China Resources Jumps as AB InBev Deal Seen Boosting Beer Sales

  • ABI may buy SABMiller, China Resources' beer-making partner
  • Deal could face antitrust scrutiny from Chinese regulator

China Resources Enterprise Ltd. rose to its highest in three months as Anheuser-Busch InBev NV’s planned offer to buy the Hong Kong-based beermaker’s partner SABMiller Plc could help boost sales and yield cost savings in China thanks to a boosted combined market share.

China Resources rose as much as 5.9 percent to HK$26 in Hong Kong trading, the highest intraday level since June 19, while the Hang Seng Index climbed 1 percent. SABMiller has a 49 percent stake in a joint venture with China Resources to produce the country’s best-selling Snow Beer.

If AB InBev succeeds in buying SABMiller and manages to retain the Snow Beer partnership, "this could be a game changer for China’s beer industry, as the two players would control 42 percent market share, yielding significant sales and cost synergies,” Goldman Sachs Group Inc. analyst Lisa Deng wrote in a note.

Snow Beer had a 21 percent share of China’s beer market by volume last year, followed by Tsingtao Brewery Co. and Beijing Yanjing Brewery Co., according to data from market researcher Euromonitor International. AB InBev’s beer brands -- Harbin, Budweiser and Sedrin -- were ranked fourth, sixth and seventh in China, the data showed.

’Big Bang’

China’s beer market could be on the cusp of a "Big Bang" as potential further consolidation among the top five beer-makers leads to more "rational competition" that would drive expansion in the industry’s profit pool, Deng wrote. The volume of beer sold in China grew 18 percent in the five years to 2014, according to Euromonitor.

Tsingtao Brewery surged as much as 16 percent to HK$39.8 in Hong Kong, the biggest intraday gain since October 2008, while Yanjing Brewery rose as much as 4 percent to 7.72 yuan in Shenzhen trading.

Antitrust officials at the Chinese Ministry of Commerce will give the AB InBev-SABMiller deal close scrutiny because the two companies have significant businesses there directly and through joint ventures, said David Anderson, a lawyer at Berwin Leighton Paisner in Brussels.