E-Malt.com News article: China: Three China Resources Enterprise top managers detained in anti-corruption campaign

The most aggressive “anti-corruption” campaign in China in recent years has scored three high-profile casualties at SABMiller’s joint venture partner in that country, Business Day reported on April 28.

Until he was detained last week, Song Lin was chairman of state-owned China Resources Holding, whose listed conglomerate China Resources Enterprise (CRE) has joint control with SABMiller of CR Snow, which is the largest beer group in China.

Song’s detention was followed in a few days by that of the chief executive of China Resources Capital and of an executive director of China Resources Land. A fourth executive, the chairman of China Resources Pharmaceuticals, is reported to be in the US with his family.

So far, CRE has not been directly affected by the campaign, but a source quoted in Hong Kong’s South China Morning Post remarked that the China Resources investigation had been widened.

A spokesman for SABMiller said the group would not comment, and referred to a statement issued by CRE that the investigation of Song would not cause a material adverse impact on the business or operations of CRE.

SABMiller said in a statement on April 28: "As things stand, this investigation has nothing to do with SABMiller or our CRSB joint venture."

"We have no reason to believe that the investigation will have any material adverse impact on our operations. The joint venture will continue to be managed and operated in the normal course of business," SABMiller said.

London analyst Trevor Stirling of Bernstein Research said that CR Snow had benefited from its strong relations with the Chinese government.

“At the very least, that strong advantage has disappeared,” said Bernstein. But he said that with the pace of deal-making slowing in the Chinese market that advantage was becoming less important to CR Snow and SABMiller.

CRE, 51.3% owned by China Resources, is listed in Hong Kong, and controls operations in retailing, food, beverages and textiles. It holds 51% of the CR Snow joint venture.

Beijing-based analysts — accustomed to high-profile executives at China’s massive state-owned entities being detained “for suspected violations of Communist Party discipline and the law” and being replaced by more politically fashionable individuals — seem taken aback by the vigour with which this campaign is being waged.

“This regularly happens to these big state-owned groups, for obvious reasons,” remarked one analyst, who said that this time the campaign looked more serious than usual.

One of SA Breweries major strategic advantages as it set its sights on domination of the global beer market was its ability to choose its partners well, and then work with them very effectively. In Africa, SAB teamed up with French-owned Castel Group in 2001 to form a powerful pan-African alliance that was able to carve up the continent’s market efficiently.

In 2002, its acquisition of control of US-based Miller Beer made the powerful Philip Morris Group — later renamed Altria — the biggest single shareholder in the newly created SABMiller.

The group’s expansion into Latin America would have been impossible without the tie-up with the Santo Domingo family, which enabled SABMiller to acquire Bavaria Brewery in exchange for a 15.1% stake in an enlarged SABMiller.

But long before any of these strategic alliances were established, way back in 1994, SAB had set up a joint venture with CRE.

CR Snow’s rapid growth was based on its acquisition of small local beer companies, which were frequently inefficient and unprofitable.

That it is now the biggest beer company in China is attributed to its access to the high-ranking politicians who largely determine the level of success enjoyed by a business.


30 April, 2014