China, Harbin: Anheuser-Busch, the world's largest brewery by sales value, hopes to have an active role in conforming the Chinese beer industry and plans to continue developing Northeast China's beer market, according to Patrick Stokes, president and chief executive officer of Anheuser-Busch Companies, China Daily posted on January 24.

Anheuser-Busch won the heated takeover of Harbin Brewery Group with an offer of nearly US$720 million last June, defeating SABMiller, its arch-rival in the global beer market. "The acquisition of Harbin Brewery provides us a platform for the penetration of the northeast's market," said Stokes. "This move is of strategic significance and what we are aiming at is long-term growth in China," he said.

Harbin Brewery, the fourth largest beer company in China, has a dominant position in the beer market of Northeast China with its famous brand "Hapi." The beer's main competitor in the region is "Snow" of China Resources Enterprises Limited, in which SABMiller holds a 49 per cent stake. "Hapi" and "Snow" together hold a 90 per cent share of Northeast China's beer market. Harbin Brewery produced 1.3 million tons of beer in 2004, an increase of 140,000 tons year-on-year.

Anheuser-Busch began to tap the domestic market in 1993 when it bought a 9.9% share of Tsingtao Brewery Co Ltd, China's largest beer company. It also owns 97 per cent of the Budweiser Wuhan International Brewing Co Ltd in Wuhan, central China's Hubei Province. Stokes said that Anheuser-Busch aims to develop three brands to cater for China's various beer needs.

Its Budweiser plant in Wuhan will produce premium grade beer designed for the high-end market. Co-operation with Tsingtao is focused on the continued involvement in China's largest beer company. The two sides have signed an agreement to increase Anheuser-Busch's ownership of Tsingtao to a final 27 per cent over the next several years. "And Harbin Brewery is a famous regional brand which has a strategic position in the northeastern beer market," Stokes said.

"Besides the injection of investment, Anheuser-Busch mainly brought changes in technological innovation, financial management and sales concepts," said Yu Xueren from the brewery. Yu added that the brewery had no plan to reduce current staff numbers and is working on a detailed plan to raise wage levels and improve welfare. Harbin Brewery will unveil another product - Hapi classical 1900 - and boost output this year, according to Li Wentao, chairman of Harbin Brewery.

The injection of more than US$700 million into Northeast China takes Anheuser-Busch's total investment in the country to more than US$1.2 billion, making China the company's largest destination for overseas investment, according to Martin Cargas, vice-president of Anheuser-Busch International Inc.

With a lot of small local beer companies with many different brands in one region of China, the current situation of Chinese brewing industry is just like that of the United States five decades ago, Cargas said.

And Harbin Brewery is just like Anheuser-Busch at that time, with a 4% stake in the national beer market. "Anheuser-Busch hopes to have an active role in conforming the Chinese brewing industry," he said. "We are very glad to have seized the opportunity to join the reform of the State-owned enterprises in Northeast China, such as Harbin Brewery," he said. Anheuser-Busch is also keen to foster a good social environment in Harbin.

The company decided to spend 3.2 million yuan (US$385,000) on subsidizing less well-off university students in the city. The sum was the first from the Harbin City Anheuser-Busch Civic Development Fund, which was set up by Anheuser-Busch on July 15, 2004.

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