SABMiller in talks to buy Foster's breweries

By Chris Mercer

- Last updated on GMT

Related tags Foster Foster's lager Beer Sabmiller

SABMiller is in talks to buy Foster's overseas breweries in Asia, has learnt, as the potential sale offers
brewers a better foothold in one of the world's fastest growing
beer markets.

A source close to SABMiller confirmed the group was interested in buying Foster's Asian breweries and that negotiations have taken place between the two firms.

The source said a deal, if successful, would be relatively small, but could help SABMiller to build on its strong position in the emerging Asia Pacific beer market. "I think by this summer SAB could be vying for number one spot [in China]."

Talks for the Foster's division were at an early stage, however, with several other major brewers expected to show an interest.

Rumours emerged last week that Foster's was looking to sell its overseas breweries. Earnings before interest and tax fell 11 per cent at the Australian group's Brewing International Division in the second half of last year.

A sale may fetch Foster's around AUS$100-200m, said a beer industry analyst to​.

He said the price was "relatively small"​, but added that details had not emerged of what this would include and that Foster's could expect to get royalty payments for whoever took on its beer facilities.

Foster's was unavailable for comment at the time of publishing.

Any buyer would gain a better foothold in the promising Asia Pacific region, predicted by Goldman Sachs​ to show the fastest beer market growth up to 2010. China is already the world's largest beer producer.

Foster's has one brewery in China and two in Vietnam, with a fourth in India. "There would be a lot of competition [for them],"​ said the analyst, who wished to remain anonymous.

"Heineken are wanting to develop their business in emerging markets, SABMiller have a relationship with Foster's in North America, and are already number two in China, and I'm sure Scottish & Newcastle would be very interested."

Scottish & Newcastle (S&N) and SAB have been touted as possible frontrunners for Foster's breweries because they are already "in the family"​, with rights to Foster's beer in Europe and North America respectively.

S&N could provide stiff competition to SAB, after it helped Foster's lager to a 10 per cent sales rise in the UK last year, despite relatively stagnant market conditions there.

SAB, however, already has a strong foothold in Asia Pacific. The group recently used its Chinese subsidiary, CR Snow, to buy 85 per cent of the Qingyuan brewery in China's rich Fujian province.

The UK-based brewer is keen to beat back rival Inbev for number two spot on the market, and push ahead for first place.

SAB also recently signed a joint-venture with Vietnamese dairy firm Vinamilk, in order to make use of the native group's distribution network and market knowledge.

Graham Mackay, chief executive of SABMiller, said at an analyst conference last month that beer still had a "long way to go"​ in market share growth across emerging markets.

Beer consumption in China is an average 18.76 litres per person per year, compared to 39 in Vietnam and just one litre in India. The US average is 84 litres per person.

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