Chinese brewer mounts attack

By DITA DE BONI

SHANGHAI - China's best-known brewer, Tsingtao Brewery, is making a grab for market share in Shanghai that could impact on both Lion Nathan and Brierley Investments.

The brewery, now the No 3 provider of beer to Shanghai, will launch a new beer called Huadong this month at a price of about 1.7 yuan (50c) a bottle.

Suntory, its biggest rival in the city, costs 2.5 yuan.

Tsingtao plans to make 30,000 tonnes of Huadong a year at the plant in Songjiang district that it bought from Carlsberg in August.

The company also plans to sell Huadong in eastern China after a six-month promotional period in Shanghai.

Carlsberg offloaded its Shanghai brewery to Tsingtao for $12 million after losing about the same amount every year for a decade since entering the market in the early 1990s.

But despite the difficulties foreign brewers have faced in the area, Shanghai's beer sales this year are forecast to rise to more than 500,000 tonnes, compared with 300,000 tonnes last year.

Suntory supplies about 50 per cent of the city's beer, followed by Reeb beer, made by Shanghai Mila.

Suntory is a joint venture between closely held Japanese brewer and distiller Suntory and a Shanghai brewery.

Mila is a unit of Asia Pacific Breweries, a Singapore-based joint venture between Dutch brewer Heineken and Singapore's Fraser & Neave.

Brierley Investments this month lifted its stake in Fraser & Neave to 10 per cent and indicated it wanted more.

Its immediate target is Overseas Chinese Banking Corporation's 20 per cent.

Singapore's Monetary Authority has said the stake must be divested within three years.

Lion Nathan, which recently wrote down its China businesses by $158 million, has already said there are too many people selling beer in the nation, with the low cost structure and retail price of product from local producers a real hurdle for competitors.

It entered the market in 1995 and has yet to make a profit there.

Other global brewing concerns, including Fosters, Beck's and the world's largest brewer, Anheuser-Busch (Budweiser), have all been forced to reassess their Chinese operations.