Tsingtao to lift beer sales by 10pc, shut two brewers
Gladys Tang
February 4, 2005
Tsingtao Brewery, China's biggest brewer, aims to sell 10 percent more beer and close two loss-making brewers in 2005, analysts said.
The company, which has a market share of 13 percent in China, increased its sales volume by 13 percent to 3.7 million tonnes of beer in 2004 but expects slower growth this year.
``We aim at lifting sales by 10 percent this year,'' Zhang Ruixiang, assistant to Tsingtao Brewery's corporate secretary, said on Thursday.
Zhang said the company closed two unprofitable brewers last year, each with annual production capacity of around 30,000 tonnes.
CLSA estimates the closure will incur asset impairment losses of around 80 million yuan (HK$75.41 million) for the first nine months of 2004, while Macquarie Research quoted Tsingtao's management as saying that the brewer plans to shut two more inefficient brewers this year. Zhang, however, said the exact amount of impairment loss will be ``far less than 80 million yuan.''
``We haven't completed the evaluation but the figure will be released soon,'' he said. ``It has been our plan to close the loss-making brewers but we don't have a timetable.''
Last month, Tsingtao Brewery launched low-priced Tsingtao brand beer to target the Beijing low-end market aggressively. The beer is being produced by brewers acquired by Tsingtao in 2000.
The management earlier revealed that it targets to achieve 30-50 percent market share in Beijing in 2008, from less than 5 percent currently. The capital city's dominant player, Yanjing Brewery, holds about 80 percent market share. However, CLSA said Tsingtao will find it hard to be profitable in Beijing as ``new entrants enter the fray lured by rosy growth prospects on the 2008 Olympics.''
In contrast to Tsingtao Brewery's planned move to the low-end market in Beijing, its listed peer Kingway Brewery plans to sell more medium and high-end beer with profit margins of 50-60 percent.
Kingway's chairman, Ye Xuquan, has said he expects contribution from these beers to increase to 55 percent this year, from 50 per cent in 2004.
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