Interbrew, the world's second largest brewery and China's third largest beer producer, Zhujiang Beer Group, signed a Memorandum of Understanding on Friday, under which Zhujiang Beer offers Interbrew the opportunity to become one of the promoters of its restructuring into a joint stock company.

This could result in Interbrew taking up to 25 percent in the Zhujiang Joint Stock Company, but it will be subject to final agreements on price and related conditions.

According to Yang Rongming, board director of the Zhujiang Beer Group, the brewer is delegating its restructuring to a shareholding company which is expected to be set up in the first half of this year and go public in 2003.

The would-be initial public offering (IPO) aims to raise 1 billion yuan (US$120.7 million), Yang said.

Zhujiang Beer is the only remaining unlisted major Chinese brewery, while its close rivals Shandong-based Tsingtao and Beijing-based Yanjing floated in 1993 and 1997 respectively.

As the third largest beer brewer, Zhujiang's sales volume in 2001 amounted to 750,000 tons, up 10 percent, Yang said. It is the most profitable brewery whose profit accounted 15 percent of the industry last year.

Interbrew is the second largest brewer in the world in terms of volume. The strategy of Interbrew, whose company's motto is "The World's Local Brewer," is to build strong local platforms in the major beer markets around the world.

In total, more than 200 Interbrew brands are sold in over 120 countries, including Britain's Bass ale, Germany's Beck, the America's Rolling Rock and the Labatt family of beers from Canada.

In 2001, Interbrew sold more than 9 million tons of beer worth 3.5 billion euro (US$3.1 billion), grossing 910 million euro (US$797.9 million) in profits.

"Interbrew is pleased to partner with Zhujiang by drawing on its recently gained experiences through its own IPO in December 2000," said Hugo Powell, chief executive officer of Interbrew.

Industry insiders believe that their cooperation will help Zhujiang fasten its expansion pace, which is relatively slow and small compared to its major competitors, and push the beer market integration which will be controlled by three to four big players.

As the market leader in Guangdong Province with an approximate 50 percent local market share, Zhujiang brewery has far less foothold in other regions of the country and is behind its rivals in national acquisition.

China's top two Tsingtao Beer Group and Beijing Yanjing Beer Group have implemented a nationwide development strategy and bought local breweries around the country.

The foreign-funded China Resources Beer will be more aggressive with acquisition of 13 local breweries challenging Zhujiang's position as a newcomer.

However, compared to their acquisition of local small breweries, Zhujiang's move holds more weight since it is the first time local and world leaders join hands, said Gu Guoxian, vice-chairman of the China Brewery Association said.

As a counter strategy to Zhujiang's move, the three other big companies are expected to acquire more regional breweries and trigger a new round of market consolidations, Gu said.

The Chinese mainland's beer market is shared by at least 500 brewers and 80 percent have an annual production capacity below 50,000 tons.

(Xinhua News Agency April 01, 2002)