AB-InBev Eyes Second Place in China’s Beer Market

On April 8， AB-InBev offi- cially took over Ginsber， one of the leading beer brands in Northeast China， four days after approval of Chinas Ministry of Commerce for AB-InBev to acquire the entire stakes of Ginsber.

It is said that AB-InBev spent 3.8 billion yuan finishing this deal.

However， the number was described to be inaccurate by Li Quan， vice general manager of Ginsber. “The said value in the Internet is not true. We have the confidential agreement and the real price would not come out without the official announcement.”

Before this deal， King Star Beer， another well-established beer brand in China， was bought by Carlsberg， which was another example for the concentration of the beer resources of China into the giant brands. A former senior director of AB-InBev said that AB-InBev would surpass Chinese local giant Tsingtao Beer and took the second place in the Chinese beer market during the new round of integration of beer industry.

Acquiring Ginsber

The news about AB-InBevs acquisition of Ginsber came out last September， but was never given official response from both parties.

Ginsber was established in 1985 in Siping City， Jilin Province. Its annual output reaches 800 thousand kiloliters and the brands fixed assets totals over 1.2 billion yuan. It is also one of the biggest single-body beer factories in China. With a sales network centering around Jilin， it extends its products to Liaoning， Heilongjiang and Inner Mongolia. It also has certain influence in North China and Northwest China.

Du Lijun， an expert serving China Association of Brewery， said that more than 500 thousand tons of Ginsber beer can be sold annually. In Jilin， it is a force equal to China Resources Snow Beer， the largest beer brand in China.

According to Li Quan， Ginsber took the largest market in cities of Siping and Liaoyuan. In Jilin， Ginsbers biggest rival is none other Snow Beer. Both of then have their own advantages in different cities of this province.

Now， it has become a part of AB-InBev. With that deal， AB-InBev became the largest beer brand in Jilin. In addition， it beat China Resource in Heilongjiang in 2012. The beer industry in Northeast China has already been changed as AB-InBev has already taken the champion in this area.

It was not the first time that Ginsber got related to a foreign company. In July 1995， it worked with British company Bath （then a Fortune 500 company） to found Bath Ginsber Beer Co.， Ltd with the registered capital of 625 million yuan and 45% shares belonging to the Chinese company. However， due to the cultural difference， the two partners broke up in 2000 after Ginsber bought back all the shares of the British company and ran as an independent brand.endprint

Zhao Yu， an expert having spent a lot of time studying the beer market of Northeast China， said that the strategic meaning of AB-InBevs acquisition of Ginsber was also shown in the geographical location. Ginsber is located in Siping， a city that sits at the border between Jipin and Heilongjiang. With such a “stronghold”， AB-InBev could easily keep China Resource， or other brands that are stronger in Liaoning， from moving northward and posing a threat against Heilongjiang， where AB-InBevs Harbin Beer got an upper hand.

Actually， acquiring Ginsber is also an embodiment of AB-InBevs strategies in China. In its financial report of third quarter 2013， AB-InBev disclosed the plan of enhancing its position in China. Five local beer brands in different regions are the targets of its acquisition plans. For this， AB-InBev increased its budget by US$1.05 billion. If the five targets are acquired， AB-InBevs annuall output in China could increase by 1.9 million kiloliters. Undoubtedly， Ginsber is one of the five targets.

To Surpass Tsingtao Beer？

Even though the beer market in China slowed down its growth in these years， it is still one of the fastest growing markets in the world. Thus it has become a place with the furious contention of international beer giants of the world.

When AB-InBev is close to finishing the deal of acquiring AB-InBev， another international giant Carlsberg is on the move of acquiring King Star Beer. This deal has been on the negotiation table for years， but failed to be reached because of the huge disagreement in the shareholding structure.

An insider of the beer industry said that the negotiation was once close to deal， but Zhang Tieshan， board chairman of King Star Beer regretted the deal， saying that the price is too low. Now the two parties are still talking with each other.

A governmental official of Henan， where King Star Beer is headquartered， said that the annual output and sales of Kning Star Beer could reach 500 thousand tons per year， but its products mostly target the low- and medium-end markets. So its price is lower than Ginsber.

When the two international beer giants are busy collecting local brands into their own camps， they are quickly narrowing the gap between them and domestic leaders in the beer market.

According to the data from China Association of Brewery， the total output of beer in China amounted to 50.615 million tons. Of all the brands， China Resources sold 11.722 million tons， taking 23.15% of the market. Tsingtao Beers sales reached 8.7 million tons， accounting for 17.19% of the market. ABInBev ranked the third with the sales of 6.5523 million tons or the 14.1% market share.endprint

In addition to the output 500 thousand tons of Ginsber， AB-InBev is not far from Tsingtao Beer. At this moment， when the mergers and acquisitions became a common thing in China， AB-InBev is definitely going to acquire more local brands in the future.

Among the top three beer brands in China， China Resources is hard to be surpassed and the competition is mainly staged between Tsingtao Beer and ABInBev. Every beer expert in China is now focused on whether AB-InBev can surmount Tsingtao Beer.

Du Lujun said that AB-InBev is behind Tsingtao Beer in terms of sales， but the situation might not be the same in the future.

A former director of AB-InBev in China said that it was only a matter of time for AB-InBev to surpass Tsingtao Beer. The fast expansion of this U.S.-Belgium company in China is driven by the mergers and acquisitions. The Chinese market is so huge that it provides unlimited opportunities for these deals， which need to be driven by the capital. In the capital strength， AB-InBev is much stronger than Tsingtao Beer.

According to AB-InBevs annual financial report， the company is the largest beer company in the U.S.， Canada， Mexico， Brazil and Argentina.endprint