China: Carlsberg is eying purchase of Asahi’s stake in Tsingtao

Carlsberg Group is eying to pick up the 19.9% stake of Asahi Group Holdings in Chinese second largest brewer Tsingtao Brewery Company. The Japanese company appointed Morgan Stanley to advise a potential sale. The shares are worth about US$1.2 billion based on Wednesday's close in Hong Kong. The money is much needed by Asahi to finance the costly purchase of breweries from AB InBev in Europe.  Asahi bought the minority stake in Tsingtao in 2009 for about HK$5.17 billion ($0.67billion) from AB InBev. The idea to promote its flagship brand Asahi Super Dry through Tsingtao never materialized, which is the main reason for the divesture.

Cees ’t Hart, CEO and President Carlsberg Group has since long seen the huge opportunities of the Chinses market and put China on the top of the list of priorities of the Danish brewer. In 2014, while still being CEO of Dutch dairy company FrieslandCampina, he promoted a strong cooperation between his company and China.

Up to now, Carlsberg is only fifth in the Chinese beer market and has currently a modest 4.6% market share with a strong focus on West China.  Market leader is China Resources Snow Breweries (CR Snow, 23,2%), followed by Tsingtao (18,4%), AB InBev (14,0%) and Yanjing (10.7%). On Oct 11, 2016 , AB InBev announced completion of the divestiture of its 49% stake in CR Snow  to China Resources Beer (Holdings) Company for $1.6 billion to obtain Chinese regulatory approval for the takeover of SABMiller, the former No. 2 brewer in the world.

Carlsberg was one of the first international brewers to export beer to China, starting more than 150 years ago. The Danish brewing group officially began its business in Greater China in 1978. The company inaugurated the Carlsberg Brewery in Hong Kong in 1981, which became the base for Carlsberg’s expansion into mainland China. In 1995, Carlsberg acquired major shareholding in a brewery in Huizhou, Guangdong. In 1999, all production was moved from Hong Kong to Huizhou. The Carlsberg Brewery Guangdong in Huizhou nowadays supplies products to mainland China, Hong Kong, and the Macau markets.

After 2000, Carlsberg expanded its footprint to the lower developed western territories of China. It accelerated the acquisition of shareholdings in breweries in West China. West China covers about 71,4 % of the total Chinese area but has only 28,1 % of the population earning meager 17,1 % of the gross domestic product.

While keeping the local brands there, Carlsberg is assisting the acquired breweries to reconstruct and upgrade their facilities, as well as introducing advanced technology, brewing methods, and management approaches. As a result of these efforts, Carlsberg has become the leading brewery group in West China.

 

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