CARLSBERG A/S and Lanzhou Huanghe Enterprise Co will spend 500 million yuan (US$65.4 million) to set up a brewery in northwestern China, according to Lanzhou Huanghe officials yesterday.
The move will pave the way for the Denmark-based brewer to increase competitiveness against Anheuser-Busch Co Ltd, maker of Budweiser, and InBev NV, brewer of Stella Artois and Hoegarden, in the world's biggest beer market.
Annual beer consumption grew more than 15 percent last year, the third straight year of double digit growth.
Carlsberg is expected to invest 200 million to hold a 40 percent stake in the plant in Lanzhou, capital of Gansu Province, said Wei Fuxin, board secretary of Shenzhen-listed Lanzhou Huanghe.
Analysts said China's beer industry will continue to witness mergers and acquisitions over the next several years before eliminating smaller producers.
The new facility, which is waiting for government approval, will produce 500,000 tons of Huanghe-branded beers annually, lifting the firm's total production capacity to 800,000 tons after its completion.
"Carlsberg appears more like a strategic investor," said Wei, "We will benefit from getting a pool of advanced technology and we can establish our regional brand nationwide."
The plant will also be Carlsberg's fifth venture in China as it focuses on the western region since its return to the market in 2003.
The company has acquired stakes in four smaller brewers in the Xinjiang Uygur Autonomous Region, Tibet Autonomous Region and Yunnan Province.
Carlsberg's total investment in western cities has topped one billion yuan, accounting for 50 percent its total investment in China, according to 21st Business Herald.
Carlsberg has sought more cooperation with Chinese partners and bigger share holdings in such joint ventures for better profitability.
Lanzhou Huanghe has formed a dominant position in the northwest with a 75 percent market share in Gansu Province and 80 percent in Qinghai Province.