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AB InBev plans to enter the Chinese market as well as other Asian countries. The company would, however, have to develop a strong enough market entry strategy, to stand a chance against local companies.
Anheuser-Busch InBev, currently the world’s largest brewing company by revenue, is trying to break big into many parts of Asia, with a considerable focus on China. The company which debuted its listing on the Hong Kong stock exchange about a week ago, is also interested in other markets such as South Korea, Vietnam and India as well. However, many who are familiar with the market in China, for example, are yet to see how the company could possibly break into a market that’s already mostly controlled with a strong influence, by local brands.
In China, the company has just a 16% market share based on data from Euromonitor but doesn’t even make any top lists in other parts of Southeast Asia, mostly because local brands are still very much in power. Speaking to CNBC, Hao Hong, Chief Strategist at the Bank of Communications International, has suggested that AB InBev might need a proper game plan, to make much of a difference in China.
“Local Chinese beer companies have very strong control on the local regional share market so it remains to be seen what Budweiser’s strategy (is) going forward from here,” noted he.
The international, much bigger beer brands, actually recognize the situation and recently formed up a strategy which involves acquiring these smaller companies, as their way of entering the market. AB InBev could consider this a good enough game plan, maybe their only worthy enough strategy. Back in 2017, for example, Thai Beverage became the largest beer company in Southeast Asia, after its $4.8 billion acquisition of Saigon Beer Alcohol Beverage Corp, Vietnam’s biggest beer company.
Currently, there is no larger beer market in the world than China. Already, 25% of the Chinese market share is in the hands of China Resources Beer, whose Snow beer is the world’s best-seller by sheer volume alone. Furthermore, Hong mentions that regardless of the huge Chinese beer market size, the traditional baijiu which is a distilled alcoholic drink made out of sorghum is still one of the most popular and might be hard to topple.
According to him, “the segment that is really doing well is the baijiu…so it remains to be seen how much further growth [AB InBev] can get from the Chinese market”.
Budweiser’s APAC listing debuted quite successfully last week. The IPO had been priced within the HK$27 – HK$30 range, but opened at a share price of 27.40 Hong Kong dollars, about 3.49 USD, higher than its lower pricing range. A few months ago, the company made an attempt for this IPO but later discontinued its plans, citing unfavourable factors and market conditions. The shares continued to perform impressively and eventually closed at HK$28.20, a 4.4% increase. By close the company had raised $5 billion from the sale and cemented a $47 billion market cap, making it the largest IPO in Hong Kong and the second largest in the world, for 2019. Till now, Uber Technologies Inc., holds the record for the largest IPO this year, when it raised $8.1 billion in May.