Johannesburg — SABMILLER's announcement that its Chinese associate, China Resources Snow Breweries, had purchased an 85% stake in Quanzhou Qingyuan Brewery indicates that the brewer is continuing to extend its reach in the country through acquisitions.

CE Graham Mackay said at the release of SABMiller's interim results to September last year that the group would continue to make acquisitions in China.

He said the global brewing industry had continued to consolidate, and the smaller targets for acquisition were in China and Russia.

SABMiller has been investing in China since 1994 with China Resources Enterprises.

China Resources Enterprises is the second-largest brewer in China. It had a 2-million hectolitre market in the 1980s, which has now increased to a 235-million hectolitre market.

Mitch Ramsay, communications manager for Africa and Asia, says despite a slowdown in the rampant consolidation that has characterised the Chinese beer market in the past few years, it is still somewhat fragmented.

China had about 800 breweries before consolidation began, many owned by local governments and municipalities in an effort to create employment, rather than being profit driven, Ramsay says.

He says if brewers want to extend their product reach, the acquisition of another brewery in a different region is often necessary.

"China is characterised by local brands. There is no such thing as a national brand," he said.

The recently purchased Quanzhou Qingyuan Brewery is SABMiller's first attempt, through its China Resources Snow associate, to extend its reach into the southeast province of Fujian, which has a population of 7-million people.

In 2004 Fujian Province recorded total beer sales of 13,5-million hectolitres and annual consumption per capita of 39l, exceeding the national average of 23l.

SABMiller said the consideration for the acquisition of Qingyuan would be based on its appraised net asset value, which is expected to be about $10,5m. The brewery's annual production capacity is 1,2-million hectolitres. SABMiller said the capacity could be increased to 2,8-million hectolitres after an upgrade for an additional investment of 65-million yuan.

Qingyuan Brewery's main product line is its "Qingyuan" beer, distributed for sale mainly in the Quanzhou area.

Strong growth in China for the six months to September last year helped contribute to an overall 12% organic beer volume increase on a comparable basis for SABMiller in Africa and Asia.

Premium label Snow was launched as a national brand in China in the past year and had generated organic volume growth of 51%.

This brand now has a 13% share of the world's largest beer market.

Its closest competitor, Tsingtao beer, produced by a brewer of the same name, has about 15% to 16% market share, Ramsay says.

SABMiller's other main brands in China include Xibao, Zero Clock, Harbin Huadan, Yate, He Shi, Snowflake (Snow) and Largo.