Suntory, Asahi Maneuver for Alliance with Tsingtao

Suntory Holdings Ltd., Japan’s top beverage maker, is in tieup talks with China’s Tsingtao Brewery as a way to expand sales in China, said inside sources Tuesday. The only hitch is that Tsingtao is 20% owned by Asahi, Suntory’s Japanese rival.

Suntory is in talks to with Tsingtao to produce beer jointly in Shanghai and to share their distribution and sales networks. Both companies currently distribute beverage products in Shanghai and neighboring Jiangsu Province. Suntory already enjoys a 30% share of Shanghai’s beer market, making it the industry leader there.

Suntory also hopes the tieup will give it access to Tsingtao’s sales network to help grow its business throughout China.

The Asahi Group, which already owns about 20% of Tsingtao’s shares, is negotiating to use Tsingtao’s distribution network across China. So far Suntory has not received Asahi’s response to its plans to form an alliance with Tsingtao.

Tsingtao is China’s second largest brewery. It was founded in 1903 by Hong Kong-based Anglo-German Brewery Co. In 1916 it fell under the jurisdiction of the Japanese military administrator who liquidated its shareholdings and sold it to Japan’s Dai-Nippon Brewery (which was later split into Asahi and Sapporo Breweries).

After Japan’s surrender in 1945 Tsingtao fell into the hands of the Nationalist government, then in 1949 became a state-owned enterprise of the People’s Republic of China. It was privatized in 1993, with Anheuser-Busch taking a 27% stake. About 20% of that was sold to Asahi in 2009, making it the company’s 2nd largest shareholder. Later that year Anheuser-Busch InBev sold its remaining 7% to Chinese tycoon Chen Fashu.