Anheuser-Busch buys majority interest in Chinese brewery.

HONG KONG--(BUSINESS WIRE)--Feb. 27, 1995--The international beer subsidiary of American brewer Anheuser-Busch Companies Inc., (NYSE:BUD) announced Monday it has purchased controlling interest (80 percent) in a Chinese brewery that will soon begin producing its Budweiser brand, the world's number-one selling beer, for Chinese beer drinkers.

The deal makes Anheuser-Busch the first U.S. brewer to control a majority interest in a brewery in the People's Republic of China, which last year became the second-largest beer market in the world.

Anheuser-Busch, the world's largest brewer, purchased an 80 percent interest in a joint venture that owns the brewery, which is located in the city of Wuhan, Hubei Province, in Central China. Terms of the deal were not disclosed. The name of the joint venture will be Budweiser Wuhan International Brewing Co. Ltd. The remaining 20 percent will be owned by the seven original joint venture partners.

"The China beer market has extraordinary potential, making it a top expansion priority for all world brewers," said August A. Busch III, chairman and chief executive officer of Anheuser-Busch.

"This is our second major investment in China and our largest to date. It will lay a solid foundation for our national strategy to support Budweiser and our partners' brands in the country. We believe we are getting in on the ground floor in what is potentially one of the world's biggest and most exciting markets."

This significant international move, which gives Anheuser-Busch its first majority interest in an offshore brewery, comes as the company's domestic beer company shows continued growth and record sales in 1994.

Brewing Budweiser at the Wuhan brewery will allow Anheuser-Busch to offer the Chinese consumer the distinctive taste and quality that are hallmarks of the brand worldwide. Budweiser production is expected to begin at the Wuhan brewery in May following capital investments for equipment modifications to meet Budweiser brewing and packaging specifications.

The advanced brewing and packaging technology and management techniques that Anheuser-Busch brings to the joint venture are expected to improve product quality and consistency and increase environmental protection.

"The joint venture gives us an excellent, technologically advanced facility to almost immediately begin local production of Budweiser according to our strict quality specifications," said Raymond E. Goff, president of Anheuser-Busch Asia Inc., and newly appointed chairman of the joint venture.

"The joint venture combines the market experience and distribution channels developed through the Steinbrau brand with the sales strategies and marketing techniques of Budweiser, giving both brands a competitive edge in the Chinese beer market."

An Anheuser-Busch management team, including a brewmaster, will supervise the production of Budweiser in China for quality and consistency assurance. The Budweiser sold in China will be brewed according to the same processes and using the same ingredients as those used in the Budweiser sold in the United States and around the world.

In addition to Budweiser, the brewery will continue to produce and market Steinbrau beer. Steinbrau, a premium Chinese beer brand with an established following in China, has been produced at the Wuhan brewery since 1989. With current sales of approximately 400,000 hectoliters (341,000 barrels) annually, Steinbrau will continue to be an important part of the joint venture's marketing effort.

The Wuhan joint venture gives Anheuser-Busch its second significant role in the China beer market. In 1993, Anheuser-Busch purchased a 5 percent interest in China's largest brewer, Tsingtao. Additionally, Anheuser-Busch continues to explore partnerships with brewers in Southern China.

The joint venture's brewery location in central China is strategically important in Anheuser-Busch's ambitious plans for the Chinese beer market, which include plans to distribute Budweiser throughout the country. Through the careful selection of partners in China, Anheuser-Busch's objective is to become the number-one or number-two brewing group in China by the year 2005.

Wuhan, the fifth-largest city in China, is at the center of the National Rail System and is a key port on the Yangtze River, both essential transportation routes to reach key Chinese markets, including Beijing, Shanghai and Guangzhou.

Budweiser is expected to attract strong consumer appeal in China due to consumers' increasing disposable incomes and strong preferences for high-quality American brands. Chinese beer drinkers see Budweiser as a fresh, light and drinkable beer that is clean, crisp and distinctive from other international or domestic beers.

Marketing plans in support of Budweiser are expected to include television, outdoor and point-of-sale advertising, along with consumer and retailer special events and promotions. Following the spring 1995 start-up of production at the Wuhan brewery, Budweiser is expected to achieve a minimum 10 percent share of the premium segment of the Chinese beer market during the next 10 years.

The Chinese beer industry is highly fragmented, with more than 800 breweries. The country's top 10 brewers control less than 10 percent of the market. The market grew 20 percent in 1993 and is expected to continue growing 10 percent annually through the 1990s.

The country's per capita beer consumption is currently only 10 liters per year, compared with approximately 90 liters per year in the United States. With a population of 1.2 billion, growing at a rate of more than 16 million people per year, China now ranks second only to the United States in beer production. It is expected to pass the U.S. beer market by the turn of the century.

Anheuser-Busch's investment in the joint venture was completed after necessary approvals were gained from the local and national representatives of China's Ministry of Foreign Trade and Economic Cooperation, with the assistance of the U.S. State Department.

"The various Chinese government agencies in Wuhan and Beijing have been extremely supportive in obtaining the necessary project approvals," said Goff.

The board of the joint venture will be comprised of 15 members, 12 from Anheuser-Busch. The remaining three seats will be split between the other seven minority partners.

The other partners are China Wuhan Brewing General Factory; China Everbright Trading Co.; China Light Industrial Corporation for Foreign Economic and Technical Cooperation; Wuhan Trust and Investment Co., Ltd. of the People's Construction Bank of China; AMS Anlagenplanung GmnH & Co.; Gabriel Sedlmayr Spaten-Franziskaner-Brau KGAA; and DEG-Deutsche Investitions- Und Entwicklungsgellschaft GmbH.

The joint venture in China follows several other Anheuser-Busch international business ventures announced recently. Last week, the company agreed to purchase a 10 percent equity stake in a major new subsidiary of Companhia Antarctica Paulista of Brazil.

In January, the company announced a proposed agreement with Shaw Wallace of Bombay to license brew and sell Budweiser in India and established a contract brewing agreement with Sociedad Anonima Damm of Spain. In 1993, Anheuser-Busch purchased a 17.7 percent investment in Grupo Modelo, the leading brewer in Mexico.

Also in 1993, the company formed a marketing sales and distribution joint venture with the Kirin Brewery, the largest brewer in Japan. Additionally, the company has recently strengthened its brand development activities in Central America.

Building on the continued growth and record sales in Anheuser- Busch's domestic beer company, Anheuser-Busch International, Inc. also had record volume in 1994 of 4.5 million barrels (5.3 million hectoliters), the 10th consecutive year in which it achieved record volume.

That volume total includes U.S. exports and foreign-produced Anheuser-Busch beers. Anheuser-Busch International increased its earnings by about 50 percent in 1994, making it the second largest contributor to the parent company's consolidated earnings growth.

Anheuser-Busch International Inc. is a subsidiary of Anheuser- Busch Companies Inc. and is responsible for the company's foreign beer operations and for exploring and developing beer markets outside of the United States.

Its activities include contract and license brewing, exports, sales, marketing and distribution of the company's beers in foreign markets, as well as establishing equity partnerships with leading foreign brewers. With sales in more than 70 countries, Anheuser-Busch International is the leading exporter of beer from the United States, accounting for about 43 percent of all beer exports.

Anheuser-Busch, based in St. Louis, sold a record 88.5 million barrels (103.8 million hectoliters) of beer in 1994, a 1.4 percent increase over the previous year and the 18th consecutive year of record sales.

Sales to retailers, considered a more accurate measure of underlying consumer demand, increased 2.8 percent in 1994. The company now holds a leading 45 percent share of the U.S. beer market -- up 0.3 percent -- and a leading 9 percent share of the world beer market.

CONTACT: Anheuser-Busch, St. Louis

U.S.: Terri Vogt, 314/982-1771 or

Hong Kong: Christopher Homfray, 852/2877-3939