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Suntory acquires Shanghai Eastern Sea Beer

03-Feb-2005

The Shanghai Jinshan District Government has confirmed that Suntory Investment, a Chinese investment company, has acquired 74 per cent equity of Shanghai Eastern Sea Beer, a leading brewery company located in Zhangyan County of the district. The deal makes Suntory become the largest shareholder of Eastern Sea Beer.

Suntory Beer is considered a top brand within the brewery industry, enjoying the highest level of consumer recognition in Shanghai and neighboring cities. As Eastern Sea has maintained good market coverage on the outskirts of Shanghai, Suntory says it intends to utilise this opportunity to penetrate the markets of neighbouring counties and districts of the city.

The brewery has the advantage of being located in one of China's most populace and economically advanced regions. To date all the leading international beer players have invested heavily in the region and in recent months have accounted for the majority of beers acquisitions.

Currently Suntory ranks amongst the top ten beer brewers in China. It has concentrated its operations around the Shanghai region and was the first company to introduce light beer into that region. In 2004 the company produced and sold an estimated 360,000 tonnes of beer and continued to increase its sales growth by more than 30 per cent.

Suntory's acquisition is the latest in a string of deals that is continuing to turn the fast growing China beer market on its head. In November, Japanese brewery Kirin announced a €27.5 million deal to buy up a 25 per cent stake in Dalian Daxue brewery, based in the nearby Liaoning Province. After making the deal Kirin said it believed that the Dalian's beer sales were expected to surge by 30 per cent in the course of the next year.

Also in November, InBev announced that it was acquiring the remaining shares it did not own in the Hunan Debier Brewery, in Hunan province. The move, which cost an estimated €15 million Europe, aims to consolidate InBev's position as the third biggest brewer in China.

Latest official figures show that China has more than 500 small and medium sized breweries, with an average annual production of 50,000 tonnes, making the largest beer market by volume in the world. Together with foreign brewers, this accounts for 75 per cent of the market, with the rest shared by three producers, Tsingtao, Yanjing and Chian Resources Enterprise.

This fragmented beer market provides a perfect hunting ground for powerful companies with a strong appetite for smaller regional players, and significantly, it is one of the few industries in China where foreign ownership is unrestricted by government.

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