China Resources Snow Breweries, SABMiller's joint venture with China Resources Enterprise, has made its first acquisition in northern Shandong province, the London-listed company said yesterday.
The joint venture will acquire the brewing assets of Shandong Hupo Brewery for about US$42m. The brewery will be acquired through the formation of a joint venture in which CR Snow will initially own 90%, purchasing the balance within three years.
The brewery has an annual production capacity of 2,7-million hectolitres, but the company will spend $8m to improve technology to increase capacity to 3-million hectolitres and ensure the production requirements are sufficient to produce the brand Snow, the largest selling brand in China.
The MD of SABMiller Asia, Ari Mervis, said Snow was seeing good growth in China and had been well received in Shandong.
Mervis said “the significant import sales volume that the brand already enjoys in the province certainly justifies the establishment of a production base here”.
“The brewery has a strategic location in northern Shandong and is well connected by highways to the other major cities in this region.”
The brewery will then be the same size as the Heineken brewery that is being constructed in the south of Gauteng and is set to be complete by the end of this year, Mervis said.
Absa Investments analyst Chris Gilmour said China was now the largest volume region in the world, but had low margins. “In some areas of China, beer sells for less than bottled water.”
He said it would take a while for industry consolidation to happen, which would result in rising prices. Prices would also rise as the economy grows.
China Resources Enterprise MD Long Chen said the acquisition would raise the beer's market presence. “It is a major step for us to complete the distribution network in the coastal regions of eastern China.”
Gilmour said China's vast size made it difficult to ensure geographic penetration.
The brewery is in Zouping county, in the north of Shandong, China's largest consumer of beer. Zouping also serves as a transportation hub to major cities such as Binzhou, Jinan, Zibo and Dongying.
Source: Business Day
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