Anheuser-Busch moves south but without its partner Tsingtao

Anheuser-Busch Cos. Inc. said it will build a brewery in Foshan, southern China, to help reach its goal of doubling the distribution of Budweiser in China over the next five years.

The Foshan brewery, in Guangdong province, is scheduled for completion in late 2008 at a cost of USD 63 million. It will have a production capacity of 2.6 million hl, says Anheuser-Busch, with a potential for expansion.

Guangdong province on the southern coast of China is one of the largest and wealthiest provincial beer markets in China with an estimated volume of 20 million hl beer per year. Guangdong is home to 80 million people plus about 30 million migrants, who reside in Guangdong for at least six months every year. The massive influx of migrants from other provinces, dubbed the "floating population", is due to Guangdong’s booming economy. It has the highest manufacturing density, often referred to as the world’s manufacturing base.

Anheuser-Busch may have chosen Foshan for obvious reasons. But Guangdong is far from an easy market. All the major international brewers are already well-established there: SABMiller, InBev, Heineken, Carlsberg. Not to forget Tsingtao brewery, which entered the lucrative Guangdong market as early as 1999, and has opened breweries in Shenzhen, Zhuhai and Foshan. Apparently, expansion at the Tsingtao brewery site in Foshan was not an option for Anheuser-Busch, although it owns a 27 percent stake in Tsingtao.

Anheuser-Busch said that it wants to push its Budweiser and Harbin beer brands. Either the Tsingtao people in Guangdong opposed such a notion or Anheuser-Busch does not think that it will gain majority control of Tsingtao any time soon. Whatever the reason, Anheuser-Busch decided to play it safe and set up its own shop.

Put differently, Anheuser-Busch has thus made it clear that its strategy in China is two-thronged: that it does not place all its bets on Tsingtao but also pursues its own interests with Harbin.