Blog: Heineken fighting to break China
Olly Wehring | 6 September 2006
Strong performances in most of the world’s emerging beer markets led to a set of healthy first-half results at Heineken today (6 September).
Nevertheless, it was interesting to note the comments of Heineken CEO Jean-Francois van Boxmeer on China, a key emerging beer market but also the world’s largest by volume.
Heineken, he said, was close to breaking even in China after over a decade in the country but he insisted it remained a “very tough market”. Multinational brewers have faced difficulties in distributing beer across the country while the very low price of beer makes it a challenge to generate rising profits.
“If you see the selling prices there, and I’m talking about your bread and butter local Chinese brands, then pricing is very low at around EUR22 (US$28.13) a hectolitre. It’s extremely difficult to earn a lot of money,” van Boxmeer said.
“It’s a very tough market structurally. We don’t have a pessimistic view on China but we don’t see going forward anything that will make that situation structurally change. There is chronic over-capacity in the market of around 30%.”
Nevertheless, SABMiller’s Chinese venture said today that its earnings during the first-half had risen 26% to HK$75m (US9.6m) as sales of its national brand, Snow, soared 85%. The venture seems to be succeeding in pushing Snow as a national brand and is fighting it out with Tsingtao for top spot in China.
Heineken, alongside Asian partner Fraser & Neave, has spent much of this year expanding its presence on the continent outside of China, with deals to strengthen their foothold in India, Laos and Vietnam.
It’s vital for Heineken that it doesn’t take its eye of the ball in China and allow its fierce global rivals to grow too strongly in such a key market for future growth in the beer industry.
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