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Heineken takes stake of largest brewer in China

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Cans of Snow Beer are displayed on a shelf at a supermarket in Beijing. GREG BAKER/afp

Heineken takes stake of largest brewer in China

Dutch beer giant Heineken will pour $3.1 billion into a stake in China’s top brewer, expanding its access in the Asian giant’s booming and hotly contested market, the two groups announced Friday.

Heineken has signed a “non-binding” agreement with China Resources Beer to acquire 40 per cent of CRH, the listed entity controlling the Chinese group, for a total of HK$24.35 billion, according to a statement.

In return, China Resources Beer will buy a 0.9 percent stake in Heineken for €464 million ($537 million).

The Dutch firm, which operates three breweries in the country, will merge its operations in China with those of its new partner.

The world’s second biggest beer company will also grant its partner permission to market its eponymous beer brand in China.

Heineken and its Chinese partner are joining forces at a time when competition is becoming fierce in the Chinese market, with consumers turning towards foreign beers and premium products as middle class incomes rise.

“It’s impossible that Heineken can grab a significant larger market share in China by itself,” Barney Wu, an analyst at Guotai Junan Securities Co, was quoted as saying by Bloomberg News.

“It has missed the chance as other international rivals such as AB InBev have become strong market leaders in the market,” Wu said.

China remains dominated by local brewers, with three Chinese groups controlling more than 40 per cent of the market, according to figures from Euromonitor International cited by Bloomberg News.

‘Numerous challenges’

China Resources controls 18 per cent of the country’s beer sales, followed by number two competitor Tsingtao.

The deal allows Beijing-based China Resources Beer, known above all for low-cost brands like Snow Beer, to add a well-known premium brand to its line-up.

“The premium beer segment is the crucial battleground that brewers are now seeking to conquer,” CR Beer chief executive Hou Xiaohai told journalists.

“The objective is clear, but the challenges are numerous,” Hou said.

Rivalries are also intensifying between international giants, including Denmark’s Carlsberg and Belgium’s AB Inbev, putting pressure on prices and lowering margins. The pressure has prompted certain foreign groups to withdraw, including Japan’s Asahi.

China, the world’s largest beer consumer, “is forecast to be the biggest contributor to premium volume growth in the next five years, driven by its rapidly growing middle class”, Heineken said.

CEO Jean-Francois van Boxmeer praised the “winning combination” of Heineken’s “strong brand” and China Resources Beer’s extensive distribution network in the country.

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