Tsingtao Brewery Co (青島啤酒), part-owned by Anheuser-Busch Cos, said its sales will grow by at least 20 percent annually in the next five years as it increases spending to build new plants.

The biggest Chinese brewer will focus on the construction of additional production lines in the next three to five years to sustain its revenue growth, chairman Li Guirong (李桂榮) said in an interview yesterday in the Chinese port city of Qingdao.

Rising affluence in the world’s biggest beer market spurred a 16 percent surge in sales last year, with consumption forecast by Anheuser-Busch to double within a decade. Tsingtao Brewery, responsible for more than half of China’s beer exports, is increasing marketing of premium products, including a low-alcohol brand, through sponsoring next year’s Beijing Olympic Games.

The company will add additional production capacity of more than 1 million tonnes by the start of next year by building new plants in Shandong, Sichuan and Shaanxi, Li said.

“We will depend primarily on the domestic market for our development due to the strong local demands,” Li said.

Tsingtao Brewery now has 50 plants in 20 provinces across China. The company produced 4.5 million tonnes of beer last year, Li said.

Tsingtao aims to increase sales of its profitable Tsingtao brand by 17 percent this year.

FOSHAN, Guangdong: US-based Anheuser-Busch, one of the world’s leading beer makers, yesterday announced it will build a brewery in this Pearl River Delta city.

With an initial investment of $63 million, construction of the brewery will begin next month and is set for completion late next year.

The project will be capable of yielding 2.6 million hectoliters annually at the initial stage. Sufficient room has been set aside for future expansion.

The brands to be brewed at the facility are Budweiser, Bud Ice, Budweiser Ultra and Budweiser Genuine Draft as well as Harbin premium brands for the domestic market.

“As one of the largest-volume and fastest growing beer markets in the world, China remains one of our most important international priorities,” said August A. Busch, president and CEO of Anheuser-Busch Companies Inc.

“The Foshan brewery will allow us to increase the availability of Budweiser and Harbin premium brands in China, where the premium and super-premium categories are growing faster than the rest of the industry and have tremendous long-term potential.”

He said the new facility is part of Anheuser-Busch’s strategy to position itself more favorably for future growth in China. It will help to promote Budweiser as a leading international premium beer while expanding Harbin’s premium brands outside Northeast China and partner with Tsingtao Brewery Company to strengthen its position as a leading brewer in China.

Anheuser-Busch aims to double Budweiser’s distribution across the nation over the next five years by expanding to 100 new cities each with a population of over 1 million where it aims to have another 150 million Budweiser drinkers. It also aims to introduce Harbin premium brands to 33 new markets in China this year.

The Foshan facility is Anheuser-Busch’s second self-invested brewery in China. Its first one was in Wuhan, capital of Central China’s Hubei Province, in 1995. The Wuhan brewery has an annual production capacity of 4.2 million hectoliters, four times the initial design capacity.

(China Daily 04/04/2007 page14)

After SABMiller lost a bidding war for China’s Harbin Brewery Group to Anheuser-Busch (BUD ) Cos. two years ago, it looked as if America’s King of Beers would reign over the Middle Kingdom as well. Anheuser-Busch, after all, had already sealed a deal with China’s leading brewery, Tsingtao, and with Harbin in its stable it looked unbeatable.

But SABMiller had a Plan B that could well give it the throne after all. Since losing Harbin, London-based SAB has focused its energies on a 12-year-old joint venture, China Resources Snow Breweries Ltd., that is now thriving. In June, CR Snow, which includes 46 breweries across the country, surpassed longtime leader Tsingtao for the No. 1 spot. For the 12 months through June, CR Snow produced nearly 40 million barrels, vs. 37 million for Tsingtao. As a result, CR Snow boasts 14.9% of the Chinese market, compared with Tsingtao’s 13.9%. “Our growth has been on the back of a very consistent and targeted strategy,”says Wayne Hall, SABMiller’s finance director in China.

Both companies want to be the toast of China. As beer sales in the U.S. and Western Europe have lost their fizz, they’re growing at 8%-plus annually in China. That has helped China overtake the U.S. as the world’s top beer market.

SAB was early to see the promise of China, where it has been brewing since 1994. Yet instead of targeting big cities such as Shanghai and Beijing, as its competitors did, SABMiller scooped up breweries in less affluent areas, including the northeastern rust belt and the populous inland province of Sichuan. This contrarian strategy has allowed SABMiller to build up a national footprint at bargain prices. While Anheuser ponied up $700 million–as much as $62 per barrel of annual brewing capacity–for Harbin, SABMiller has typically paid $30-$40 per barrel for its breweries. “SABMiller has made a mint by purposely buying cheaper assets,” says Bear, Stearns & Co. (BS ) analyst Anthony Bucalo.

SABMiller has been smart in its positioning of the flagship Snow brand. To appeal to upwardly mobile youth, it slapped a shiny, modern label on the 50-year-old brew and launched a national ad campaign emphasizing the beer’s freshness, complete with sweepstakes that reward winners with outdoorsy vacations. The marketing push is paying off as it presses into the big cities. China now accounts for nearly 20% of SABMiller’s total beer volumes, and Snow has become China’s No. 1 brand. Soon, it will probably surpass Miller Lite as the biggest seller in the company’s cooler.

BUD’S COMEBACK
Anheuser remains a formidable foe. If you factor in Harbin and its own Budweiser, the brewer remains bigger than CR Snow in China. Its century-old Tsingtao is a big player in the premium segment, where profits are plumper, and it plans to go national with Harbin, currently concentrated in the northeast. “We have more of a premium portfolio, which at the end of the day is how you’re going to make it in China,” says Stephen J. Burrows, CEO of Anheuser-Busch International.

Both companies, meanwhile, could be tripped up by China’s fragmented market, where restaurants, not supermarkets or liquor stores, account for the lion’s share of beer sales. A byzantine distribution system pinches profits and makes it tough even for international heavyweights to dictate pricing and influence how their beers are displayed.

May 5, 2004 – SABMiller is launching a takeover bid for a Chinese brewer that could open up a battle with U.S. giant Anheuser-Busch. SABMiller’s offer for the Harbin Brewery is $551 million.

London-based SABMiller, which sells Miller beers in the United States and many others around the world, already holds a 29.6% stake in Harbin. Under Honk Kong’s stock market rules, if it owned 30% then a takeover bid would be required. Anheuser-Busch just purchased its own 29% share of Harbin. Harbin is the fourth-largest brewer in China and dominates the northeast China market.

Anheuser-Busch could raise its stake in Harbin to prevent SABMiller from gaining control, setting off a bidding war. Anheuser-Busch also owns a 10% stake in Chinese market leader Tsingtao Brewery, which it will raise to 27% by 2010 as part of a mandatory bond conversion.

In 2002, China surpassed the U.S. to become the world’s biggest beer market by volume, and the country accounts for 16.9% of world-wide consumption. With beer sales growth in Western Europe and the U.S. is flat, the fast-growing Chinese market has become more important.