Prepared Foods August 30, 2004 enewsletter

SABMiller, the world's second-largest brewer, took steps to reassert its position in the Chinese beer market, announcing an investment in a new $82 million brewery.

Through its joint venture with China Resource Enterprise (CRE), a retail, beverage and oil conglomerate, SABMiller will contribute 49% of the total needed for the brewery in the south-eastern province of Guangdong. In the city of Dongguan, it will be able to produce about 3 million hectoliters annually. The venture will use CRE's retail outlets to distribute its beer.

The brewer suffered a setback in its ambitions in the Chinese beer market -- one of the world's largest and fastest-growing -- earlier this year when it lost a $552 million bidding battle for the Harbin Brewery Group.

Anheuser-Busch took a stake in Harbin to rival that already owned by SABMiller. This prompted a takeover duel that ended in Anheuser's bid being successful and SAB severing its links with Harbin. It is nonetheless already the second-largest brewer in China, with a market share of 11%.

A spokesman for SAB said, "We are already strong in the northeast and northwest. The south-east is economically a very active region, so we looked at opportunities there. We did consider other possibilities but thought the most effective way was to build from a greenfield site."

Guangdong is one of China's wealthiest and most developed provinces, incorporating the Pearl River delta and home to 79 million people. It accounts for about 8% of China's total beer sales.

SABMiller is one of a number of foreign brewers keen to boost their market share in China. While the U.S. and European beer markets are flat, with growth of little more than 2%, sales in China are growing at more than 6% annually, estimates suggest. Carlsberg last month bought stakes in four Chinese breweries, and Interbrew, which is behind the Stella Artois and Becks beer brands, bought the Zhejiang Shiliang Brewery for $53 million.

Construction of SABMiller's brewery in Dongguan will start in November. It is expected to be operational in 2006. A spokesman said the group was still on the lookout for opportunities to strike new deals or begin new developments in China.