01 June, 2007

China: China Resources Enterprise aims to exceed 2007 sales rise

Food and beverage conglomerate China Resources Enterprise Ltd. expects volume growth in beer sales in 2007 to at least match last year's 34 percent, propelled by increasing consumption as income rises and consumption patterns change within China, Reters reported May 31.

That exceeded a previous forecast for about 25 percent growth in beer sales this year, given in March.

Growth in Chinese beer consumption is accelerating alongside rising incomes and changing lifestyles, with beer becoming not only a staple at meal-times but now also increasingly consumed for leisure, Managing Director Mark Chen told reporters on Thursday.
Thus, the market had averaged 6 percent annual growth in past years but sales leapt 15 percent last year -- driven by the soccer World Cup -- and rose 17.5 percent in 2007's first quarter, he said.

"2006 proved to have been the best for the Chinese beer industry in many years," Chen told reporters after a shareholders' meeting.

China Resources' shares climbed 7.9 percent on Thursday, outperforming the market's <.HSI> 1.7 percent rally, after having slipped 0.56 percent in the past month.

But the country's top brewer, partnered with SABMiller Plc. in China, conceded worsening margin pressure from the rising cost of raw materials -- about 30 percent dearer in the first half of 2007.

It saw net losses at its beverage business widen slightly to HK$31 million (US$4 million) in the first quarter as both firms struggled also to integrate a clutch of breweries bought during a rapid nationwide expansion.

Chinese beer prices have been rising 5 to 6 percent on average in past years, in part to offset input prices.

Still, Chen said China Resources would try to keep prices stable while sustaining a growth rate for 2007 in excess of 2006's overall 25 percent jump in corporate net profit.

Yet he remained bullish on this year's outlook because of a surprising upsurge in consumption in the first quarter.

The corporation now hopes to increase market share this year by two to three percentage points from 15 percent last year, Chen added.

In past years, the firm – which also makes fabrics, operates supermarket and has container port interests – has been shedding non-core assets to focus on its retail and consumer-oriented businesses.

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