SABMiller's Chief Executive Graham Mackay.

Amid its current hostile takeover bid for Australian brewer, Foster's, SABMiller (SAB) on Thursday announced that China Resources Snow Breweries, or CR Snow, its joint venture with China Resources Enterprise has entered into an agreement with China Kweichow Moutai Distillery to jointly invest in Guizhou Moutai Beer.

The new partnership would translate into a joint venture called China Resources Snow Breweries (Junyi).

As part of the transaction, CR Snow would invest RMB270 million (approximately US$42 million) in return for a 70% equity stake in the joint venture.

With an annual production capacity of one million hectolitres, Moutai Beer was a popular brand with a strong competitive position in Guizhou Province. CR Snow already has a leading position in Guizhou Province, with a market share of approximately 50% and sales volume of over 1.8 million hectolitres in 2010.

Since its entry into the Guizhou market in 2007, CR Snow's sales volumes had grown at 40% per year, SABMiller said.

Ari Mervis, Chairman of CR Snow and managing director of SABMiller Asia, said: “CR Snow's partnership with Moutai further strengthens our position in this important province and further supports in building on our position as the leading brewer in the China beer market.”

Chen Lang, Chief Executive Officer of China Resources Enterprise, said: “The brewing industry in Guizhou Province has been growing rapidly in recent years, with the overall sales volume in 2010 increasing by 10% year on year to 3.9 million hectoliters. Moutai Beer has a sound track record with potential for explosive growth. Leveraging the joint venture's brand equity in Guizhou Province, CR Snow will immediately widen its market network, thereby generating more opportunities for Snow beer's further development. We believe that such deep collaboration between the two leading parties will not only facilitate our strategic plans for our beer business in Guizhou Province, but will also provide a more established platform for continued sustainable growth.”

SABMiller had brewing interests and distribution agreements across 75 countries in six continents. The group's portfolio included global brands such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch, as well as leading local brands such as Aguila, Castle, Miller Lite, Snow and Tyskie.

In the year ended March 31, the group reported US$4,491 million adjusted pre-tax profit and group revenue of US$28,311 million.

China Resources Snow Breweries was established in 1993 and became a joint venture with SABMiller in 1994. Its shareholders included China Resources Enterprise and SABMiller Asia, a subsidiary of SABMiller.

China Resources Enterprise had a 51% interest in China Resources Snow Breweries, while SABMiller Asia held the remaining 49% interest.

In 2010, it operated over 70 breweries in China with a total beer sales volume of about 92 million hectolitres. It is the largest beer company in China by sales volume. - I-Net Bridge