• Japanese brewer seeks contract brewing tie-ups
  • To "leverage" Tsingtao's sales network
  • Sees China as major overseas opportunity
China is the promised land for Asahi Breweries

China is the promised land for Asahi Breweries

Asahi Breweries is keen to expand its partnerhsip with Tsingtao Brewery as the Japanese beer giant looks to China to help it reduce reliance on a stagnant domestic market.

Asahi Breweries told just-drinks today (19 August) that it is seeking more tie-ups with Tsingtao Brewery in order to profit from the Chinese brewer's sales and distribution network. Asahi owns a 20% stake in Tsingtao, handing it a solid footing in what is already the world's largest beer market by volume.

Asahi said that it could not confirm whether Tsingtao Brewery will definitely acquire a 44% stake in Hangzhou Xihu Beer Asahi Co in China, as reported by local media this week. Tsingtao would pay CNY2bn (US$294m) for the share in the Asahi-controlled brewer, The Economic Observer reported.

But, Asahi confirmed that it is seeking to "leverage" a strategic alliance between itself and Tsingtao. "We will push ahead with outsourcing the production of Tsingtao Beer to breweries in which [Asahi] has previously invested, looking to reconfigure the profit base for our entire beer business in China with greater speed," a spokesperson for the Japanese brewer said.

Ties betwwen Asahi and Tsingtao were strengthened this week when Tsingtao reported that it had signed a contract brewing deal with Hangzhou Xihu Beer Asahi Co. Tsingtao will pay RMB14m (US$2m) this year for the firm to brew its beers. 

China's beer market expanded by 5% in the first half of 2010, emphasising that the country retains strong growth potential when compared to shrinking mature markets from Tokyo to New York to London. Tsingtao volume sales only rose by 3% for the six-month period, although Tsingtao brand volumes jumped by 15% on the same period of 2009.

Asahi told just-drinks that it sees China, with an anticipated population of 1.46bn by 2030, as a major overseas growth opportunity. All Japanese brewers have long-term strategies to expand in the South East Asia region.

In 2008, China's beer consumption was six times as high as in 1990 and per capita consumption rose approximately five times - to around 30 litres - over the same period. China is already twice as big as the world's second largest beer market, the US, and yet has a per capita consumption that is less than half that of most developed beer markets.

"The pace of growth of the country's economy is also gaining speed, with China looking increasingly likely to overtake Japan with the world's second largest gross domestic product (GDP) in 2010," said Asahi. "Alongside this growth, technological innovation in manufacturing, logistics and a wide range of other areas, coupled with elements such as modernisation of distribution channels and the market entry of new domestic and foreign companies, is fanning expansion in China's consumer market."

Asahi said earlier this month that falling demand for alcoholic drinks in Japan has caused a dip in half-year sales, with profits down by almost a third.