Byravee Iyer
May 14, 2013

Heineken’s entry in Myanmar sparks off beer war

ASIA-PACIFIC - Following the recent flurry of activity by cola companies, Heineken has re-entered Myanmar through a joint venture with privately-owned Alliance Brewery Company (ABC) to brew and sell its beers in the country.

Heineken has entered the market through a joint venture agreement
Heineken has entered the market through a joint venture agreement

Under the terms of the agreement, Heineken through its subsidiary Asia Pacific Breweries Limited, will have a controlling 57 per cent stake in the new company and will be responsible for its management, brewing and technical expertise. As part of this, the new company, APB Alliance Brewery Company Limited, will build a new brewery in the country, investing US$60 million. 

"This is a truly exciting business opportunity that expands further our exposure to high growth markets. There is growing recognition of the positive progress that Myanmar is making in terms of political and social reforms," said Jean-Francois van Boxmeer, Heinken CEO and chairman in a press release. 

ABC is majority-owned by Aung Moe Kyaw, a local entrepreneur and established player in the spirits market.

Beer makers like Heineken are counting on growing the market in the region. Per capita consumption in Myanmar is just 3 litres per person compared with 30 litres in neighbouring Vietnam and 26 litres in Thailand. At present, the market is said to be dominated by Myanmar Beer (owned by Myanmar Brewery) with roughly 70 per cent market share.

Brewers are also banking on the country's postive GDP growth of 6 per cent. The Asian Development Bank predicts that GDP per capita could touch US$2000-3000 levels by 2030, making Myanmar a lucrative market for multinational companies.

In February, ThaiBev, through its acquisition of Fraser & Neave, acquired a 55 per cent stake in Myanmar Brewery. Around the same time Danish brewer Carslberg announced its intention to enter Myanmar and signed a partnership agreement with Myanmar Golden Star (MGS) Breweries to make and distribute its beer in the country. The joint venture, Myanmar Carlsberg Co, is 51 per cent owned by Carlsberg and plans to build a brewery in the region.

Still, there are several challenges ahead for multinationals. Myanmar is one of the most impoverished nations in Asia with about a third of the population living below the poverty line. Urban consumption in cities like Yangon and Mandalay account for about 15 per cent of the population. Infrastructure and regulatory issues are also concerns for brands entering this market. For the moment though, that isn't stopping anyone. Late last year, Pepsi and Coca-Cola both charted plans for Myanmar. More recently, telecom players like Vodafone and China Mobile revealed plans to bid for for a license in Myanmar. 

 

Source:
Campaign Asia

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