Tsingtao beer, a legacy of the German occupation of Qingdao about a century ago, has long been established as a symbol of the city. The brewery, founded in 1903 by British and German businessmen, takes its name from the former spelling of Qingdao. While famous outside the mainland, until recently the beer was not greatly sought after in its home town due to its high price. Times have changed. China is emerging as an important beer market and the company is increasingly focusing on domestic sales. The nation's top brewer by export volume, Tsingtao has succeeded in raising its market share in Qingdao, competing head-to-head with key rival Laoshan beer in what is seen as a two-horse race. The company, the first H share to list in Hong Kong as part of the mainland's experiment with listing state enterprises overseas, has an ambitious plan for quantum-leap growth. Vice-chairman Peng Zuoyi said: 'The chance has come for us to have explosive growth.' Tsingtao hopes to take advantage of a government policy which aims to protect national industries from being overwhelmed by foreign competitors. The policy provides for the setting up of a reserve fund to alleviate the burden of interest payments on companies buying non-performing and debt-ridden enterprises. Under a scheme, effective since last month, Shandong province has a quota of 300 million yuan this year for enterprises which have to settle the interest payments of companies they purchase. 'If we build a brewery with production capacity of 100,000 tonnes, we need to invest 600 million yuan. If we buy one, we need only to invest about 100 million yuan, or one-sixth of the investment required for a green-field project,' Mr Peng said. The scheme undoubtedly has given an additional impetus to the group to expand through acquisitions. 'We are buying production facilities, but more important we are buying their market shares,' he said. The company plans eventually to buy more than 10 breweries in the province with an estimated cost of 700 million to 800 million yuan. The province has 20 breweries in operation. Of these, about 13 have annual production capacity of 60,000 tonnes or above with the remainder having between 30,000 and 50,000 tonnes. Only one-third are in good shape, with the rest potential acquisition targets. 'The breweries are willing to join us because by doing so, they are waived from the responsibilities of paying interest in full,' Mr Peng said. The company hopes to expand as fast as it can because the policy is not expected to remain in place for long. Having learned from its experience in running breweries it has bought, Tsingtao decided to allow new members of the company to keep producing their own brand names instead of the premier Tsingtao beer as initially planned. This will see the company carry different brand names, with Tsingtao as the flagship. The company adopted the strategy after successfully trying it out at a factory it bought in Xian last year. Sales of the Xian factory's Hans brand beer rose more than 300 per cent year-on-year in the first five months of this year, or equivalent to the 20,000 tonnes produced for the whole of last year. Supply still lags demand. 'Local brand names have a stable group of followers among the local community,' Mr Peng said. The company's Yangzhou factory, which it initially wanted to produce Tsingtao beer, is still some way away from a turnaround. Substantial improvement at the plant would come only around October this year, Mr Peng said. Tsingtao envisages capturing a sizeable share of the low and medium-end markets under its present strategy. 'We will not only produce premier beer but also cheaper beer. We will brew whatever the market wants,' Mr Peng said. The company target is to have 10 per cent of the mainland market, up from 2.2 per cent last year and an estimated 3 per cent this year. 'It is not a question of whether we may be able to achieve that goal. We must,' Mr Peng said. The company expects its sales and production to reach 500,000 tonnes this year, up from 350,000 last year. It aims to boost production capacity to 1.4 million tonnes by 2000. Asked if the company was able to achieve the ambitious goal of almost tripling its production capacity in three years, Mr Peng said: 'The outcome may be more satisfactory than initially planned.' A detailed plan for meeting the target already was in place, he said.