Kingway "sells wine" to negotiate the sale of beer assets

The most basic motivation for companies to generate mergers and acquisitions is to seek better and faster development of the company. In 2011, there were many successful cases of mergers and acquisitions in the food industry. For example, the success of Nestle's acquisition of Xu Fuji and the unfavorable merger of Yum! In order to seek better development of the company, Kingway Beer is interested in selling its core beer business. Other companies are striving to expand and expand their business. Why did Kingway embark on the “sale of wine” road and sell its core business?

Jinwei negotiated the sale of the beer business, and the oligopolistic situation intensified. The announcement issued by Kingway Beer stated that Kingway Brewery Group is considering the performance potential of the company's business and assets, and plans to start negotiations with a number of independent third parties mainly engaged in the brewing and distribution of beer products. The above-mentioned third parties are invited to submit proposals and offers of interest regarding the acquisition of certain beer business and assets of Kingway Brewery, and proposals for possible arrangements for the lease of Kingway Brewery production facilities.

As for the reason for the “planned sale of beer business,” Kingway Brew stated that although the Kingway Brewery Group resumed profitability in 2009 (after two consecutive years of losses), the Group’s business is still facing various major challenges, especially After the financial crisis in 2008, costs increased, new taxes and government fees and fierce competition in the market. In addition to the uncertain global economic environment, the group’s board of directors has set up a committee to conduct a strategic review of the group to assess the group’s operating environment and asset utilization potential, find ways to improve its profitability, and create new revenue sources, thus formulating the group’s Long-term business goals. The sale of beer business is part of the overall strategy review process.

According to statistics, at the beginning of 2004, Heineken, a foreign-funded beer giant, spent RMB 550 million to purchase a 21.37% stake in Kingway Brewery at a price of RMB 1.85 per share, becoming the second largest shareholder of Kingway Brewery. However, in March last year, Heineken intended to sell its stake in Kingway Brewing Co., Ltd., once Snow Beer became a strong competitor, but in the end, Guangdong Yuehai Holdings Co., Ltd., a controlling shareholder of Jinwei Brewery, exercised the right of preemption and acquired it for 1.08 billion yuan. Heineken held this part of the shares, eventually Guangdong Yuehai Holdings's shareholding ratio jumped from 52.45% to 73.82%.

In this regard, there are beer industry analysts, said Kingway beer this announcement does not clearly stated that it will sell the entire beer business, there is no clear number of buyers. However, Snow Beer has a great chance of becoming a marketer. After all, Snow Beer and Kingway Beer “passed” last year, and it is hopeful that this time. In addition, Zhujiang Beer and Tsingtao Beer currently have 33% and 25% market share respectively in Guangdong. Both may be hoping to win the Kingway beer business, thereby expanding the market share in the Guangdong region.

Why does Kingway Beer embark on the "sales road"?

For the Golden Way Group's intention to sell beer business, industry expert Xiao Zhuqing told the media that, in fact, brand aging, new product development lag is the real fatal problem of Kingway beer. At present, the entire beer industry is fiercely competitive, and the brand new products are being introduced into new markets at a rapid rate. However, for many years, Jinwei has been weak in either brand innovation or market innovation.

According to information on the official website of Kingway Beer, Kingway Beer was established in 1985 and formerly known as the Shenzhen Brewery. In 1989, Guangdong Group Holdings Shenzhen Beer Co., Ltd. In July 1990, the first batch of “Kingway Beer” was produced. In 1997, Guangdong Beer Group, with Kingway Beer as its core business, was listed on the market. After 27 years of development, Kingway Beer was once the overlord of the Pearl River Delta region. It has operations throughout the country and has invested in 8 factories in Shenzhen, Shantou, Xi’an and Chengdu. Jinwei Beer's 2011 interim report shows that in the first half of last year, Kingway Brewery's operating income increased by 13.9% to HK$890 million, while its net profit fell by 84.2% to only HK$1.456 million.

After undergoing rapid development, Kingway Beer has constantly encountered bottlenecks in its development. Some dealers stated that from 2005 to 2007, the Kingway beer business had been relatively smooth, but after the financial crisis in 2008, sales began to decline. In 2007, when Jinwei Beer built a factory in Chengdu, it had built an “Air Beer Garden in the Sky” project. However, after three years of operation, the result was not ideal, and it had no choice but to re-rent it.

Earlier, despite the fact that Guangdong had successfully blocked one snowflake purchase of shares in Kingway, the industry stated that due to lack of strength, Guangdong is unlikely to continue operating Kingway, and Jinwei is still unable to escape the fate of being re-sold.

Related Links: Kingway Beer Brand Profile The Kingway Beer Brand is owned by Kingway Brewing Group Co., Ltd. (formerly known as Guangdong Beer Group Co., Ltd.). Kingway Brewery Group Co., Ltd. is a Hong Kong-listed company (stock code 124) and is a subsidiary company of the Guangdong Provincial Government, which is the largest company in Hong Kong, Guangdong Holdings Group Co., Ltd.

Brewing beer with German traditional craftsmanship, Kingway Beer is innovative on the basis of maintaining a mellow, refreshing flavour, with a unique international taste of pure alcohol. Kingway beer products include over a dozen series such as Lao Jinwei, Jinwei Chunsheng, Jinwei Jinchun, Jinwei 2008, and Green Jinwei, which are mainly sold in Guangdong Province and sold to Tianjin, Sichuan, Xi’an, Guangxi, Fujian, and Hunan. More than 20 provinces, municipalities and autonomous regions such as Jiangxi, Jiangsu, Anhui, Shaanxi, and Heilongjiang are also sold in Hong Kong, Macau, Southeast Asia, Canada and Panama and other overseas markets.

Kingway Beer Group specializes in beer brewing and sales. It has seven wholly-owned modern beer production enterprises with an annual production capacity of 200,000 tons: Shenzhen Jinwei Beer Co., Ltd., Shenzhen Kingway Brewing Co., Ltd., and Kingway Beer (Shantou) Co., Ltd. The company, Jinwei Beer (Dongguan) Co., Ltd., Jinwei Beer (Tianjin) Co., Ltd., Kingway Beer (Xi'an) Co., Ltd., and Kingway Beer Group (Chengdu) Co., Ltd. are wholly-owned subsidiaries.

In January 2004, the internationally renowned company Heineken Group joined Kingway through Heineken Asia Pacific Brewing (China) Pte. Ltd., and held approximately 21% of the shares in Kingway Beer Group, becoming a strategic partner of Kingway Beer.

After the Jinwei Foshan Brewery was officially opened in January 2008, the Group has eight modern beer production bases with a total annual production capacity of 1.7 million tons, laying a good foundation for the Group's future development and profitability.

Kingway’s long-term development goal is to develop into a beer company with an annual production capacity of over 2.5 million tons and an annual sales volume of over 2 million tons from now until 2014.