Local conglomerate ties up with Ziemann group in ambitious plan to create beer able to compete in international market

We see this as the beginning of a long lasting relationship.

Cambodia’s Chip Mong Group inked an agreement Sunday with Germany’s Ziemann Group to establish a US$60 million joint-venture brewery to produce a “world-class beer” in Cambodia.

“We hope the venture will lead to Cambodia producing a quality product to compete in both local and international markets,” Leang Khun, president of Chip Mong Group, said at the signing event.

According to the terms of the joint-venture agreement, $60 million in capital will be invested by Chip Mong Group, leaving Ziemann Group responsible for operations at the new brewery, which will be called Khmer Brewery.

Work on the plant, to be located in Choueng Ek commune in Phnom Penh’s Dang Kor district, is scheduled to commence in January. When construction wraps up 15 months later, the brewery will create 700 jobs and produce from 100 to 200 million litres of beer annually, Leang Khun said.

Joachim Gunkel, managing director of Ziemann, said the Ludwigsburg, Germany-based firm brought its technical expertise to the venture. He said the firm had 150 years’ experience in the industry, and partnered with some of the world’s biggest producers, including Corona, Heineken and Beck’s.

“We see this as the beginning of a long-lasting relationship where we will provide ongoing support, service and commitment towards Khmer Brewery for the time ahead,” he said at the launch.

When production begins satisfying domestic demand, Suy Sem, head of the Ministry of Industry, Mines, and Energy, said he anticipated the involvement of internationally recognised Ziemann would give the brewery the kudos to sell its product in international markets.

“We hope that the beer produced by the two companies will not only help reduce imports of the beverage from abroad but also enable Cambodia to have a quality beverage to compete in foreign markets,” he said.

Cambodians downed an average of 11.8 litres per capita in 2007 according to the International Centre for Alcohol Policies, still well short of the annual consumption in neighbouring countries; Laotians drink 19.6 litres annually on average and Thais 31.9 litres. However, consumption in the Kingdom grew about 13 percent year on year in 2007, the latest year figures are available, creating attractive growth potential for beer producers in the country.

Stiff competition

Clamoring for market share are international giants Heineken International and Carlsberg. Both firms recently announced that strong results in the third quarter of the year in Indochina helped balance poor sales in traditional European and American markets.

Carlsberg had seen revenues rise 24 percent in its Asian markets in the year to the end of September, driven largely by strong returns in Indochina, said chief executive officer Jorgen Buhl Rasmussen at a press conference in November.

Khmer Brewery is the latest entrant into what is fast becoming an increasingly crowded domestic market.

Another Cambodian company, Kingdom Breweries Limited, plans to begin production on what it terms a “boutique beer” in mid-2010, according to Peter Brongers, chief executive officer at the brewery.

Majority owned by investment firm Leopard Capital, the brewery intends to meet what it says is demand for an upscale beer in Cambodia.