China, Shanghai: Shanghai Jinshan District Government announced on February 3 that Suntory Investment Co., Ltd., a Chinese investment company, has recently acquired 74% equity of Shanghai Eastern Sea Beer Co., Ltd., a famous brewery company located in Zhangyan County of the district. After the acquisition, Suntory has become the largest shareholder of Eastern Sea Beer.

Suntory Beer is considered a top brand within the brewery industry, enjoying the highest level of consumer recognition in Shanghai and neighboring cities. As Eastern Sea has maintained good market coverage on the outskirts of Shanghai, Suntory intends to utilize this opportunity to penetrate the markets of neighboring counties and districts of the city.

Suntory is listed in the 'Global Top 500', ranking among the top 10 beer brewers. It is also the first company to produce light beer in Shanghai, which has won great recognition. According to official statistics of a recent survey, Suntory Beer has maintained a high growth rate at an average of 32% per annum since its inception. In 2004, Suntory produced and sold more than 360,000 tons of beer in eastern China, the highest record in Shanghai and Jiangsu Province, acquiring 70% of the general beer market share in Shanghai. Meanwhile, Eastern Sea has a capacity to produce 200,000 tons of beer per year. In 2004, the company produced and sold about 107,000 tons, claiming the biggest market share in the outskirts of Shanghai. The major subsidiaries of Eastern Sea include: Eastern Sea, Golden Field, Eagle. Following the successful acquisition, Suntory's production is likely to exceed 530,000 tons this year in the eastern China market.

About Jinshan District: Jinshan, one of the 19 districts (counties) of Shanghai, is located in the southwest of the city, north of the Hangzhou Bay and west of Zhejiang Province. It is situated at the hub of the economic region linking Shanghai, Hangzhou and Ningbo, and is inside the geographic ring of the Yangtze River Delta that is only a two hours drive away. Jinshan District has a total land area of 586 square kilometers (about 226 square miles), equivalent to that of Singapore, and a population of 550,000. It has rich natural and cultural heritages, including beautiful beach lines, famous traditional peasant paintings, black ceramic arts and crafts, and a world-renowned petrochemical base.

Suntory’s acquisition is the latest in a string of deals that is continuing to turn the fast growing China beer market on its head. In November, Japanese brewery Kirin announced a €27.5 million deal to buy up a 25 % stake in Dalian Daxue brewery, based in the nearby Liaoning Province. After making the deal Kirin said it believed that the Dalian’s beer sales were expected to surge by 30 per cent in the course of the next year. Also in November, InBev announced that it was acquiring the remaining shares it did not own in the Hunan Debier Brewery, in Hunan province. The move, which cost an estimated €15 million Europe, aims to consolidate InBev’s position as the third biggest brewer in China.

Latest official figures show that China has more than 500 small and medium sized breweries, with an average annual production of 50,000 tonnes, making the largest beer market by volume in the world. Together with foreign brewers, this accounts for 75 per cent of the market, with the rest shared by three producers, Tsingtao, Yanjing and Chian Resources Enterprise. This fragmented beer market provides a perfect hunting ground for powerful companies with a strong appetite for smaller regional players, and significantly, it is one of the few industries in China where foreign ownership is unrestricted by government.

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