China: SABMiller’s CR Snow Breweries joint venture is now the largest brewer in China

SABMiller plc, one of the world’s leading brewers, announced October 06 that its Chinese joint venture, CR Snow Breweries (‘CR Snow’), has become the largest brewer in China by sales volume and by brewing capacity. In the 12 months to June 2006, CR Snow sold over 45 million hectolitres of beer, of which the Snow brand accounted for 21 million hectolitres.

CR Snow’s top ten brands, which include Snow, Blue Sword, Singo and New3star, account for 85% over overall sales, and the Snow brand is now China’s largest. Snow’s dramatic performance has benefited from CR Snow’s unique integration of a national brand and a national distribution platform.

SABMiller, which operates in China through its 49 percent stake in China Resources Snow Breweries (CR Snow), says its share of the Chinese beer market rose to 14.9 percent in the first six months of 2006, and said it was now the largest brewer in China by sales volume and brewing capacity.

This puts SABMiller, the world's second-biggest brewer, ahead of the previous Chinese beer leader Tsingtao Brewery Co. Ltd., which has a share of 13.9 percent, while Yanjing Brewery Co. has 10.2 percent.

The Chinese beer industry grew volumes 10 percent in 2005 when it moved ahead of the United States to be the world's biggest beer market, at around 300 million hectolitres, and so far in 2006 beer industry volumes have grown 13 percent.

"SABMiller is growing well ahead of the industry on the basis of the performance of Snow," Andre Parker, SABMiller's managing director of Asia and Africa, told a briefing at the group's headquarters in London.

The Chinese beer market accounts for some 18 percent of SABMiller's group beer volumes but less than 5 percent of profit due to lower margins in an industry which has grown volumes eight percent annually over the last eight years.

"We have grown with and ahead of the market, and this year our growth is in double-digit percentages," he said.

SABMiller, the brewer of Miller Lite, Castle and Peroni beers, entered the Chinese market in 1994 with its partner China Resources Enterprise Ltd., and has seen strong beer industry growth led by rapid urbanisation of the population and the recruitment of younger drinkers.

The group has trimmed its brands so that its top 10, such as Snow, Blue Sword and Singo, account for over 85 percent of its annual production, or over 45 million hectolitres, with its Snow brand accounting for almost half, or 21 million hectolitres, as it moved above Tsingtao to be the No 1 beer brand in 2005.

Tsingtao is 27 percent owned by top US beer-maker Anheuser-Busch Cos. Inc..

But prices in the Chinese beer market are still relatively low for brewers due in part to the "good" margins taken by bars and restaurants, Parker said.

"China will not overnight become a very profitable beer market, it will be a hard slog," he said.

Last year, SABMiller managed a low single figure percent rise in beer prices, but Parker stressed it had the advantage of low capital costs as it bought brewing capacity at under $30 a hectolitre and is building new capacity at or below $30, while international competitors have bought above that figure.

Average beer consumption is rising amongst China's 1.3 billion population, rising in 2005 to 26 litres per capita per year, below Britain at around 100 and the United States at almost 80 but still well above India at under 1 litre.

SABMiller plc is one of the world’s largest brewers with brewing interests or distribution agreements in over 60 countries across five continents. The group’s brands include premium international beers such as Miller Genuine Draft, Peroni Nastro Azzurro and Pilsner Urquell, as well as an exceptional range of market leading local brands. Outside the USA, SABMiller plc is also one of the largest bottlers of Coca-Cola products in the world.

In the year ended 31 March 2006, the group reported US$15,307 million in revenues and profit before tax of US$2,453 million. SABMiller plc is listed on the London and Johannesburg stock exchanges.

E-malt.com, the global information source for the brewing and malting industry professionals. The bi-weekly E-malt.com Newsletters feature latest industry news, statistics in graphs and tables, world barley and malt prices, and other relevant information. Click here to get full access to E-malt.com. If you are a Castle Malting client, you can get free access to E-malt.com website and publications. Contact us for more information at marketing@castlemalting.com .