China: Heineken buys 40% stake in China’s leading brewer

Heineken is going to buy a 40% share in China’s leading brewer China Resources Beer Holding (CRH Beer) at a price of a $3.1 billion. The remaining 60% will stay with seller China Resources Enterprise (CRE), which will in turn buy 5.2 million Heineken shares for 464 million euros ($538 million) which corresponds to 0.9% of the total share value.

Both companies announced today that they have signed non-binding agreements to create „a long-term strategic partnership for Mainland China, Hong Kong and Macau“. As already reported earlier (inside.beer, 26.5.2018) both companies were in talks to combine their respective businesses in China but it was believed that Heineken would sell its Chinese business. The new move can be attributed as a success for Heineken Chairman of the Executive Board & CEO Jean-François van Boxmeer.

Instead of leaving the biggest beer market in the world like Japanese brewer Asahi, which sold its nearly 20% stake in Chinese brewer Tsingtao at the end of last year (inside.beer, 21.12.2017), the world’s second biggest brewer will now  achieve a combined Chinese beer market share of 26.6%, which makes it market leader in a market far ahead of Tsingtao and AB InBev, which have shares of the Chinese beer market of 17.5% and 16.1% respectively.

As part of the strategic partnership, Heinekens China's current operations will be combined with CR Beer’s operations and Heineken will license the Heineken® brand in China to CR Beer on a long-term basis. The world’s second largest brewer will be CRE's exclusive partner for international premium lager beers in China and both partners will investigate which other premium brands from Heineken’s portfolio can be licensed to CR Beer in China.

Heineken and CRE will also investigate if the Dutch brewer's global presence and marketing capabilities can be leveraged to support and accelerate the international growth of CR Beer’s Snow® brand and its other Chinese brands to become the Chinese beers of choice.

Heineken is currently operating three breweries in China but was never big enough to profit from economies of scale in such a huge market. CR Beer on the other side is market leader in China but was lacking a well-established premium brand, like Heineken, which sells at higher margins. CR Beer’s main product Snow, which is the best selling beer brand in the world with 105.6 million hectoliters in 2016 (inside.beer,  17.8.2017) is a main-stream product, which is sold at discounted prices.

Chen Lang, Chairman of CRE, said: "We are very excited about this partnership and see immense potential in the combined strengths of CR Beer and Heineken. With Heineken’s long heritage and world-class iconic brand portfolio, along with our leading presence and deep understanding of China, we believe we can win together in this new era of the Chinese beer market, in which the premium segment will become increasingly important. In Heineken we have found the perfect partner to achieve our ambitions in China and - as an international partner - to support us in growing our business outside China."

 

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