---
title: "Latest Progress! China Resources Beer Acquires Heineken's China Business, Ready to Brave the World Together?"
description: "On August 3, China Resources Beer announced that its controlling shareholder, China Resources Group (Beer) Co., Ltd., placed 40% of its shares with Heineken Group for approximately HK$24.35 billion, while China Resources Enterprise, holding 60% of China Resources Beer, purchased 0.9% of Heineken's shares for a total cash consideration of approximately EUR 463 million. Upon completion, Heineken Group will effectively receive a 20.67% equity interest in China Resources Beer (Holdings) Co., Ltd. The two companies have formed a strategic partnership through a share swap. Following this agreement, further progress has been made today."
author: "New Distribution"
publisher: "New Distribution"
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published: "2018-11-05"
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# Latest Progress! China Resources Beer Acquires Heineken's China Business, Ready to Brave the World Together?

> On August 3, China Resources Beer announced that its controlling shareholder, China Resources Group (Beer) Co., Ltd., placed 40% of its shares with Heineken Group for approximately HK$24.35 billion, while China Resources Enterprise, holding 60% of China Resources Beer, purchased 0.9% of Heineken's shares for a total cash consideration of approximately EUR 463 million. Upon completion, Heineken Group will effectively receive a 20.67% equity interest in China Resources Beer (Holdings) Co., Ltd. The two companies have formed a strategic partnership through a share swap. Following this agreement, further progress has been made today.

On August 3, China Resources Beer announced that its controlling shareholder, China Resources Group (Beer) Co., Ltd., placed 40% of its shares with Heineken Group for approximately HK$24.35 billion, while China Resources Enterprise, holding 60% of China Resources Beer, purchased 0.9% of Heineken's shares for a total cash consideration of approximately EUR 463 million. Upon completion, Heineken Group will effectively receive a 20.67% equity interest in China Resources Beer (Holdings) Co., Ltd. The two companies have formed a strategic partnership through a share swap.

Following this agreement, today, the latest progress in the China Resources-Heineken cooperation has been made.

**I. China Resources Buys All 7 Heineken Enterprises in China**

On the morning of November 5 (today), China Resources Beer announced that the group had signed a share purchase master agreement with Heineken Group on the same day. According to the agreement, China Resources Beer (through its wholly-owned subsidiary, China Resources Snow Breweries) has agreed to purchase, and Heineken International has agreed to sell:

> 1. All equity interests in 6 companies established in China (collectively referred to as the Heineken Mainland China Target Companies);
>
> 2. All issued shares of Heineken Hong Kong Limited (referred to as the Heineken Hong Kong Target Company).

The specific information of the above acquired companies is as follows:

It is reported that at the closing of the Heineken China share purchase master agreement (referred to as closing), the total consideration paid by the buyer in cash (referred to as the purchase price) is the estimated purchase price, i.e., the agreed enterprise value of the Heineken China target shares is HK$2,354,670,000 (approximately HK$2.355 billion), adjusted according to price adjustment items (referred to as the estimated purchase price). After closing, the purchase price will be further adjusted based on the closing statement prepared in accordance with general market practice (referred to as the final purchase price).

In addition, according to the framework agreement signed on the same day, China Resources Beer and Heineken Brouwerijen (the trademark licensor) agreed to commence a long-term strategic cooperation. The principles are as follows:

> 1. Within the exclusive territory, combining the group's competitive advantages in sales channels and Heineken Group's high-end brand advantages, to achieve rapid development of Heineken Group's licensed high-end brands in the exclusive territory, striving for world-class operational efficiency;
>
> 2. Outside the exclusive territory, where appropriate and with the consent of the parties to the framework agreement, utilize Heineken Group's global distribution network, extensive knowledge, and unique capabilities in the high-end beer segment in those markets to support the internationalization of the group's existing and future Chinese beer brand portfolio (excluding Heineken Group's licensed high-end brands), and to become the best-selling Chinese beer brand in international markets outside the exclusive territory.

**II. Heineken's China Situation is Concerning**

Heineken, founded in Amsterdam, the Netherlands, is currently the world's second-largest brewer, accounting for approximately 10% of the global beer market share. Its top competitor, Anheuser-Busch InBev, currently holds approximately 20% of the global market share.

Heineken entered the Chinese market in 1983, a full 12 years earlier than its global rival AB InBev. It has been striving to build a strong sales network in China and establish a mark for its flagship product, Heineken beer. However, unlike its global success and its rivalry with AB InBev, the rapidly growing Chinese market seems to have nothing to do with Heineken.

According to Heineken's 2017 performance report, Heineken's beer sales volume in 2017 was 21.8 million tons, an increase of 8.9% year-on-year; Heineken brand sales volume was 3.6 million tons, an increase of 4.5% year-on-year; full-year revenue was EUR 21.908 billion, an increase of 5.4% year-on-year; revenue per hectoliter increased by 2.1%; full-year net profit was EUR 2.247 billion, an increase of 7.1% year-on-year.

Although Heineken's 2017 global performance showed mid-to-high single-digit growth across various indicators, its total sales volume in the Asia-Pacific region was 630,000 tons, 30,000 tons less than in 2016, making it the only region with negative growth. The annual report mentioned that in China, "Heineken brand sales volume is under pressure."

**III. China Resources' High-End Segment is Weak and Needs Upgrading**

As the world's largest beer market, China Resources Beer currently holds approximately 26% of the market share in China, making it the largest brewer in China. In terms of volume, Snow, under China Resources Beer, is one of the best-selling beers globally.

However, under the competitive mindset that overly emphasized "winning by volume" and using market share capture as the main strategy, price wars and an overly low-end product structure have made Snow the least profitable brand among the five major beer giants in China, despite its large sales volume.

Although Snow is actively seeking to restructure its product chain, it is an indisputable fact that years of price wars have yielded little achievement in the high-end beer segment.

In stark contrast, AB InBev, seeing the huge potential of consumption upgrading in the Chinese market, has already laid out approximately 20 high-end international brands in China in advance. This poses a significant strategic threat to Snow's future development in China.

**IV. Heineken + China Resources: A Strategy with Great Vision!**

Famous beer marketing expert Mr. Fang Gang pointed out: Whether it is Heineken or Snow, from a competitive perspective, their global competitor is AB InBev. The enemy of my enemy is my friend. Moreover, China Resources Beer lacks ultra-high-end brands, while Heineken has them, but Heineken lacks scale in China. Therefore, the cooperation between the two forms a certain complementarity. It is natural for the two brands to come together.

Mr. Fang Gang stated: From an industry perspective, as China's largest beer company by volume, China Resources Beer must lay out high-end products and optimize its product line. From a consumer perspective, Chinese consumers, especially the younger generation, are very receptive to high-quality, high-priced products.

Therefore, for China Resources Beer, there is both an industry-side demand and a consumer-side demand, which has prompted China Resources Beer to increase its presence in the mid-to-high-end beer market, including the launch of Brave the World SuperX in the first quarter of this year, and the acquisition of Heineken China.

From a negative perspective: AB InBev and Tsingtao's ultra-high-end, high-end, and mid-range products, coupled with imported beers and craft beers, are encircling, robbing, and eroding the market, leaving China Resources Beer, which lacks major brands and trendy brands, unable to rely solely on Snow to dominate.

Heineken has been weak in China for years, with rampant parallel imports and a collapsed price system, and its share of the high-end market in China lags far behind AB InBev. This time, leveraging China Resources Beer to start anew is also a last resort.

**Therefore, this is a highly complementary cooperation. For China Resources Beer, it solves the problems of weak high-end offerings, lack of support in the double-digit price band, and internationalization (the final battle). For Snow, this is not just a domestic acquisition but an opportunity to potentially expand globally. For Heineken, its long-term non-mainstream status in China may also be reversed, and cooperating with China Resources Beer is a wise move. Heineken strategically gives up the Chinese market to form a global layout through a strategic alliance with Snow Beer!**

The curtain on this highly anticipated beer war has just been raised...

The beer industry landscape is undergoing subtle changes, and the acquisition window has opened again! The future competition in China's beer market is no longer about big fish eating small fish, but a game between big fish and big fish! In the future, it is not impossible for the five major giants to become two major giants, with a duel between Budweiser and Snow.

Let us wait and see.

This article is compiled and edited by <New Distribution>.

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