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Stirring foams in beer market
By Zhan Lisheng (Business Weekly)
Updated: 2004-12-31 10:26

Beijing Yanjing Beer Group Corp recently announced it would invest 75 million yuan (US$9.04 million) in the construction of a brewery in the Pearl River Delta city of Foshan.

The new plant, set to being operations in June 2005, will be capable of producing 100,000 tons of beer annually for Pearl River Delta cities including Guangzhou, Shenzhen and Dongguan.

Tsingtao, Yanjing and China Resources Breweries Ltd (CRB), the nation's leading brewers, have all so far set up their production facilities in Guangdong, triggering intense competition with local beer giants including Guangzhou Zhujiang Brewery Group Co Ltd and Shenzhen Kingway Brewery Co Ltd.

CRB announced in August it would invest about 680 million yuan (US$81.93 million) in the construction of a new brewery in Dongguan, due to become operational in early 2006 with an total capacity of approximately 303,600 tons of both premium and drought beer.

Tsingtao Beer entered the lucrative Guangdong market as early as 1999, and has opened breweries in Shenzhen, Zhuhai and Foshan.

"The construction of a new brewery is the most efficient and effective way to gain access to this market," noted Frank Ning, chairman of China Resources Enterprise Ltd.

Like Ning, the executives of both Yanjing and Tsingtao attributed their affection for the Guangdong market to its comparatively high profitability.

The production output volume of Guangdong's beer industry accounts for some 10 per cent of the nation's total, but its profits makes up about one-third of the national total, according to statistics.

The province's beer industry earned a profit of 157 million yuan (US$18.92 million) in the first half of this year, up 52 per cent year-on-year.

Beer profits stand at more than 300 yuan (US$36.14) per ton in Guangdong Province, compared with the national average of 70 yuan (US$8.43) per ton, official statistics indicate.

The province accounts for approximately 8 per cent of China's total beer consumption, rising from 667,920 tons in 1992 to the current approximately 1.97 million tons .

Fang Quangui, general manager of Zhujiang Beer takes a calm attitude towards the intensifying competition, saying the local beer giant has geared up efforts to diversify its production facilities with handsome investments to fortify its market share.

Zhujiang Beer, which has long occupied over 50 per cent of the market in Guangdong Province and over 75 per cent of the market in Guangzhou, has vowed to build itself into one of Asia's largest brewing centres.

In the wake of its capital input of 1 billion yuan (US$120.48 million) for a brewery in Dongguan in July, which is capable of an annual production of 500,000 tons, Zhujiang Beer announced in October that it would expand the production capacity of its Zhanjiang production base in the west of the province to 400,000 tons annually.

Zhujiang Beer will invest 800 million yuan (US$96.39 million) in the expansion.

Zhujiang Beer will also establish a brewery in Shaoguan, in the north of the province, although further investment details are currently unavailable.

The general manager said that the new investments will put Zhujiang Beer in an improved position to tap the market potential throughout the province as well as in the neighbouring provinces and regions of Hainan, Guangxi, Yunnan, Guizhou, Sichuan, Hunan and Jiangxi, and throughout Southeast Asia.

According to Zhujiang Beer's development blueprint, the company aims to realize an annual beer production capacity of 1.50 million tons by the end of 2005; and more than 4 million tons by 2010.

Likewise, Shenzhen Kingway Brewery Co Ltd, another beer giant in the province has spared no efforts in its expansion drive.

Kingway Beer invested 700 million yuan (US$84.34 million) in a brewery with an annual production capacity of 500,000 tons in Dongguan in May; and it invested 400 million yuan (US$48.19 million) for a plant in Shantou in the east of the province in 2003.

Zhujiang Beer realized a production output of 672,980 tons in the first eight months of this year, up 23.5 per cent; while Kingway Beer realized a production output of 248,952 tons, up 40.4 per cent.

While keeping a close eye on the local market, brewers in the province should pay greater attention to business opportunities outside Guangdong and even abroad, advised Guo Yingxin, chairman of the Guangdong Provincial Beer Association.

Better technology and high profitability offer the province's brewers advantages as they try to expand into the national market, and their proximity to Hong Kong, Macao and the Southeast Asian countries and regions will increase the overseas competitiveness of the province's brewers, the chairman said.

Zhujiang Beer has teamed up with Belgium-based Interbrew, the world's second-largest brewery. This partnership means Zhujiang Beer will be able to take advantage of Interbrew's global sales network for exports, while Zhujiang Beer will help "Beck's" beer crack the domestic market.

And Kingway Beer has announced investment of US$100 million for a brewery in the North China's Tianjin municipality, capable of an annual production of 404,800 tons.

Guangdong has 12 brewers, with their exports worth US$16.63 million in the first 10 months of this year, up 12.75 per cent year-on-year, official statistics indicate.

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