Anheuser-Busch (AB) Harbin Brewery Group, the fourth largest brewery in China was founded in 1900 and was acquired by Anheuser-Busch (AB) at $720 million in 2004. Known for its Hapi beer, the brewery holds 4% market share in China and is also the leading brewery in Northeast China. The external environmental analysis has indicated the overall attractiveness of the beer industry in China due to tremendous growth potential. However, there are also threats for AB Harbin which will be explained in this report. AB Harbin also reflected a healthy situation from the internal analysis.
There are 3 main problems for AB Harbin which includes the intense competition, increasing expectation and demand from customers and the poor distribution networks in China. The group has proposed acquisition as the main solution to these problems faced. The acquisition will be funded either by internal loans from the existing breweries under AB or through issuing of new shares.
It is important for Harbin to acquire as many breweries as possible since its major competitor is SABMiller. The rational being that if Harbin does not acquire these breweries, SABMiller will, resulting AB Harbin to have a smaller market share. AB Harbin can begin to produce its beer from that location allowing an easier entrance for itself. AB already owns a stake hold in Tsingtao; the next logical move would be to try and acquire 51% of Tsingtao, reducing their competition and allowing them to widen their product category and market share. Acquiring Tsingtao would be challenging and costly, but the overall benefit reaped would surpass the cost. With the current economic crisis looming over Asia, the overall value of Tsingtao would have weakened, along with its share price, thus making it a viable time for AB Harbin to takeover.
Harbin Brewery Group, the fourth largest brewery in China was founded in 1900 and was acquired by Anheuser-Busch (AB) at $720 million in 2004. Known for its Hapi beer, the brewery holds 4% market share in China and is also the leading brewery in Northeast China. AB Harbin brewery has 13 breweries in China which are located at Daqing, Hailun, Harbin, and other territories.
In order to satisfy the different customer segments, AB Harbin Brewery has 11 different brand names to cater to the 3 main segments which are popular, premium and super-premier beer segments.
AB Harbin Brewery has also been recognized by many awards such as “China Top Brand Award” in 2002 and 2005, “Outstanding Company for good faith” in 2007 and “Top Brand Award” in 2007 as well.
Nationally, the largest brewer is Tsingtao Brewery, with a 13.8% market share, followed by China Resources Breweries, Yanjing Brewery, and Harbin Brewery with shares of 11.5%, 11.2%, and 4.6% respectively.
2. Current situation –Performance assessment
The critic assessment for the industry analysis presentation is attached in the appendix. The current situation of AB Harbin is as following.
As the largest-volume growing beer market in the world, China is one of the most important markets for AB outside the United States. AB has invested in China through its owned and operated Budweiser Wuhan International Brewery, a 27 percent equity interest in Tsingtao and a 100 percent ownership of Harbin Brewery.
Budweiser continues to strive to be the best selling beer in China’s super-premier market. In 2007, AB has plans to build its 1st international Greenfield brewery outside USA in Foshan, China which will be due for completion in late 2008. Due to the huge beer market potential in China, AB has also announced plans to relocate and build a bigger Tangshan brewery which will be available in late 2009.
1. External Analysis –Pest Analysis
In China, it is always common to see joint ventures between foreign firms and local companies as there is still much control in China. The bureaucracy plays an important role in...