Carlsberg A/S, the world's fifth largest brewer, together with a Danish fund, will buy stakes in four breweries in China, further expanding its presence in the country's western regions.

Carlsberg and the Danish Industrialization Fund for Developing Countries (IFU) have agreed with Lanzhou Huanghe Enterprise Co to acquire 50 percent of the Lanzhou Huanghe Brewery, which includes three breweries in Northwest China's Gansu Province.

The three sides will jointly construct a new plant in Qinghai Province, with Carlsberg and IFU acquiring a 40 percent stake, the Valby, Denmark-based brewer said on its website.

Foreign beer makers have been scrambling to invest in China over the past two years, as the Europeans and the Americans have cut back on beer consumption, while great potential still remains in China.

China is the world's largest beer market by volume, making 257 million hectoliters last year, up 6.4 percent from 2002.

But the average person drinks just 10 litres of beer a year - compared with about 50 in Japan and 84 in the United States.

According to the agreement, the Danish brewer will invest a combined 115 million Danish krone (US$19 million) in the four breweries.

Huanghe will inject assets worth 105 million yuan (US$12.7 million) for half of the Gansu venture and 20 million yuan (US$2.4 million) in cash for 40 percent of the Qinghai plant, the Chinese company said in a statement published on Friday.

The four breweries are expected to sell a total of 1.6 million hectoliters of beer, and will have a combined capacity of 3 million hectoliters of beer a year once the Qinghai plant is completed, Carlsberg said.

The three Gansu breweries have a 36 percent market share in a province where annual per-capita beer consumption is forecast to rise to the country's average 20 litres in the next decade, from 8.5 litres.

"The acquisition of a total production capacity of approximately 3 million hectoliters of beer and a well-known brand fits well into Carlsberg's strategy to establish a strong position in western Chinese provinces," the company said.

Carlsberg bought the Huashi Brewery and Dali Beer Group in Yunnan Province in 2003 and bought a 50 percent stake in Lhasa Brewery this February.

However, industry analyst Qiao Baijun from Galaxy Securities said that it is hard to tell whether the deal could be called successful or not for Carlsberg.

"Lanzhou Huanghe is just a small private brewer and does not perform very well," he said.

Huanghe just turned to make a profit of 3.5 million yuan (US$420,000) last year from a loss of 15.6 million yuan (US$1.88 million) in 2002.

"In addition, the northwestern market, with limited growth potential, is full of strong competitors," he said.

(China Daily July 17, 2004)