Heineken acquires 21pc stake in Guangdong Brewery
The US$71m deal finally gives the Dutch brewer a significant presence in China
Heineken, the world's third-largest brewer, has become the latest international player to grab a slice of the mainland's lucrative beer market, signing a US$71.8 million deal for 21 per cent of Guangdong Brewery Holdings.
The recently formed vehicle for China operations, Heineken Asia Pacific Breweries China, is taking the stake in Guangdong Brewery, which has an annual production capacity of four million hectolitres. While that may be small in a mainland market that consumes 250 million hectolitres a year, Guangdong Brewery's Kingway brand has more than 60 per cent of the Shenzhen market and a 15 per cent share of the provincial market.
Heineken has trailed the two biggest breweries into China. World No1 Anheuser-Busch has teamed up with Tsingtao Brewery, taking a 9.9 per cent stake, and SABMiller owns 29.6 per cent of Harbin Brewery. Smaller operators have also been quick to move in, Scottish & Newcastle acquiring 19.5 per cent of Chongqing Brewery, Interbrew taking stakes in KK Group, Zhujiang Brewery and China Lion Brewing and Carlsberg taking over Yunnan Dali Brewery and Kunming Huashi Brewery.
Heineken's Asia-Pacific managing director Herman Hofhuis said yesterday he believed the Dutch brewer and Kingway would create a competitive combination in the mainland. 'With the entry of several international players, the Chinese beer industry is consolidating very rapidly,' he said.
The competitive landscape of the industry would also change, along with rapid improvement in brewing technology and increased focus on brand and portfolio management, he said.
'Heineken's priority in China is to partner with local brewers who have the same shared values, same drive for success, strong leadership and an impressive track record. We found all these in Kingway.'
Asked when Heineken would start brewing its own brand of beer in China, Mr Hofhuis said: 'Very soon. It depends on what we can sell this year.'
Guangdong Brewery chairman Ye Xuquan said the group's two production plants in Shenzhen both met Heineken's technological requirements. 'Brewing Heineken with our facilities still depends on discussions but it is a possibility this year.'
Mr Ye said Guangdong Brewery would also benefit from the partnership, leveraging on Heineken's international sales network to expand overseas.
Guangdong Brewery will spend HK$247 million from the share sale on business development, including construction of a Shantou brewery, and for working capital. The Shantou brewery, due to begin operation next year, will add 50 per cent to annual capacity.
Under the share sale agreement, Heineken bought 133.76 million new shares from Guangdong Brewery at HK$1.85 each and also acquired 165.49 million Guangdong Brewery shares from its parent, GDH, at the same price.
The price represents a 9.8 per cent discount to the HK$2.05 closing price before Guangdong Brewery was suspended from trading yesterday.
Heineken already operates two breweries in China, one in Shanghai and another in Hainan, in a joint venture with Singapore's Fraser & Neave where they make Tiger beer.
