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AB-InBev deal may reshuffle Chinese market

By Yu Tianyu (China Daily)
Updated: 2008-07-31 16:45

US brewer Anheuser-Busch Cos Inc (AB) accepted a sweetened $52 billion takeover bid from Belgium-based InBev in July, creating the world's largest beer maker, which will produce a quarter of the world's beer, with Budweiser as its flagship brand.

The deal is an indication of the willingness of international beer giants in the sector to cooperate on a higher level.

The two companies' footprints in China are complementary. InBev's China business in southeastern China will be enhanced by AB's strength in northeastern China, according to a statement published on InBev's website.

InBev entered the Chinese market in 1984, and it has since owned 33 private and joint-venture factories with an annual capacity of four million kiloliters. The company currently ranks No 3 in the sector in China and already has partnerships with smaller Chinese players including Zhejiang Shiliang Brewery, and owns 100 percent of Fujian Sedrin Brewery.

After the deal, it will obtain AB's 27 percent stake in China's Tsingtao, the leading Chinese premium brewer, as well as ownership of the Harbin Brewery Group's 13 breweries.

In addition, InBev will own AB's Budweiser, which is a strong and growing brand in China and Corona Extra, which is the No 5 brand globally.

Xiao Derun, director of the Beer Branch of China Alcoholic Drinks Industry Association, said the new company would take up 25 percent of China's total beer production.

CR Snow, which is currently China's No 1 brewery, produces in the region of 6.9 million kiloliters annually. The new combined company is expected to become the largest beer manufacturer in China with a capacity of 10 million kiloliters a year.

Industry insiders predict that the major competition in China's beer market will be between InBev and CR Snow in coming years.

SAB Miller, one of the world's largest breweries based at South Africa, purchased 49 percent of CR Snow, which pushed it above Tsingtao beer to become the country's top beer manufacturer within two years.

However, after Inbev's deal with AB, China's beer industry is expected to be reshuffled as the market used to be dominated by CR Snow, Yanjing and Tsingtao.

Analysts and industry insiders hold various opinions on the deal, which would threaten or pressurize China's three major breweries.

"The merger hasn't had an impacts on Chinese market so far," said Guo Yanhong, director of Corporate Affairs of InBev China.

The speed of InBev's deployment in China would not be fast, so the industry structure might not be largely changed this year, an analyst from Datong Securities echoed.

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