China: Asia Pacific Breweries sets up regional headquarters in Shanghai
Asia Pacific Breweries Limited (APB) announced on June 28 that it has set up a Regional Headquarters (RHQ), Heineken-APB (China) Management Services, Co., Ltd (HAPBC MC) in China, through its associate company, Heineken-APB (China) Pte Ltd (HAPBC). Based in Shanghai, HAPBC MC will manage and oversee all HAPBC's operations and investment activities in the People's Republic of China.
With an initial registered capital of US$6.1 million, HAPBC MC is a wholly-foreign owned subsidiary of HAPBC which is jointly owned by APB and Asia Pacific Investment Pte Ltd, a 50-50 joint venture between Heineken and Fraser and Neave, Limited.
The move is aligned with APB's One China Organisation to achieve a sustained focus on the China beer market and orientate its companies to participate in the accelerated consolidation that is taking place in the Chinese beer market. It is timely that the outfit is now formed to facilitate APB's future progression in China given its growing economy that is becoming larger, more complex and increasingly open.
By setting up a RHQ in China, APB and its related companies as well as its foreign employees in China will be granted preferential tax incentives and benefits by the Chinese authorities. Some of these benefits include tax allowances, ease of entry and extended stay for foreign employees working in China which will help to draw and retain APB's pool of foreign talent in China. Other merits such as more relaxed rules on importing of goods and foreign currency issues will also ease APB's China operations.
On the set-up of the RHQ, Mr Koh Poh Tiong, Chief Executive Officer, APB explained, "China has the largest beer market in the world with an estimated sales volume of 291 million hectolitres of beer in 2004. Despite the challenges and intense competition in the China beer market, APB recognises China's potential as a significant long-term growth market. The RHQ will further drive our growth plans to enhance our brewing operations and forge strategic alliances with domestic players. The new status will place us in a good stead to operate more efficiently and gather greater momentum for our expansion in China."
Currently, APB's brewery operations and joint venture companies concentrate around the more affluent provinces such as Shanghai, Guangdong and Jiangsu as well as Hainan in the South. With China's GDP growth continuing to increase at a rate in excess of 8 per cent, the prosperity and opportunities that were once confined to the larger urban areas are now starting to filter into regions further afield.
In view of this and to seize the opportunities brought about by the distribution of wealth to less developed parts of China, HAPBC MC will provide APB with an easier access it needed to increase its penetration in China.
Over the past one year, APB made significant progress in the world's largest beer market with its One China Organisation strategy which has been designed to give its business activities in China undivided focus and address its long term growth in the industry. This saw all its brewery operations streamlined under Heineken-APB which also assumes all production, marketing and sales efforts for APB's beer brands and spearheads all business strategic activities such as investments, mergers and acquisition in the PRC.
Since the inception of Heineken-APB in 2004, APB's investments in China have been able to achieve unified strategy and management; increased operational efficiency and enhanced growth opportunities.
Through its stake investments in Kingway Brewery Holdings Ltd in January 2004 and Jiangsu DaFuHao Breweries Co., Ltd in March this year, Heineken-APB saw its total production capacity in China triple in just over a year. Heineken-APB holds a 21% interest in the former and a 40% share in the latter.
Heineken-APB also commenced brewing Heineken lager at its Shanghai operations in early 2004 after it was awarded the licence to brew the popular international beer in China. Since June 2004, all Heineken beer in China has been brewed in Shanghai and this saw an improvement in the utilisation of the brewery.
Performance at APB's Hainan brewery, too, has improved and the brewery turned profitable last year. In July 2004, it further increased its annual production capacity to 1.2 million hectolitres to cater to increasing demand for Anchor beer and its variants.
On Heineken-APB's achievements, Mr Koh said, "APB's One China Organisation strategy has enabled the group to enhance our operations and further extend our footprint to Guangdong and Jiangsu in the PRC over the past one year. Apart from that, our investments in Kingway and DaFuHao Breweries have also contributed to our return to profitability strategy for our China operations. We believe that we have the right strategy in place to combat competition and improve market share and we shall continue to forge strategic alliances with suitable domestic breweries to further strengthen APB's position in the China beer market. Now that we have attained RHQ status in China, we expect the accompanying advantages to reduce overheads and accelerate our return to profitability for our China operations," Mr Koh added.
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