China: CR Snow announced acquisitions in Shanxi & Inner Mongolia
China Resources Snow Breweries Limited ("CR Snow"), SABMiller's joint venture in China with China Resources Enterprise, Limited ("CRE"), has announced that it has agreed to acquire the brewing assets of Shanxi Yueshan Brewery Company Limited ("Yueshan Brewery") for a cash consideration of US$17.7 million, according to China Resources Enterprise Limited press release of December 15.
In addition, CR Snow will acquire the brewing assets of the Inner Mongolia Mengyuan Fine Wine & Brewery Company Limited ("Mengyuan Brewery") for a consideration of US$4.7 million, the first move by an international brewer into this region.
The Shanxi province is located in the northern part of China, and to the east of the Yellow River with a population of about 34 million inhabitants. The Inner
Mongolian autonomous region borders the Shanxi Province and is the third largest region among Chinese provinces and autonomous regions (over 1.1 million square kilometres) with a population of 24 million people. Despite a relatively low population level, Inner Mongolia has a favourable beer market as beer consumption per capita is high and the population is relatively concentrated in its major cities.
At present, CR Snow does not have a plant in either area, though 34,000 hectolitres and 119,000 hectolitres of SNOW were sold in the two regions in calendar year 2005. In the first half of 2006, these sales volumes have grown strongly, reflecting the rising demand for the SNOW brand across these areas. CR Snow will commence production of SNOW as soon as practicable following completion of the acquisitions.
Mr. Andre Parker, Managing Director of SABMiller Africa & Asia, said; "These acquisitions represent a natural progression for us, as we look to develop our current footprint across the northern and north-eastern regions. Both breweries are in markets that we currently sell into and not only offer an attractive growth opportunity at justifiable costs, but also will enhance the potential for the national roll-out of "SNOW" in China."
Mr. Mark Chen, Managing Director of CRE said; "This signifies the expansion of our existing beer production network along the coastal line and Yangtze River into the neighbouring areas, attributed to the rapid development of "SNOW" as a national brand. As the standard of living and consumption power grow in these areas, rising demand for higher quality beer is anticipated, providing excellent opportunities for CR Snow."
The Yueshan Brewery is conveniently located at Jinzhong, which is approximately 17 kilometers from the capital city, Taiyuan. In 2005, 600,000 hectolitres of beer was sold through the brewery which equated to a market share of approximately 30% in Jinzhong and 20% in Taiyuan. The total investment cost in
the Yueshan Brewery is expected to be around US$29.1 million, which includes an additional investment of US$11.4 million to be installed in two phases.
An initial amount of US$2.5 million will be spent on technology upgrades to existing facilities in order to align with production requirements for SNOW.
Subsequently, the remaining US$8.9 million will be invested in 2008 to upgrade the production capacity from 1.5 million to 2.5 million hectolitres of beer.
The Mengyuan Brewery is strategically located in the north-eastern city of Ulanhot, providing a platform for entering into both the southern and northern cities of the Inner Mongolia autonomous region. A targeted level of investment of US$2.5 million will increase production capacity from 500,000 to 600,000 hectolitres. Total sales volume of the Mengyuan Brewery in 2005 amounted to around 140,000 hectolitres.
About China Resources Snow Breweries Limited
China Resources Snow Breweries Limited was established in 1993 and became a joint venture with SABMiller plc in 1994. The company is engaged in the production, sales and marketing of beer and beverages in China. Its shareholders are China Resources Enterprise, Limited and SABMiller Asia Limited,
a subsidiary of SABMiller plc. China Resources Enterprise, Limited has a 51% interest in China Resources Snow Breweries Limited while SABMiller Asia Limited holds the remaining 49% interest. It operates more than 40 breweries in the Chinese Mainland with a total sales volume of about 39.5 million hectolitres in 2005.
About SABMiller plc
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.
About China Resources Enterprise, Limited
China Resources Enterprise, Limited is listed on the Hong Kong Stock Exchange and is also traded on SEAQ International of the London Stock Exchange. It is one of the constituent stocks of the Hang Seng Index in Hong Kong.The Group focuses on the consumer businesses in both the Chinese Mainland and Hong Kong, with core activities being retail, beverage, food processing and distribution, textile and property investment.
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