Bass pulls out of China as joint venture turns bitter

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The Independent Online

Bass, which is already considering selling its UK brewing business, is abandoning its Chinese operations in an admission that its attempts to paint the People's Republic red have failed.

Bass is in talks to sell its 55 per cent stake in the Bass Ginsber brewery in north-east China to its local partner, a spokeswoman for the brewery revealed. An official at the provincial economic commission in Changchun confirmed Bass was pulling out.

As China battles a slowdown in foreign investment that only entry to the World Trade Organisation (WTO) can arrest, the foreign trade ministry in Peking is considering making this a test case of how not to run a joint venture.

Tensions between Bass and Ginsber have worsened to the extent that bodyguards are said to accompany every British visitor to the brewery.

The brewery spokeswoman explained: "The gaps between our cultures have led to different views and even clashes, as the foreign party felt it didn't get what it wanted."

In 1996, China's vast population presented an irresistible draw to foreign brewers. Total beer output was predicted to overtake that of the US by 2005. To a fanfare of bagpipes and kilted Scotsmen, Tennents was launched in Peking and Shanghai as a premium drink for the growing class of affluent Chinese.

Bass was unique in selling a slice of Scotland through marketing campaigns full of Highland scenery and the Loch Ness monster. Local beer drinkers were intrigued but they have stuck to their domestic brews, which are four or five times cheaper than Tennents, Bass's alternative.

Bass's investment, the Ginsber brewery in Siping, Jilin Province, belonged to the Red Mouth Group, a rural collective famous for its successful conversion to capitalism. Peddling everything from steel to electric fans, Bass's partner was more flexible and commercial than China's state-owned monoliths, but lacked the clout to fight local protectionism and resolve distribution problems.

Refused licences to sell bottled beer in certain cities, the brewery focused on draught beer. Even nature was against them - besides regular floods blocking road and rail, winters froze the beer in the draught piping.

Meanwhile, domestic breweries responded with better-packaged and cheaper lager, leaving foreign breweries struggling.

It will come as small comfort to Bass that Guinness is withdrawing from its licensing operation in China, while Fosters has closed down two of its three Chinese plants. However, the lure of a billion thirsty Chinese remains a powerful draw.