Lion Nathan quits China

Australia’s sec­ond-biggest brew­er was chased out of the Chi­nese mar­ket by com­pe­ti­tion for mar­ket share and the dif­fi­cul­ty of man­ag­ing a dis­tri­b­u­tion-based busi­ness in Chi­na Accord­ing to “The Age”:http://www.theage.com.au/articles/2004/07/29/1091080377632.html?from=storylhs Lion Nathan’s three brew­eries in the Yangtze Riv­er delta increased sales vol­umes by an astound­ing 63 per cent in the six months to March 31 but the busi­ness remained unprof­itable. In the same six months, its oper­at­ing loss in Chi­na ran to $7 mil­lion after a sim­i­lar loss in the pre­vi­ous half year. bq. It struck intense com­pe­ti­tion, how­ev­er, from state-owned brew­eries sell­ing cheap beer, while China’s splin­tered retail­ing net­works and poor roads can­celled out the ben­e­fits of hav­ing a big effi­cient brew­ery. Lion Nathan made oper­at­ing loss­es of more than $200 mil­lion in sev­en years and cut the book val­ue of its invest­ment to about $130 mil­lion. (“Stuff (NZ)”:http://www.stuff.co.nz/stuff/0,2106,3035046a13,00.html) “Bloomberg”:http://quote.bloomberg.com/apps/news?pid=10000081&sid=aZsXtwPdi1kw reports that for­eign brew­ers in Chi­na are buy­ing mar­ket share. They face about 500 local com­peti­tors in a mar­ket that is divid­ed by regions, cul­tures, tastes and incomes. The 10 biggest brew­ers con­trolled 53 per­cent of the mar­ket last year, com­pared with 22 per­cent in 1996. But the poten­tial rewards are big, too. Beer sales rose 6.3 per­cent by vol­ume in 2002, three to four times the growth in sales in Europe or the USA. Accord­ing to a Lion Nathan “press release”:http://www.lion-nathan.com.au/news/corporate/lion+nathan+sells+chinese+beer+business+for+a$219+million.htm bq. Lion Nathan has entered into an uncon­di­tion­al agree­ment to sell its Chi­nese beer busi­ness (Lion Nathan Chi­na) to Chi­na Resources Brew­eries (CRB), a joint ven­ture owned by SAB­Miller and Chi­na Resources Enter­pris­es, for US$154 mil­lion (A$219 mil­lion), fol­low­ing the con­clu­sion of a com­pet­i­tive sale process.¬† CRB is the sec­ond largest brew­er in Chi­na and it oper­ates over 30 brew­eries in the Chi­nese main­land.¬†

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