August 3 -- Tsingtao Brewery (600600, 0168.HK) failed in its bid to take over Hangzhou Xihu Beer Asahi, as China Resources Breweries yesterday completed the acquisition of the Hangzhou-based brewer, paying 270 million yuan to acquire the remaining 55 percent stake it does not own, reports China Business News.

The parent of Xihu Beer, Asahi Breweries Itochu (Holdings), had in November last year, entrusted the management of its 55 percent stake in Xihu Beer to Tsingtao Brewery.

Following the entrustment, China Resources Breweries purchased a 45 percent stake in Xihu Beer and 16 related brands for 268 million yuan at end November last year.

In addition to gaining full control of Xihu Beer, China Resources Breweries acquired the entire equity of Huzhou Beer after purchasing a 25 percent stake in the brewer for 30 million yuan. The remaining shareholding of Huzhou Beer is held by Xihu Beer.

The acquisition will bring the total number of production bases owned by China Resources Breweries in Zhejiang province to eight.

Apart from this failure, the world's leading brewer AB Inbev had triumphed in the bidding war with Tsingtao Brewery for Henan Weixue Beer.

According to an analyst with Haitong Securities (600837), Zhao Yong, focusing on the mid to low-end beer market is crucial in the battle for market share as the room for growth in the mid to high-end beer market is limited. However, Tsingtao Brewery had been focusing its resources in the mid to high-end market.

Sales of Tsingtao Brewery’s major brands accounted for 60 percent of its total sales in the first quarter of 2011, up from 39 percent in 2008.

One of the main reasons for Tsingtao Brewery's lower than expected growth in its market share in recent years was that the sales growth of its three low-end brands were not up to expectations, added an industry analyst.

According to the company secretary of Tsingtao Brewery, Zhang Ruixiang, the company plans to increase annual sales to 10 million tons in three years, and had just obtained 200,000 tons of beer production capacities in Hangzhou, Zhejiang province, for about 100 million yuan.

Zhang said Tsingtao Brewery has seven billion yuan of cash on hand, and will not give up on its efforts to grow through acquisitions.

The cost of acquisitions had increased as there are not many brewers which meet its criteria of having 100,000 tons of production capacity, said Zhang.

Shares of Tsingtao Brewery closed at 36.91 yuan today, up 0.14 percent.