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Tsingtao Thirsty for Home Market
The Tsingtao Brewery Group is reaching out from its base in Qingdao of East China's Shandong Province, to extend its firm hold on the beer market to the entire country.
It devoured 27 brewery companies in 10 provinces over the last few years.
Two other beer companies in Beijing were added to the list of Tsingtao's conquests on Friday, on the heels of its recent acquisition of 75 per cent of shares for a Carlsburg beer factory in Shanghai at about 150 million (US$18.1 million).
The two newest acquisitions are the Asia Shuang He Sheng Five Star Beer Co Ltd and the Three Ring Asia Pacific Beer Co Ltd.
Reports said Tsingtao signed an acquisition agreement on Friday with the Asia Strategic Investment Corp (ASIMCO), which holds a 63 per cent stake in Five Star and a 53 per cent share of Three Ring.
The new acquisitions will add 400,000 tons annual production capacity to Tsingtao's existing 1.1 million tons and drag the company a step closer to its target of becoming the world's second largest beer company with annual production capacity of 8 million tons.
ASIMCO, an international investment fund, is said to have spent tens of millions of US dollars for the purchase and upgrade of the two beer companies since 1995.
Business insiders said the two beer companies are Tsingtao's largest acquisition.
But Tsingtao officials refused to disclose how much it has to pay for the companies.
A spokesman with ASIMCO said the corporation has decided to pull completely out of the beer industry and concentrate on its auto parts business in China.
It's not the first time for Tsingtao to purchase a foreign company.
In September 1999, the company bought a 60 per cent stake of Huangmei Co Ltd in Zhuhai of South China's Guangdong Province for 30 million yuan (US$3.61 million). Huangmei is a joint venture with an Australian brewery.
In the same month, Tsingtao purchased the Malaysian-invested Shanghai Brewery for 38 million yuan (US$4.58 million).
An official with the State Light Industry Bureau said the tide of incoming foreign investors in China's beer industry in the 1990s is ebbing away.
Official statistics indicate foreign investors controlled about 60 per cent of China's large and medium-sized beer companies in the 1990s.
ASIMCO in 1995 purchased 60 per cent of shares for Five Star, which late Premier Zhou Enlai designated as the beer for national banquets in 1959 but which began to lose money in 1993 due to problems with State companies.
The infusion of foreign capital, a total of US$62 million, was believed to hold a healing magic but failed to renew Five Star's past glory.
Five Star production stagnated at about 200,000 tons while that of Yanjing and Tsingtao jumped to 1 million tons from 350,000 tons in 1995-99.
The ASIMCO spokesman attributed the failure to Five Star's awkward marketing, backward management and heavy burdens intrinsic in many State companies.
Peng Zuoyi, general manager of Tsingtao, said foreign investors, strangers to the China beer market, didn't know that brands priced above 5 yuan (US$0.6) a bottle took up less than 10 per cent of the market.
Foreign-invested expensive beer enjoyed brisk popularity for a short time and was then drowned out by cheap, flexible and timely supply of local brands, he said.
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