---
title: "Beer Industry Landscape Has Changed: From Five Giants to a Two-Headed Contest Between Snow and Budweiser!"
description: "The ownership of Snow Beer has long been a focus of industry attention. Recently, China Resources Beer announced a rights issue to raise HK$9.5 billion, partly to acquire the 49% stake in Snow Beer held by SABMiller Asia, thereby achieving full ownership. Industry insiders say that if the acquisition succeeds, it will further polarize the domestic beer industry, leading to a two-player contest between Snow and Budweiser."
author: "New Distribution"
publisher: "New Distribution"
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published: "2016-07-17"
language: "en"
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# Beer Industry Landscape Has Changed: From Five Giants to a Two-Headed Contest Between Snow and Budweiser!

> The ownership of Snow Beer has long been a focus of industry attention. Recently, China Resources Beer announced a rights issue to raise HK$9.5 billion, partly to acquire the 49% stake in Snow Beer held by SABMiller Asia, thereby achieving full ownership. Industry insiders say that if the acquisition succeeds, it will further polarize the domestic beer industry, leading to a two-player contest between Snow and Budweiser.

The ownership of Snow Beer has long been a focus of industry attention. Recently, China Resources Beer announced a rights issue to raise HK$9.5 billion, partly to acquire the 49% stake in Snow Beer held by SABMiller Asia, thereby achieving full ownership of Snow Beer.

Industry insiders say that if China Resources Beer succeeds in the acquisition, it will further polarize the domestic beer industry, leading to a two-player contest between Snow and Budweiser.

China Resources Beer Plans Full Acquisition of Snow Beer

Currently, China Resources Beer holds 51% of China Resources Snow Breweries, while SABMiller Asia holds the remaining 49%. As early as March 2 this year, China Resources Beer announced its intention to acquire the 49% stake in China Resources Snow Breweries held by SABMiller Asia for US$1.6 billion (approximately HK$12.44 billion). Upon completion of the transaction, China Resources Snow Breweries will become a wholly-owned subsidiary of China Resources Beer.

Regarding this acquisition, the latest announcement from China Resources Beer on July 6 shows that the company proposes a rights issue of 811 million shares on the basis of one rights share for every three existing shares held, at a subscription price of HK$11.73 per share, with net proceeds of HK$9.514 billion. Part of the proceeds will be used to acquire the 49% stake in Snow Beer held by SABMiller Asia.

It is understood that the Ministry of Commerce is conducting an anti-monopoly review of the acquisition. However, China Resources Beer remains optimistic. According to the company, discussions with the Ministry of Commerce have not revealed any potential issues, and it is confident of passing the anti-monopoly review. The HK$12.44 billion acquisition price will be paid through internal resources, the rights issue and other financing, and loans from the parent company. The proportion of rights issue funds used for the acquisition will be determined based on market conditions.

In the view of Zhu Danpeng, a researcher at the China Brand Research Institute's Food and Beverage Industry, the full acquisition of Snow Beer by China Resources Beer may be questioned as monopolistic to some extent, but in reality, according to relevant Chinese regulations, this acquisition should not be in violation.

Further Polarization of the Beer Industry Landscape

In recent years, the market concentration of China's beer industry has continued to increase, eventually forming a market pattern of five strong players competing. China Resources Snow, Tsingtao Brewery, Yanjing Beer, Budweiser, and Carlsberg, the five major beer giants, occupy the vast majority of the industry's market share.

Public statistics show that China Resources Beer's joint venture with SABMiller, China Resources Snow Breweries, holds a 25% market share in the Chinese market, followed by Tsingtao Brewery with 18%, and the world's largest beer company, Anheuser-Busch InBev, with 16%. In terms of 2015 revenue, Snow Beer achieved RMB 29.32 billion, Tsingtao Brewery's operating revenue was approximately RMB 27.6 billion, Anheuser-Busch InBev's revenue in China was RMB 27.56 billion, while Yanjing Beer's revenue was only RMB 12.5 billion.

China Resources' full acquisition of Snow will greatly increase its influence in the entire beer industry in the future. Regarding this acquisition, beer industry expert Fang Gang said in an interview with the media that China Resources intends to completely widen the gap with its competitors.

"If China Resources Beer successfully acquires Snow Beer, it will further polarize the domestic beer industry, and the future Chinese market will present a competitive landscape between China Resources Beer and Anheuser-Busch InBev," analysts pointed out. After the acquisition, China Resources Beer will firmly hold the top position in the domestic market, while the world's number one, Anheuser-Busch InBev, will not sit idly by. Last year, it reached a US$105.5 billion acquisition agreement with SABMiller, which will give it one-third of the global beer market share after the acquisition.

In the industry's view, a new round of oligopoly in the beer industry is intensifying. The acquisition between Anheuser-Busch InBev and SAB, as well as China Resources Beer's acquisition of Snow Beer, are signals. "The domestic beer market has developed to a certain stage, and the oligopoly effect is becoming more obvious. Small and medium-sized breweries find it difficult to survive, and some will gradually exit the market," Zhu Danpeng believes. China Resources Beer and Anheuser-Busch InBev will compete as industry oligarchs in the future, and will also launch acquisitions of the second tier. China's beer industry may usher in a wave of acquisitions.

A research report points out that the oligopolistic competition pattern in China's beer industry is becoming increasingly evident. In 2015, the five major beer groups—China Resources Snow, Tsingtao Brewery, Anheuser-Busch InBev, Yanjing Beer, and Carlsberg—had a combined market share of over 80%. Future industry consolidation may occur among the giants, accelerating the integration process.

Has Domestic Beer Consumption Basically Peaked?

Behind the oligopolistic pattern in the beer industry are declining market sales and increasingly fierce market competition. According to beer industry research reports, domestic beer consumption has basically peaked, the industry's profitability is weak, and competition is becoming more intense. The price of beer does not match its value, and it is common for the entire industry to earn only 8 cents per can, which has led domestic companies into a zero-sum game.

Unlike other alcoholic beverages such as baijiu, wine, and foreign spirits, the beer industry has the characteristics of low unit price and high sales volume, and price and production-sales ratios fluctuate very little. Relevant data show that since 2009, the growth rate of beer production and sales in China has remained below 10%, and most of the time below 5%. Especially after 2013, beer production has gradually declined, further confirming the saturation of market demand.

According to data from the National Bureau of Statistics, in 2015, China's beer market was affected by slowing economic growth and a sluggish overall consumption environment, with production hitting a five-year low. From January to December 2015, the cumulative national beer production was 47.15 million kiloliters, a year-on-year decrease of 5.06%.

It is worth noting that last year, among the eight domestic beer listed companies, except for Zhujiang Beer, which achieved a year-on-year increase in net profit, the other seven companies all experienced performance declines. Chongqing Beer even suffered its first loss. Some analysts say that the performance of beer listed companies also reflects that the domestic beer industry is undergoing a new round of adjustment, and the future competitive landscape will be even more intense.

"We expect China's beer demand to remain sluggish for the rest of the year. Economic factors, lower temperatures in the south, and widespread rainy weather across the country may have a negative impact on beer demand," noted a research report from Industrial Securities. Market data show that in May this year, beer sales volume and sales value at the national supermarket level both fell by more than 10% year-on-year, and the decline in sales volume expanded significantly compared with the first quarter. In addition to economic factors, lower temperatures in the south compared with previous years also had a negative impact on beer demand.

A report from Zhongtai Securities believes that the domestic beer industry may remain in an adjustment period for the next one to two years. Under the impact of overseas giants such as Budweiser, as well as imported beer and craft beer, domestic beer manufacturers are facing increasing competitive pressure. "We look forward to integration among domestic beer companies bringing about changes in the industry landscape; otherwise, even after the natural adjustment period, domestic beer companies will still face relatively difficult situations in the future."

Compiled by China Beverage Industry Network

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