21/12/2006 – SABMiller, one of the world’s biggest brewers, is establishing a major presence in China through its joint venture China Resources Snow Breweries, which last week said it would acquire two breweries in northern China for a combined US$22.4 million.

China Resources Snow Breweries will pay US$17.7 million for a brewery in Shanxi Province and US$4.7 million for another in Inner Mongolia, SABMiller said in a statement.

“These acquisitions represent a natural progression for us, as we look to develop our current footprint across the northern and northeastern regions, ” said Andre Parker, managing director of SABMiller.

SABMiller already owns 46 Chinese breweries in 13 provinces of China and claimed in October that its China Resources Snow venture has become the largest Chinese brewer by sales volume, beating domestic rival Tsingtao Brewery.

Meanwhile Kirin, the second largest brewer in Japan, also revealed plans for Chinese expansion last week. It said that it is planning to invest US$38 million in a 25 per cent stake in Qiandaohu beer, a Hangzhou-based company.

The purchase is expected to be completed in January 2007, when the factory will begin to produce Kirin beer. It is estimated that by the end of 2007 Kirin will increase its annual production in China from 5.4 million litres to 6.8 million litres.

Kirin is looking for a bigger market share in the Yangtze River delta area of China where rival Asahi, Japan’s leading brewer, already has a presence. Asahi invested US$36 million in building a new beer factory in Huzhou city (Zhejiang province) earlier this year.

Another Japanese brewer, Suntory, has also gained a presence in the area, cornering 69 per cent of the market, according to the Beijing Business Daily.

Kirin retains the right to raise the share it owns in Qiandaohu to 49 per cent in five years.

The London-based brewer said it now becomes second only to domestic giant Tsingtao Brewery Co Ltd in one of the fastest growing beer markets in the world a national beer market second only in volume to the United States,according to today’s China Daily.

The joint venture, to be called China Resources （Sichuan ） Blue Sword Breweries, will be 62 per cent owned by SAB’s CRE Beverage Ltd（CREB） and the remainder by the province’s leading brewer Sichuan Blue Sword Breweries group, with SAB having management control of the venture.

SAB says Sichuan’s 90 million population traditionally consumes spirits, but the beer market has the potential to grow with beer drinking per head only half that in the rest of China.

“The Sichuan Province is in the centre of the government’s go-west policy, and prospects are good with a per capita beer consumption of only nine litres per annum compared with 18 in the rest of China,” said Andre Parker, managing director of SAB’s beer operations outside South Africa.

Shares in SAB, which is one of the leading brewers in developing markets such as Africa, Eastern Europe and China were down five per cent, or 22-3/4 pence at 428-1/2p by 1445 GMT.

The venture will combine CREB’s two breweries with 10 owned by Blue Sword in Sichuan, brew the area’s two main beers Blue Sword and CREB’s Snowflake, and have an 80 per cent share of the province’s beer market. It will sell six million hectolitres of beer a year, with five million from Blue Sword breweries.

Parker said SAB had topped up its investment to take control of the venture, and would pay US$26 million to Blue Sword as its part of the CREB investment.

As SAB owns 49 per cent of joint venture CREB, its 51-per cent partner Hong Kong-listed China Resources Enterprise Ltd would pay slightly over US$26 million for its share.