CRE negotiates to take over breweries

Red chip China Resources Enterprise (CRE) is negotiating to acquire several breweries with a total capacity of more than 200,000 tonnes in central and northern China, its executive director said.

Huang Tieying said the breweries were in provinces where foreign beer investors were not very active, such as Sichuan, Jilin and Liaoning.

'The total production capacity of the breweries under negotiation is more than 200,000 tonnes a year,' Mr Huang said.

He expected negotiations could be concluded within the next couple of months. CRE, the listed flagship of China's Ministry of Foreign Trade and Economic Co-operation's commercial arm, China Resources Holdings, now has controlling stakes in three breweries in Dalian and Shenyang, with a total annual capacity of 450,000 tonnes.

Mr Huang refused to elaborate on CRE's spin-off plans, saying every company had different strategies.

'We'd like to be a key player in this field, even bigger than the existing large breweries,' he said.

'The potential for China is huge and it will overtake the United States as the world's largest beer market in a few years' time.' The company has recently raised its expansion target by 50 per cent to reach an annual production capacity of 1.5 million tonnes by 2000.

He said CRE expected to meet the original goal - one million tonnes - in 1999, a year earlier than originally scheduled.

'We know the market better and have more experience in running breweries now,' he said. 'Therefore, we are confident we can increase our expansion target.' Last year, CRE's beer division registered more than $10 million profit from a capacity of 300,000 tonnes. He expected the profit contribution from the brewery sector would grow at least 50 per cent this year because the China Resources Dalian Brewery, with a capacity of 80,000 tonnes, went into full production last November.

The expansion cost 200 million yuan (about HK$185.8 million) and would be financed internally.

Mr Huang said China's beer market was under adjustment because of keen competition, but he expected it would grow 10 per cent this year, slowing down from an average of 15 per cent in the past few years.