Heineken takes on AB InBev in China with $3bn deal

Heineken NV is buying a $3.1bn stake in China’s top beer maker - the country’s biggest brewery deal - as it seeks to unseat rival Anheuser-Busch InBev in a fiercely competitive market.

The Dutch brewer will pay HK$24.4bn for a 40% stake in the parent of China Resources Beer Holdings Co, maker of the country’s best-selling Snow brand. 

The move gives Heineken a local foothold and distribution network in a market that’s embracing more exclusive drinks, but has proved challenging for foreign players from Asahi Group Holdings Ltd to Carlsberg A/S.

The world’s largest beer market, China has seen intense competition as drinkers with rising incomes look to switch to

more expensive and imported beverages. 

While the country is still dominated by affordable Chinese brews, costlier options are expected to expand the market by 21 percent to $106bn in just four years.

China Resources Beer’s success in creating a national brand in Snow is “a little bit like what Budweiser did in its glorious times in the US,” said Heineken CEO Jean-Francois van Boxmeer on a call with reporters.

The Dutch brewer is paying an implied price of HK$36.31 per share of the listed entity, a premium of 2.4% above its

closing price. 

China Resources Beer shares fell as much as 2.7% in Hong Kong, trimming their gain for the year to 24%, while Heineken rose as much as 1.7% in Amsterdam early.

The deal promises to give Heineken access to its Chinese partner’s extensive distribution to catch up to rivals.

“It’s impossible that Heineken can grab a significant larger market share in China by itself,” said Barney Wu, analyst at Guotai Junan Securities Co. “It has missed the chance as other international rivals such as AB InBev have become strong leaders in the market.”

Heineken’s operations in the country will be combined with those of China Resources Beer, and the Dutch brewer will license

its brand to the Chinese partner on a long-term basis, according to company statements. 

China Resources Beer’s parent company will acquire Heineken shares worth about €464m.

The Dutch company will make its global distribution channels available to China Resources’ brands including Snow.