E-Malt.com News article: Vietnam & Singapore: Asia Pacific Breweries invests in 5th brewery in Vietnam

After sealing one of its largest acquisitions with the recent purchase of the Foster's breweries in Central and South Vietnam in September 2006, Asia Pacific Breweries Limited (APB) is acquiring the assets of Quang Nam Brewery (QNB) as part of the ongoing expansion in one of its best performing markets, according to APB’s press release of January 11. This acquisition is executed via Vietnam Brewery Limited (VBL) in which APB owns a 60% stake.

To extend its presence and further tap on the beer market in Central Vietnam, VBL entered into an agreement with Quang Nam Electric Construction Company (QNEC) to establish a joint venture company, VBL (Quang Nam) Ltd (VBLQN). VBLQN will acquire the existing assets and business of QNB. It also intends to upgrade and expand the brewery's production capacity and will initially be involved in the production, marketing and distribution of "Larger" and "Larue" beer brands.

VBL will inject approximately US$11 million (approximately S$17 million) into VBLQN for its 80% stake in the latter while QNEC will inject approximately US$2.75 million in combination of cash and assets into VBLQN for the remaining 20% stake in VBLQN. QNEC is a state-owned enterprise in Vietnam under the direct management of Quang Nam People's Committee.

Located in Dien Ban district, QNB is the sole brewer in Quang Nam Province which is situated southwest of Da Nang Municipality. Equipped with an annual production capacity of 250,000 hectoliters, QNB currently brews mainstream brands - "Larger" beer and its three variants - "Larger Green", "Larger Red" and "Larger Metallic Red". Following the addition of QNB, APB will have five breweries in Vietnam with a combined total annual production capacity of 3.95 million hectoliters. The total beer market in Vietnam is estimated to be in excess of 15 million hectoliters a year.

Mr Koh Poh Tiong, Chief Executive Officer, APB, commented, "This latest investment is in line with our intra-market growth strategy in Vietnam. The addition of the brewery in Quang Nam fortifies our market presence in Central Vietnam, complementing our brewery in the Da Nang Municipality. Central Vietnam provides a strategic launch pad for the continuing enlargement of the mainstream brands of QNB and the Da Nang brewery, namely, the "Larger" and "Biere Larue" brands respectively. We will continue to enhance the brand equity of these mainstream brands and complement them with our popular premium brews - "Tiger" and "Heineken", to achieve a broader brand portfolio to better satisfy the varied tastes of the Vietnamese drinkers in the long run and extend further market coverage in that region."

Central Vietnam, in particular Quang Nam Province and Da Nang Municipality, has demonstrated significant market potential for the long-term development of mainstream brands which command 90% of the total beer market there.

Furthermore, QNB's close proximity to the Da Nang brewery, which is already operating at close to full capacity producing "Biere Larue", makes it an immediate additional source of production for "Biere Larue" - a popular mainstream brand which has seen rising demands in Central Vietnam.

"Since APB's first entry into the Vietnam beer market some 15 years ago, we have progressively expanded our market position and presence through a multi-pronged growth strategy of increasing production capacity, building greenfield breweries and acquiring stakes in strategic local breweries when opportunities arise." added Mr Koh. "With five breweries strategically located in the Southern, Central and Northern Vietnam, we are well positioned to serve the growing number of beer consumers nationally more efficiently and effectively; and, poised to achieve the next level of growth."

Indochina (i.e. Vietnam and Cambodia) has consistently been rated as one of the key growth engines and prime contributors to APB's group profit before interest, taxation and exceptional items (PBIT). For the past five years, APB's sales in Indochina achieved an average double-digit growth rate per annum and registered a growth of over 10% in FY 2005/06 as compared to the previous year. Revenue and PBIT contributions by the Indochina operations to APB for FY2005/06 stood at $529.4 million and $140.3 million respectively. With the inclusion of QNB, this brings APB's tally of breweries in Indochina to six (five in Vietnam, one in Cambodia, excluding one in Laos that will be operational in the second half of 2007); and, in the Asia Pacific region to 29 in 10 countries.


12 January, 2007