Take-overs by Chinese breweries expected
March 13, 2017 Category Mergers & Acquisitions, Weekly
Chinese brewers are at the dawn of a golden age of multi-year profit growth, according to market analysts. The top five brand names in China by market share are China Resources Beer at 24.6%, Tsingtao Brewery at 17.9%, Budweiser at 15.7%, Yanjing Brewery at 10% and Carlsberg Group at 5%, according to Euromonitor. Large brewers in China are expected to continue with their growth by acquisition, with companies such as China Resources Beer likely to seek out acquisition targets in domestic and international markets. “We believe that large-scale mergers and acquisitions are likely to materialize in the next three years, which also offers investment opportunities,” said Charlie Chen, Analyst at Deutsche Bank. “While we suggest that investors take long positions on high-quality brewers, investors could also trade around M&A news to take short-term returns. Consolidation in the Chinese beer market seems unavoidable, and we see a high chance that the current big five may eventually become a big three,” Chen said. Among favored companies in the sector, Chen highlighted China Resources Beer because of the company’s management, which he labelled “superior”. He also highlighted the company’s ability to raise beer prices and the ability to uncover future cost savings from operations. Deutsche Bank forecasts beer consumption in China by volume will expand 1.9% annually from 2016 through 2020.
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