Heineken takes stake of largest brewer in China

Dutch beer giant Heineken will pour $3.1 billion into a stake in China’s top brewer, expanding its access in the Asian giant’s booming and hotly contested market, the two groups announced Friday.

Heineken has signed a “non-binding” agreement with China Resources Beer to acquire 40 per cent of CRH, the listed entity controlling the Chinese group, for a total of HK$24.35 billion, according to a statement.

In return, China Resources Beer will buy a 0.9 percent stake in Heineken for €464 million ($537 million).

The Dutch firm, which operates three breweries in the country, will merge its operations in China with those of its new partner.

The world’s second biggest beer company will also grant its partner permission to market its eponymous beer brand in China.

Heineken and its Chinese partner are joining forces at a time when competition is becoming fierce in the Chinese market, with consumers turning towards foreign beers and premium products as middle class incomes rise.

“It’s impossible that Heineken can grab a significant larger market share in China by itself,” Barney Wu, an analyst at Guotai Junan Securities Co, was quoted as saying by Bloomberg News.

“It has missed the chance as other international rivals such as AB InBev have become strong market leaders in the market,” Wu said.

China remains dominated by local brewers, with three Chinese groups controlling more than 40 per cent of the market, according to figures from Euromonitor International cited by Bloomberg News.

‘Numerous challenges’

China Resources controls 18 per cent of the country’s beer sales, followed by number two competitor Tsingtao.

The deal allows Beijing-based China Resources Beer, known above all for low-cost brands like Snow Beer, to add a well-known premium brand to its line-up.

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