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.¬†
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher