Heineken seals huge Chinese deal

Brewery group Heineken has acquired a 40% stake in China Resources Beer Holdings, China’s largest brewer and owner of the world’s largest beer brand, Snow Beer. The deal gives the Dutch company better access to the huge Chinese market.

Largest beer market

Heineken has bought a stake of around 2.7 billion euro in CR Beer, while in return the Chinese brewer buys 464 million euro of Heineken shares, representing an interest of 0.9%. Heineken will also transfer its existing Chinese operations to CR Beer. The deal makes Heineken the exclusive partner of CR Beer for international lager brands in China, the world’s largest beer market in terms of volume. The Dutch company will also sell Snow Beer, which is popular in China, to the rest of the world.

However, not everyone is enthusiastic about the deal: today China is a very competitive market characterized by low prices and margins. Operating margins are around 6% at CR Beer, while they amount to 15% at Heineken and are as high as 30% at world market leader AB InBev. In an opinion piece Bloomberg writes that Heineken is making the wrong choice by targeting volume rather than margins, and that this strategy will not close the gap with AB InBev.