SABMiller strengthens Chinese presence with £165m brewery deal

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The Independent Online

SABMiller has consolidated its lead position in the world's largest beer market by buying out the minority shareholders of 14 breweries in China.

The brewing giant operates in China as a 49 per cent stakeholder in China Resources Snow Breweries (CR Snow) and has the market lead over local brewer Tsingtao. Its Snow beer brand, which retails in China for 20p, is expected to become SABMiller's biggest brand by volume by the end of this financial year, shooting ahead of Miller Lite.

Analysts predict Snow to catapult into the world's top four beer brands behind Budweiser, Brazil's Skol and Mexican beer Corona.

The joint venture CR Snow already held a majority interest in the Blue Sword breweries, based in the Sichuan province in south-west China. Yesterday, it snapped up the remaining 38 per cent stake for £165m. Sichuan province, famed for its spicy cuisine, has a population of 87 million, many of whom have already developed a strong taste for beer.

Andre Parker, managing director of SABMiller Africa and Asia, said the move demonstrates the company's commitment to invest in local brands.

The Sichuan breweries enjoyed a 70 per cent share of the market last year and are well positioned to capitalise further on increasing demand, Mr Parker added. The breweries can crank out 14 million hectolitres a year and this is expected to expand by 1.6 million by the middle of this year. As part of the deal, CR Snow also acquired the rights to the Blue Sword trademarks and the Guizhou Waterfall Brewery in Guiyang City, in Guizhou, a mountainous province to the south of Sichuan, with a population of 39 million.

Beer consumption is low in the region, giving the venture a clear opportunity for growth, Mr Parker said.

Shares in SABMiller slipped one per cent which analysts said was partly due to the price paid for the minority stake. One analyst said £165m was a high price to pay for a "tidy up".

Although the Chinese beer market is growing at a rate of 8 to 10 per cent a year along with the booming economy, prices are still cheap compared to the west. "In terms of profit this deal is negligible," the analyst added.

SABMiller has indicated that it will introduce its super premium beer Miller Genuine Draft into China although no timetable has yet been set.