China Resources Enterprise

China Resources buys third brewery in Henan

PUBLISHED : Saturday, 23 July, 2011, 12:00am
UPDATED : Saturday, 23 July, 2011, 12:00am

China Resources Enterprise has bought a beer brewery in Henan in its latest move to grab a larger slice of the competitive drinks market.

The red-chip company, which runs supermarket chains CR Vanguard and Suguo and brews Snow beer, said yesterday it had taken over Henan Shangqiu Lanpai Beer, one of the largest breweries in the province, for an undisclosed price.

This is the group's third acquisition in Henan in 15 months.

China Resources Snow Breweries (China) general manager Wang Qun said the deal would immediately bolster its exposure in the mainland's central region.

China Resources Enterprise chief financial officer Frank Lai Ni-hium said two months ago that mergers and acquisitions - using net cash of about HK$3 billion - would be key to the company's development strategy in the rest of this year.

The group would also start building new brewery facilities at Shangqiu, a railway and road transport hub, Wang said.

Henan Shangqiu Lanpai Beer is one of the largest breweries in Henan, with an existing capacity of 150,000 kilolitres, and commands 60 per cent of the beer market in Shangqiu and outlying cities.

China Resources said a capacity of 200,000 kilolitres would be added to bring the total to 1 million kilolitres.

The Shangqiu Lanpai deal followed two other acquisitions in Henan: Aoke Beer, the province's second-largest brewery with three factories in Zhengzhou, Luohe and Anyang, in January; and Yu Quan Beer in Zhumadian in April last year.

In the east, China Resources spent 870 million yuan (about HK$1 billion) last week for a 49 per cent stake in Jiangsu Daifuhao Breweries, which sells BBoss beer, and 100 per cent of Shanghai Asia Pacific Brewery, which sells REEB beer.

The deals aim at strengthening China Resources' position in the eastern coastal market. The company said it had cornered 21 per cent of the mainland beer market.

Some analysts said acquisitions were necessary because the market was competitive and faced soaring costs from rising wages and barley prices.

They said beer retailers found it difficult to raise marked prices, which the National Development and Reform Commission has discouraged due to fears of inflation.

China Resources shares gained 35 HK cents, or 1 per cent, to HK$34 yesterday.