China: Kingway Brewery Holding expects 30 % growth in beer sales in 2005

Kingway Brewery Holdings Ltd. is targeting 30 % growth in beer sales in 2005, as the Chinese brewer, in which Heineken N.V. owns 21.44%, plots an aggressive expansion, its top executive said, according to Reuters on July 20.

The purveyor of Kingway and "New Life" beer saw sales rise 35 percent by volume in the first half in the world's largest market for the brew, Chairman Ye Xuquan told Reuters in a telephone interview on Wednesday.

The brewer commands a leading position in the country's prosperous south and has been building capacity in the north -- territory now dominated by top domestic brewer Tsingtao and Yanjing Brewery Co. Ltd.

Kingway hopes that an aggressive expansion would help it triple sales to 1.2 million tonnes of beer in 2009, domestically, versus just 390,000 tonnes last year. "Our sales grew by 35 percent in the first half, we expect at least 30 percent for the full year," he said from the northern city of Xi'an, where the brewer broke ground on its newest plant.

Kingway, 21.44% owned by Heineken via a joint venture, commanded about 2 percent of the mainland beer market at the end of 2004. Ye reiterated a scheme to more than double the company's capacity to 1.35 million tonnes in four years.

Asked about the possibility of Heineken increasing its holding in the mainland's 12th-largest brewer, Ye declined comment, saying the issue was being handled by its parent. But another executive said talks with Heineken were progressing.

Kingway's shares rose 4.6 percent in late afternoon trade to HK$2.825, outperfoming a broader market that . The stock had slipped about 5 percent over the past three months but is still up 16 percent over the past 52 weeks.

Ye, who is overseeing Kingway's breakneck capacity expansion across the country, said he did not rule out building even more plants in the future. Its $100 million Xi'an facility has an annual capacity of 400,000 tonnes and is the firm's second plant outside the affluent southern province of Guangdong, its corporate base.

In April, the brewery began construction of a greenfield plant with the same capacity in Tianjin, an hour's drive from Beijing, where Yanjing holds sway.

Kingway's moves were prompted partly by cut-throat rivalry with the likes of Tsingtao for a market in which per-capita beer consumption stands at 29 litres a year, compared with around 100 litres in most of western Europe.

China's beer industry, growing by 7-10 percent annually, has in recent years attracted a flood of overseas heavyweights from InBev to SABMiller, all increasingly turning to Asia as growth stagnates at home.

Tsingtao, more than a quarter-owned by Anheuser-Busch, currently leads with a 13-percent market share.

And InBev, the world's largest brewer by volume, now operates 28 production sites in China and is on the lookout for further acquisition targets.

Analysts say, however, that their efforts might be stymied in the short run by the pure costliness of foreign beers. A 640 ml bottle of local brew -- just over a pint -- might cost as little as 12 U.S. cents. "We need to branch out as they are coming in and opening plants on our door-step," Ye said. ($1=7.776 Hong Kong Dollar)

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