Brewers to spend US$35m on factory
A joint venture between China Resources Enterprise and British-based SABMiller will invest US$35.3 million in a new brewery at Harbin in northeastern China's Heilongjiang province to consolidate the position of its best-selling Snow beer in a cut-throat market.
The brewery, which has already been started and is due for completion in 18 months, will have an initial production capacity of 2.3 million hectolitres.
SABMiller, the world's second-largest brewer which holds a 49 per cent stake in the beverage arm China Resources Snow Breweries, said the new plant aimed to meet demand in the Harbin region and the western part of the province.
The brewery would also provide strategic support to an existing brewery in Shangzhi, a city in the south-eastern region of Heilongjiang, which would serve the eastern part of the province.
Snow beer has boosted sales in Heilongjiang by almost 90 per cent and its market share by about 20 per cent in the past two years despite intense competition, the company said.
Snow beer is estimated to command a 14 per cent market share in China, with arch-rival Tsingtao beer holding 16 per cent, analysts said.
'The new brewery offers an economical and efficient solution to provide capacity and complements the existing operations in the area,' said Mark Chen Shulin, China Resources Enterprise managing director.
Although Snow beer is the No2 beer in the country, it is the biggest in terms of sales volume at 15 million hectolitres last year.
Some analysts said the greenfield brewery was part of China Resources Enterprise's strategy to seek growth in addition to mergers and acquisitions.
Last year, the beverage arm of China Resources Enterprise saw a 30 per cent jump in profit contribution to $136 million, accounting for 6 per cent of the group's total earnings.