Heineken-APB Ltd (HAPBC) has acquired the assets of an existing brewery to start up beer brewing operations in the city of Wujiang located in the Jiangsu Province in China. HAPBC is 50% owned by Asia Pacific Breweries Ltd (APB). As agreed amongst the parties involved in the transaction, the price of the asset sale has not been disclosed.

The purchase, made by the HAPBC subsidiary Jiangsu DaFuHao Breweries, includes a 12-hectare piece of land, upon which a brewhouse and a packaging hall are built, as well as brewing and packaging equipment. The 10 year-old brewery, which has not been in use since October 2003, will undergo upgrading and expansion before it commences commercial operation early next year with an initial production capacity of 500,000 hectolitres. Its designed annual production capacity is 1m hl.

"Our 40% stake in DaFuHao gives Asia Pacific Breweries (APB) access to the affluent Jiangsu beer market that makes up 5% of the total China beer market," said Koh Poh Tiong, chief executive officer, APB. "DaFuHao is the leading brewery in the Jiangsu province with a market share of 12%. Its growth roadmap is to expand beyond its stronghold market in Nantong where its beer brands such as BBOSS and Dafuhao have already commanded a strong 80% share of the 1.6m-hectolitre beer market."

When the Wujiang brewery becomes operational, DaFuHao will utilise its newly-acquired plant to brew and pack its brands, including BBOSS and Dafuhao, for consumers from these regions instead of relying on the Nantong plant that is already running at full capacity especially during peak season.

With its additional production capacity and capability in Wujiang, DaFuHao will be able to more adequately fulfil the increasing demand and maximise its growth potential in these cities, a statement said. On top of that, the company expects there to be savings on costly transportation expenses when the Wujiang plant starts supplying beers to these areas instead of having them transported from its Nantong plant.

"Over the past one year, HAPBC has continued to see an increasingly positive bottomline which is attributable to better performances at our Shanghai and Hainan operations as well as our investments in Kingway and DaFuHao," Koh added. "We are pleased that our China strategy is working well and will maintain our pace to bolster our position and extend our network in the world's largest beer market. We believe that the new brewery acquired by DaFuHao will enable HAPBC's market share to improve and contribute towards HAPBC's improving bottom line."
The plant in Wujiang will also serve as an alternative platform to grow REEB, currently brewed at the Shanghai brewery, beyond its home ground.

"Given the Wujiang brewery's proximity to Shanghai, it will make an ideal production base to produce REEB and other APB beer brands in the medium term as our Shanghai brewery reaches its maximum capacity," Roh said. "While it will render support to our existing operations, it will also extend presence of REEB beyond its home province of Shanghai."