Across The Border | Beer giants struggle in China market chill

Competition is fierce in China’s beer industry as purveyors of alcoholic beverages battle for market share amid reverberations from acquisitions by the global giants.

Last week, China Resources Beer announced plans to acquire SABMiller’s 49 per cent stake in China Resources Snow Breweries, a joint venture with the English beverage giant since 1994 that has grown to become China’s biggest brewing company.

The move comes after Anheuser-Busch InBev, the world’s largest brewer, confirmed an agreement late last year to acquire rival SABMiller for a record US$121 billion. Together, the brewers account for a third of the beer sold worldwide and half the industry’s profits.

With the deal undergoing antitrust scrutiny in the United States and likely to be reviewed around the globe, ABI has promised to scale back its market share by making divestments. It has already announced the sale of SABMiller’s majority stake in MillerCoors.

That’s the likely reason for CR Snow’s low sale price of US$1.6 billion – a 58 per cent discount, according to Jefferies. Analysts say the sale will prevent one major player from gaining a new advantage over the rest of the pack.

READ MORE: Flush with cash, China Resources Enterprise is ready to splash out on new beer brands

“Previously, some investors speculated that if ABI-SABMiller kept the 49 per cent shareholding in CR Snow, ABI and CR Snow together would have close to 40 per cent market share and could lead the industry in margin increase,” said Jefferies equity analyst Kevin Chee.