BEIJING: Dutch beermaker Heineken will pour USD 3.1 billion into a stake in China's top brewer, expanding its access in the Asian giant's booming and hotly contested market, the two groups announced today.
Heineken has signed a "non-binding" agreement with China Resources Beer to acquire 40 per cent of CRH, the listed entity controlling the Chinese group, for a total of 24.35 billion Hong Kong dollars, according to a statement.
In return, China Resources Beer will buy a 0.9 per cent stake in Heineken for 464 million euros ($537 million).
The Dutch firm, which operates three breweries in the country, will merge its operations in China with those of its new partner.
Heineken will also grant its partner permission to market its eponymous beer brand in the country.
The deal allows Beijing-based China Resources Beer, known above all for low-cost brands like Snow Beer, to add a well-known premium brand to its line-up.
Heineken and its Chinese partner are joining forces at a time when competition is becoming fierce in the Chinese market, with consumers turning towards foreign beers and better quality products as middle-class incomes rise.
China remains dominated by local brewers, with three Chinese groups controlling more than 40 per cent of the market, according to figures from Euromonitor International cited by Bloomberg News.
China Resources recently controlled 18 per cent of the country's beer sales, followed by number two competitor Tsingtao.
But rivalries are also intensifying between international giants, including Denmark's Carlsberg and Belgium's AB InBev, putting pressure on prices and lowering margins.
The pressure has prompted certain foreign groups to withdraw, including Japan's Asahi.
China, the world's largest market for beer production, "is forecast to be the biggest contributor to premium volume growth in the next five years, driven by its rapidly growing middle class," Heineken said in its release.
CEO Jean-Francois van Boxmeer praised the "winning combination" of Heineken's "strong brand" and China Resources Beer's extensive distribution network in the country.