint on the China beer market, which is now the world's largest by volume. Strong economic growth combined with a population of 1.3 billion with growing expendable income gives industry experts reason to bet on the China beer market as having strong investment potential.

Although the market is still fragmented and localised, the international brewers' strategy has been to move in on provinces with strong economic development and dense population. The fact that the Yangtze River Delta Region meets all these requirements and that it has been given Special Economic Zone status by the Chinese government makes it an ideal target for brewers, with all of the big names now having a presence in the region.

Indeed, back in June Interbrew bought a 70 per cent stake in Zhejiang Shiliang Brewery, located in the Yangtze Delta, in Zehjiang province. At the time Interbrew said that the €53.2 million (€44m) transaction will give it a market share of close to 50 per cent in the east coast province, with its 48 million inhabitants. The transaction is expected to close during the summer of 2004.

SABMiller said that the acquisition of Lion Nathan's three breweries included the rights to the mainstream brands Taihushul, Linkman and Rheineck, which are all distributed in the Yangtze River Delta region. These brands help give the brewer a 20 per cent market share in the region and leading positions in the cities of Wuxi, Suzhou, Changzhou and Nanjing.

"This acquisition extends CRB's footprint in the strategically important Jiangsu and Shanghai areas, with combined market volumes of 16 million hecolitres and above average market pricing,"​ said Andre Parker, managing director of SABMiller Africa and Asia. He went on to say that he expects the transaction to give CRB's operations an improved sales mix, which would help boost sales.

Frank Ning, chairman of China Resources Enterprise, said: "Since the beginning of this year, our production capacity has already expanded by about 30 per cent through acquisitions at reasonable cost. This acquisition, being the third this year, is another major step for us to consolidate our leading position in the mainland brewery market and develop a complete national distribution network for Snow [the company's leading brand in China]."

Related topics: SABMiller

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