Heineken is taking a 40 percent stake amounting to $3.1 billion in the CRH Beer, the parent company of China Resources Beer that makes the Snow Beer. The Dutch brewing company strikes the deal in a bid to tap China which is the world's biggest beer market. The Chinese have also demonstrated a growing demand for premium beer.
Under the agreement, Heineken will give China Resources Beer exclusive rights to use the Heineken brand in mainland China, Hong Kong, and Macau. The deal also includes the acquisition of China Resources Enterprise, the company that owns CRH Beer, of 0.9 percent shareholding amounting to $537 million.
The deal opens a favorable market opportunity for both the Snow and Heineken beer. For Snow beer, the deal will push the brand upmarket. For Heineken, the deal will drive it to become the No. 1 brand in China's high-end market - something that Heineken is unable to do if it tries to enter China's market on its own.
"It's impossible that Heineken can grab a significantly larger market share in China by itself," Barney Wu, an analyst at Guotai Junan Securities Co., told Bloomberg.
Heineken had, in fact, had a hard time competing with Anheuser-Busch InBev which is one of the most in-demand in China's premium market. In 2017, Heineken had a 0.5 percent share of the Chinese beer market while Anheuser-Busch InBev had 16.1 percent. CR Beer, meanwhile, had more than the quarter of the market.
Jean-Françoisvan Boxmeer, Heineken Chairman of the Executive Board & CEO, described China as "undisputed market leader."
"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," she said in a statement. She added that Heineken is more than willing to support Snow beer to go international.
Chen Lang, Chairman of CRE, described Heineken as a perfect partner that will help bring the brand outside China.
"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," Lang said.
China Resources Beer was reportedly advised by the Nomura Holdings Inc. and UBS Group AG. Heineken, on the other hand, was advised by JPMorgan Chase & Co., according to unnamed sources who spoke with Bloomberg.
