Fuyang deal makes SABMiller biggest brewer in Chinese market

SABMiller, the international beer company, has bought another Chinese brewery as it continues its race to capture the biggest share of the fast-growing market.

SABMiller, the international beer company, has bought another Chinese brewery as it continues its race to capture the biggest share of the fast-growing market.

China Resource Enterprises (CRE), SABMiller's long-standing partner in China, is paying $15m (£8m) for the state-owned Fuyang City Snowland Brewery in the eastern province of Anhui. The takeover will mean SABMiller's production capabilities in China may edge ahead of those of the number one producer, Tsingtao.

This will raise the pressure on Anheuser-Busch, the world's largest brewer and maker of the Budweiser brand, in the battle between Western beer companies to win over Chinese consumers. Anheuser revealed on Friday it had increased its stake in Tsingtao to 27 per cent from 10 per cent. It also owns the Harbin brewery, winning an auction involving SABMiller. Harbin controls 5 per cent of the Chinese market.

The Fuyang deal brings to 38 the number of breweries SABMiller owns and runs through CRE, with whom it has had a joint venture for 11 years. The province has a population of 59 million and the brewery is the region's largest. SABMiller's strategy in China has been to buy up local brewers to create a regional dominance. Sales were up 10 per cent in the half-year to the end of February.

SABMiller is trying to create a national brand, Snow, but is also looking to import its international brand, Miller Genuine Draft. Song Lin, of CRE said: "By consolidating breweries in a proximate area and integrating our sales and marketing efforts, this will enhance revenue and operating margins and help Snow penetrate the market."

Some analysts are not convinced by the Chinese beer market's potential. A report last week by the investment bank UBS showed huge difficulties remain in transporting and distributing beer across China.