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China: Carlsberg A/S announced on 26 March 2004 that Carlsberg is in dialogue with the Lanzhou Huanghe Group about acquiring a share of the company’s brewery in the Gansu province in the western part of China. In 2003, the brewery’s beer sales volume was approx. 1 million hl and it has a 43% market share of the Gansu province. Negotiations are developing positively. However, presently there are no final agreements about form or conditions for a co-operation, and therefore Carlsberg does not wish to provide further information until negotiations are finalised.

Carlsberg Breweries will set up a 500 million yuan ($60 million) beer-making venture with China's Huanghe, as the Danish firm tries to keep up with rivals in the world's top beer market, Huanghe said on March 26, Reuters revealed. Carlsberg signed a letter of intent with Lanzhou Huanghe Enterprise Co Ltd in late February to set up a 50-50 venture with an initial annual capacity 500,000 tonnes, Huanghe said. It did not say when the venture would start up.

Carlsberg, the world's sixth-biggest brewer, has embarked on a buying spree in China, where demand is growing at 6 % annually, after a failed attempt to enter the market four years ago, Reuters commented. Carlsberg, which said last year it could spend up to 2.5 billion euros on acquisitions, has bought a handful of breweries over the past year in China and now runs several medium-sized, local breweries across the country.

Along with world's leading brewers such as Anheuser-Busch, SABMiller and Interbrew, the company is angling for a stronger foothold in the 250 million hectolitres annual beer arena. Its venture with Huanghe, based in the impoverished province of Gansu, would have a paid-in capital of 280 million yuan, with each company taking a 50 percent stake, Huanghe said in a statement published in the official China Securities Journal.

The fragmented Chinese beer market is now dominated by local brewers, including the country's largest, Tsingtao Brewery with a market share of 11-12 %. Carlsberg Breweries is 60 % owned by Danish holding company, Carlsberg A/S, with Norwegian conglomerate Orkla holding the rest.

In 2000, Carlsberg sold three-quarters of a new brewery in Shanghai to Tsingtao at a loss of almost $20 million, fearing it would struggle to sell premium beers due to strong competition, according to Reuters. China's poor road and rail networks make it difficult to distribute nationally from large breweries, so a patchwork of locally brewed beers dominate.
In August, Carlsberg fell out with a Thai brewer, Chang Beverages, with whom it had invested in breweries in the southern provinces of Yunnan and Guangdong. The future ownership of the Kunming and Huizhou breweries -- owned 51 percent by Carlsberg and 49 percent by Chang -- is unclear.

The Danish giant bought 50 percent of Tibet's Lhasa Brewery earlier this year and the Dali brewery in Yunnan in 2003.
Danish holding company Carlsberg A/S fully owns Carlsberg Breweries after buying this month Norwegian conglomerate Orkla's 40-percent stake.

Despite the past problems, some analysts were cautiously optimistic about the latest venture.
"This will definitely give them another source of growth," said Merrill Lynch's Grace Mak. "But alliances are a much more difficult prospect for foreigners because they don't have the knowledge base of local players, making the probability of success a lot more uncertain."



26 March, 2004