Heineken forms agreement with China's biggest brewer
06 Aug 2018 --- Heineken N.V. has signed non-binding agreements with China Resources Enterprise, Limited (CRE) and China Resources Beer (Holdings) Co. Ltd. (CR Beer) to create a long-term strategic partnership for Mainland China, Hong Kong and Macau (together China). In the context of this partnership, Heineken will become CRE’s 40 percent minority partner in holding company CRH (Beer) Limited (CBL), which controls CR Beer, the undisputed market leader in the world's largest beer market, China.
As part of the strategic partnership, Heineken China’s current operations will be combined with CR Beer's operations and Heineken will license the Heineken brand in China to CR Beer on a long-term basis. Together, Heineken, CRE and CR Beer are ideally positioned to win in the rapidly growing premium beer segment in China.
Strategic rationale
China's beer market, the world's largest beer market by volume, is now the second largest premium beer market globally and is forecast to be the most significant contributor to premium volume growth in the next five years, driven by its rapidly growing middle class. Profitability of the Chinese beer market is expected to improve significantly, driven by premiumization, demand for international beer brands and cost optimization.
Heineken, CRE and CR Beer are convinced that their strategic partnership will drive growth for their businesses. The partnership will enable CRE to advance its premiumization strategy and it will help Heineken to expand the availability of the Heineken brand in China to leverage the brand’s potential fully.
Other brands
Under the agreement, Heineken will be CRE's exclusive partner for international premium lager beers in China. Heineken and CR Beer will investigate which other premium brands from Heineken’s portfolio can be licensed to CR Beer in China.
Heineken and CRE will also investigate if the Dutch brewer’s global presence and marketing capabilities can be leveraged to support and accelerate the international growth of CR Beer’s Snow brand and its other Chinese brands to become the Chinese beers of choice.
Commenting on the strategic partnership, Heineken Chairman of the Executive Board & CEO Jean-François van Boxmeer said: “We very much look forward to joining forces with CRE and CR Beer, the undisputed market leader in China. We believe that our strong Heineken brand and marketing capabilities, combined with CR Beer’s deep understanding of the local market, its scale and best-in-class distribution network will create a winning combination in the growing premium beer segment in China. We look forward to working together with CRE's leadership in our newly formed Strategic Advisory Council and supporting CR Beer in its ambition to internationalize.”
Chen Lang, Chairman of CRE, says: “We are very excited about this partnership and see immense potential in the combined strengths of CR Beer and Heineken. With Heineken's long heritage and world-class iconic brand portfolio, along with our leading presence and deep understanding of China, we believe we can win together in this new era of the Chinese beer market, in which the premium segment will become increasingly important. In Heineken we have found the perfect partner to achieve our ambitions in China and – as an international partner – to support us in growing our business outside China.”
The strategic partnership between Heineken, CRE and CR Beer and the Company Transactions are subject to, among others, due diligence and further negotiations and entering into definitive, binding contractual agreement(s). If parties reach a deal on the definite agreement(s), completion will be subject to customary and applicable approvals in Mainland China and Hong Kong.
