Changes Brew in Asian Beer Sector
Published July 29, 2012
Dow Jones Newswires
The burgeoning beer industry in Asia is likely to undergo significant changes this week, when a decision is expected to be made regarding Heineken NV's US$4.1 billion bid for one of the region's prized assets.
Asia is the final frontier for the world's top brewers, and there is plenty of room to grow: Anheuser-Busch InBev NV of Belgium, U.K.-based SABMiller PLC, Dutch brewer Heineken and Carlsberg A/S of Denmark command only 23% of the industry's profits in the Asian-Pacific region but more than 60% of the sector's profits in every other region of the world, according to Bernstein Research.
"The one market where there could still be some consolidation is Asia," said Robert Jan Vos, a beer-industry analyst with ABN Amro in Amsterdam.
With sales lackluster in Europe and North America, major brewers are increasingly looking to expand throughout Asia, competing with local brands that have dominated the beer industry for decades. China and its 1.3 billion consumers have been the focus of most brewers' expansion. But Southeast Asia, and its rapidly growing economies, are also getting a close look amid a swelling middle class. Last year, Vietnam was Asia's highest-growth beer market by consumption.
Asia Pacific Breweries Ltd., Heineken's takeover target, is one of the fastest-growing and most profitable beer companies in Asia. Through popular beer brands like Tiger and Bintang, APB holds as much as 50% market share in Indonesia, Malaysia and Singapore, according to data provider Euromonitor, and has a strong presence in high-growth economies like Vietnam. It is one of themost attractive assets up for grabs in Asia. APB's operations span 30 breweries, 40 brands and 14 Asian countries.
"There are very few game-changing assets available" in Asia, says Harald Harvey, managing director in Asia for SABMiller.
Heineken's $40-a-share offer for the stake of its joint-venture partner, Fraser & Neave Ltd., in Asia Pacific Breweries was a defensive move to protect the Dutch brewer's turf, coming after companies linked to Thai tycoon Charoen Sirivadhanabhakdi bought a 22% stake in the Singaporean conglomerate and an 8.6% stake in APB. Meanwhile, Japan-based Kirin Holdings Co. -- which acquired a 15% stake in F&N in 2010 -- is considering a bid for the group's soft-drink and dairy assets.
F&N has postponed a decision on Heineken's offer until Friday.
If Heineken's bid fails, it limits the No. 3-ranked brewer's access to some of the fastest-growing beer markets in the world, where nearly two-thirds of the world's growth in beer consumption will come from over the next five years, according to Euromonitor. But if Heineken succeeds, the company's growing presence in Asia could make it harder for other major brewers to gain traction in key markets.
"If Heineken has full control, it will market its brands more aggressively and increase its share, making it harder for others to penetrate these markets," says Goh Han Peng, an analyst at DMG & Partners Securities in Singapore.
SABMiller, the world's second-largest brewer by volume after AB InBev, has one brewery in Vietnam and is looking to expand further. Carlsberg, the world's fourth-largest brewer, operates in six countries where APB has a footprint: China, Cambodia, Malaysia, Singapore, Sri Lanka and Vietnam.
Brewers are targeting the Asian-Pacific region after spending tens of billions of dollars in recent years snapping up assets in other parts of the world. SABMiller acquired Foster's of Australia last year.
In Asia, beer-industry profits are still playing catch-up with more established markets, dragged down by low unit revenue in China and India. The Asian-Pacific region accounted for 35% of global beer volume and 26% of revenue but only 17% of profits in 2010, Bernstein estimated.
Part of the problem is that companies in the region tend to be family controlled, or, in the case of China and Vietnam, government-controlled. Many already have signed joint ventures with big foreign brewers or sold them minority stakes, making it tougher for another major brewer to step in.
Of the Big Four, SABMiller derived the biggest share of its profits, 15%, from the Asian-Pacific region in 2010, after adjusting pro forma for the company's acquisition last year of Foster's, Bernstein estimated. Carlsberg, Heineken and AB InBev generated 12%, 6% and 1% of their profits in the region in 2010, respectively, according to Bernstein.
The shortage of major assets for sale is pushing up valuations in the beer industry. Heineken's offer values APB at 21 times earnings before interest, taxes, depreciation and amortization, according to UBS. This is higher than the 15.8 multiple that AB InBev is paying to buy out the half it doesn't already own in Grupo Modelo SAB of Mexico in a $20 billion deal announced last month, and far above the 12.6 average multiple paid in dozens of global beer deals since 1999, UBS says.
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Enviado: 22/1/2014 1:12
