Source: 21 Century Business Herald
September 6, CR Snow Breweries Co. Ltd., China’s biggest beer maker by production volume, is planning a bid for Guangdong-based Shaoguan Huoli Beer Co. Ltd. as it seeks to expand its presence in the southern province.
The bid for the Shaoguan-headquartered brand comes 6 months after CR Snow Breweries lost out on a 21.37% stake in another local brewer, Kingway Brewery Holdings Ltd., to Belgium’s Anheuser-Busch InBev NV.
“We lost the bid for Kingway, but that doesn’t mean the end of our acquisition drive, which is core to our strategy of gaining market share first, even if that means profitability has to come later,” Zhao Xifang, general manager of CR Snow Breweries’ Guangdong branch, told the Southern Metropolis Daily.
Huoli Beer has a production capacity of 150,000 tons per annum and distributes Huoli-branded beer products in Guangdong, as well as neighboring Jiangxi and Hunan provinces.
“After being incorporated into the CR Snow Breweries family, Huoli Beer is expected to face a better future in the Pearl River Delta market, and with its geographical advantage in Shaoguan, it would also help CR Snow Breweries to entrench its position in the Hunan and Jiangxi markets,” Zhou Maohui, secretary general of the Guangdong Provincial Alcohol Industry Association, told the Southern Metropolis Daily.
Huoli Beer has all but halted production and is going through the process of bankruptcy, after which its assets will be auctioned off, according to Zhao.
CR Snow Breweries hasn’t the disclosed financial details of the deal, but Zhao said money is of little concern for the brewer, which is a joint venture between London-based SABMiller Plc. and China Resources Enterprise Ltd. (2319.HK).
CR Snow Breweries is looking to boost its presence and production capabilities in Guangdong, where it has only 1 plant compared to the 3 run by its biggest domestic rival Tsingtao Brewery Co. Ltd. (600600.SH), which have a combined annual output of more than 1 million tons from Guangdong.
The current plant’s 400,000 ton annual production capacity is far from enough to ease the brewer’s production pressures, according to Zhao.
“Our parent China Resources Group signed an agreement with the Guangdong Provincial Government at the beginning of the year to invest RMB 10 million in the province, and investments in the beer sector are part of that [agreement],” Zhao said.
“Under that backdrop we are going to seize opportunities in the market; that could mean both mergers and acquisitions and the establishment of new production plants,” Zhao said.
Shenzhen-based CR Snow Breweries is slowly shifting its focus from more mature markets in East China to growth opportunities in south and southwestern China. Last month the company inked a deal to buy a 70% stake in Moutai Beer for RMB 270 million.
Moutai Beer is a brand under liquor producer Kweichow Moutai Co. Ltd. (600519.SH), located in southwestern China’s Guizhou province.
“Beijing, Shanghai, Guangzhou and Shenzhen are the 4 most important cities in China, and for us that means we must have a solid foothold there to match our position as the country’s largest beer producer,” Zhao said, hinting that Guangdong’s capital Guangzhou would be the brewer’s next target.
Local brand Pearl River Beer currently has a dominant 46% market share in Guangzhou, followed by Tsingtao Brewery with 15% and AB-InBev’s 10%, according to data provided by private information house Societ Insights & Decision.