China: Heineken eyes sale of Chinese business

Heineken is eying a sale of its business in China to China Ressource Beer (CRB), as Reuters reported today. The deal, which would include Heineken’s three breweries located in the Guangdong, Hainan and Zhejiang provinces, its distribution network and the brand rights for China could be worth more than $1 billion according to people close to the matter. The sources also said that the brewers discussed a share-swap as part of the transaction.

Reasons for the sale are said to be the fierce competition in the world’s biggest beer market, which does not leave sufficient margins for Heineken in comparison to its other markets, and the difficulty to grow the eponymous brand quick enough. Although the Heineken brand is considered to be one of the most prestigious beer brands in the world it is lacking well behind AB InBev’s Budweiser in the Chinese premium market.

Despite its early entry into the Chinese beer market in 1983 the Dutch brewing group has conquered only a market share of 0.5 per cent, which is tiny compared to its major competitors. Beer market leader in China is by far CRB with a 24.6% share, followed by Tsingtao with 17.9%, AB InBev with 15.7%, Beijing Yanjing with 10.5% and Carlsberg with 5.0% (all figures by Euromonitor 2015).

On the other side CRB already owns China’s best selling beer brand Snow but does without an own international high premium brand in its portfolio. Purchasing the Heineken breweries would give the brewery access to several premium lagers like Heineken, Tiger and Sol.

As a result, both partners could win in such a particular constellation. Financial markets did also react favorably and pushed on Friday the share price of CRB in Hong Kong 14.4% up to an all-time high of HK$35.30.

Discussion are still at an early stage and could also fail the sources said.

 

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