Tsingtao Brewery has reversed its cautious expansion strategy by speeding up the acquisition of bankrupt local breweries. General Manager Peng Zuoyi said buying ailing breweries would become a major way for it to achieve a 25 per cent annual rise in production. The state requires it to record a 25 per cent annual growth rate in both production and profits. He said Tsingtao would continue to build new factories, but an expansion through the acquisition of bankrupt breweries would be more cost-effective due to preferential treatment, such as tax breaks and frozen interest payment, given to buyers of bankrupt enterprises. 'We have to grasp the chance because the preferential measures will not last forever,' Mr Peng said. The H-share company said last year it would not proceed with further acquisitions before consolidating the Xian and Yangzhou plants which it had acquired earlier. Mr Peng said Shandong, where Tsingtao was based, would become the company's focus of sales promotion and expansion this year, and that Tsingtao would acquire breweries in the province. The decision to give priority to the promotion of the newly acquired brands, instead of Tsingtao's name brand, has underscored the company's efforts to tap into the lower-end of the market. 'We ignored the Hans brand after acquiring the Xian plant and focused on developing our own brand. But now we have lost the low and middle-end market in Xian while failing to do well in the up-market,' he said. Mr Peng said it was Tsingtao's aim under the new strategy to become a group offering multi-brands and multi-products. The company would upgrade production lines for brewing Tsingtao beer, only after the local brands it has acquired had established a foothold in their home market. Mr Peng said Tsingtao would stick to its plan to expand production capacity from 500,000 tonnes to 1.7 million tonnes in 2000. It was also considering plans to build a 700,000 tonnes plant with an international brewery. Construction of Shenzhen Tsingtao Beer Co, a joint venture with Pine Seal Investment, began yesterday after more than two years of negotiation. The plant, with an annual production capacity of 100,000 tonnes, will cost US$52 million. Production is expected to start in May next year. Rate of return is expected to be between 20 and 25 per cent.