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SCMP Reporter

Belgian beer giant Interbrew intends to take a stake of up to 25 per cent in China's second-largest brewery to hasten its expansion in the mainland's fast-growing beer market.

Interbrew said it signed a memorandum of understanding yesterday to take up the stake in Guangzhou-based Zhujiang Beer Group when it is relaunched as a joint stock company later this year in preparation for a domestic A-share listing in 2003.

'We signed an MOU this afternoon. But there is no specific information about the amount of investment,' an Interbrew official said yesterday.

The company said a formal deal would be 'subject to final agreement on price and related conditions'. Zhujiang Beer officials declined to comment.

Belgian Prime Minister Guy Verhofstadt, whose six-day visit to China ends today, and Guangzhou vice-mayor Lin Yuanhe attended the signing ceremony in Shanghai.

Zhujiang Beer, established in 1985, is China's second-largest brewer after Beijing-based Yanjiang Beer Group and claims a 50 per cent share of the Guangdong market.

Last year the company sold 720,000 tonnes of beer and reported a profit of 220 million yuan (about HK$206 million).

Zhujiang Beer is also the only major mainland brewer without a stock market listing.

Zhujiang Beer president and general manager Yang Rongming was quoted in yesterday's New Express News  as saying that the company hoped to raise one billion yuan from a stock market listing.

It also plans to achieve an annual output of 1.5 million tonnes, revenue of 5.5 billion yuan and profit of one billion yuan by 2005.

Interbrew, with operations in more than 20 countries, is the world's second-largest brewer. Its relationship with Zhujiang Beer dates from the mid-1980s, when Interbrew helped to update Zhujiang Beer's plant. Zhujiang Beer later brewed Interbrew's flagship beer, Stella Artois, under licence.

'Interbrew is pleased to continue its relationship with Zhujiang by drawing on its recently gained experiences through its own [initial public offering] in December 2000,' Interbrew chief executive Hugo Powell was quoted as saying.

Interbrew's relationship with Zhujiang Beer had ended by the mid-1990s, when the company shifted its focus to the Yangtse Delta and bought the only two breweries in Nanjing - Jinling Brewery and Nanjing Brewery.

Interbrew's return to Guangzhou marks a reversal of its recent strategy of targeting smaller but less competitive cities like Nanjing and avoiding, as one senior company executive put it in 1999, 'the over-traded hell-holes of Shanghai, Beijing or Guangzhou'.

'It is a hell of a [competitive] climate in Guangdong. Everybody and their dog is there,' the executive said at the time.

The overall Chinese beer market accounts for 243 million hectolitres, Reuters quoted Interbrew officials as saying. It said the overall market was carved up in provinces in which there were regional market leaders.

'China is a very large beer market and is witnessing very strong growth,' the official was quoted as saying.



Interbrew teams up with Zhujiang Beer