---
title: "Suntory Exits Tsingtao Brewery Joint Venture, Adding New Uncertainty to China's Beer Market"
description: "Tsingtao Brewery suddenly suspended trading at noon yesterday, citing 'major asset acquisition matters under planning.' Suntory Holdings plans to exit its joint venture with Tsingtao Brewery, selling its 50% stake in the equally-owned company to Tsingtao for 10-20 billion yen (approximately RMB 533 million to 1.066 billion). The news has not been officially confirmed by Tsingtao Brewery, which stated, 'Please refer to the official announcement.'"
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published: "2015-10-17"
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# Suntory Exits Tsingtao Brewery Joint Venture, Adding New Uncertainty to China's Beer Market

> Tsingtao Brewery suddenly suspended trading at noon yesterday, citing 'major asset acquisition matters under planning.' Suntory Holdings plans to exit its joint venture with Tsingtao Brewery, selling its 50% stake in the equally-owned company to Tsingtao for 10-20 billion yen (approximately RMB 533 million to 1.066 billion). The news has not been officially confirmed by Tsingtao Brewery, which stated, 'Please refer to the official announcement.'

Yesterday at noon, Tsingtao Brewery suddenly suspended trading, citing 'major asset acquisition matters under planning.' Suntory Holdings plans to exit its joint venture with Tsingtao Brewery, selling its stake in the equally-owned company to Tsingtao, involving 10-20 billion yen (approximately RMB 533 million to 1.066 billion). However, the news has not been officially confirmed by Tsingtao Brewery. Regarding the rumors, Tsingtao Brewery stated, 'Please refer to the official announcement.'

Nikkei Chinese reported yesterday that Suntory Holdings plans to exit the joint venture with Tsingtao Brewery, selling its shares in the equally-owned company to Tsingtao, and switching to a brand licensing model where Tsingtao pays royalties to Suntory. The transaction is expected to be completed before the first half of 2016, with Suntory transferring all shares in the joint venture.

Japan's Suntory is parting ways with Tsingtao Brewery, and the number of players in China's beer market is shrinking.

China accounts for a quarter of global beer consumption, but the number of players in this market is decreasing. After the second-largest U.S. brewer was reported to exit the Chinese market, Japan's beverage giant Suntory is also scaling back its beer business in China.

**A Brief 'Marriage'**

Suntory chose to cooperate with Tsingtao Brewery in 2012. According to the plan at the time, each party invested 50% to establish separate production and sales joint ventures. A total of 10 factories under two companies in Shanghai and Jiangsu were assigned to the production company, and four sales branches were managed by the sales company. Matsumoto Hiroshi, then vice president of Suntory China Business Company and Suntory China Holdings, even expressed hope for 'future cooperation in sales in other regions.'

Beer industry expert Fang Gang said, 'This move is beneficial to Tsingtao Brewery, as it further enhances Tsingtao's position in Shanghai and Jiangsu.' Data shows that the Suntory-Tsingtao joint venture primarily operates the 'Suntory' and 'Tsingtao' brands, mainly producing and selling in parts of Shanghai and Jiangsu. Annual sales are estimated at around 40 billion yen (approximately RMB 2.132 billion).

Suntory holds about 30% of the Shanghai market, with approximately 34 million cases, equivalent to about half of Suntory's total beer products in Japan. In the future, Tsingtao will obtain the trademark license and continue producing Suntory. It is currently unknown what adjustments will be made to the operation of 'Suntory' beer after Suntory's exit.

**Retreat from China's Beer Market**

This Japanese giant entered the Chinese market as early as 1981, making it the earliest Japanese manufacturer to enter China, and expanded market share by selling low- and medium-priced products. Around 2000 in Shanghai, the company held a 50% market share, but in recent years, it has been struggling due to low-price attacks from brands like China Resources Snow. According to a survey by Euromonitor International, although Suntory holds the largest market share among Japanese companies in China, it is only 1.4%, ranking 8th in the industry.

'Exiting the joint venture highlights the difficulties Japanese beer companies face in global expansion,' commented Reuters, especially as the world's two largest beer companies, Anheuser-Busch InBev and SABMiller, are discussing a merger. It is noted that although China's beer market accounts for a quarter of global sales, it generates only 3% of global beer profits.

Despite this, Suntory is already the best-selling Japanese beer company in China. Including Asahi and Kirin, the three Japanese companies together hold less than 2% of China's beer market share. Fang Gang believes that future market share in China's beer market will continue to concentrate, and companies not in the top five will struggle. 'Suntory and Silver Bullet face the same problem,' Fang Gang judged. After Suntory exits Tsingtao, it means its beer business has almost completely withdrawn from the Chinese market. This experience is similar to that of Molson Coors, the second-largest U.S. brewer, which recently exited China. 'For brewers not in a monopoly position, exiting is a rational choice.'

**-END-**

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