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SAB becomes No 2 in Chinese beer market
South African Breweries Plc, the world's fifth largest brewer, became the number two beermaker in China on Tuesday after striking a deal to be the main partner in a joint venture in the South West Chinese province of Sichuan.
The London-based brewer said it now becomes second only to domestic giant Tsingtao Brewery Co Ltd in one of the fastest growing beer markets in the world -- a national beer market second only in volume to the United States.
The joint venture, to be called China Resources (Sichuan) Blue Sword Breweries, will be 62 percent owned by SAB's CRE Beverage Ltd (CREB) and the remainder by the province's leading brewer Sichuan Blue Sword Breweries group, with SAB having management control of the venture.
SAB says Sichuan's 90 million population traditionally consumes spirits, but the beer market has the potential to grow with beer drinking per head only half that in the rest of China.
"The Sichuan province is in the centre of the government's go-west policy, and prospects are good with a per capita beer consumption of only nine litres per annum compared with 18 in the rest of China," said Andre Parker, managing director of SAB's beer operations outside South Africa.
Shares in SAB, which is one of the leading brewers in developing markets such as Africa, Eastern Europe and China were down five percent, or 22-3/4 pence at 428-1/2p by 1445 GMT.
The venture will combine CREB's two breweries with 10 owned by Blue Sword in Sichuan, brew the area's two main beers Blue Sword and CREB's Snowflake, and have an 80 percent share of the province's beer market. It will sell six million hectolitres of beer a year, with five million from Blue Sword breweries.
Parker said SAB had topped up its investment to take control of the venture, and would pay $26 million to Blue Sword as its part of the CREB investment.
As SAB owns 49 percent of joint venture CREB, its 51-percent partner Hong Kong-listed China Resources Enterprise Ltd would pay slightly over $26 million for its share.
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