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South African Breweries plc announces major joint venture to consolidate its position in China

9 October 2001

London and Hong Kong, 9 October 2001. South African Breweries plc (“SAB”), the world’s leading developing markets brewer, has today announced the establishment of a new joint venture (“JV”) - China Resources (Sichuan) Blue Sword Breweries – through its Chinese joint venture company, CRE Beverage Ltd (“CREB”), together with the Sichuan Blue Sword Breweries Group (“Blue Sword”), in Sichuan province, South West China. The JV will incorporate all the breweries owned by Blue Sword and CREB in Sichuan province and will enhance CREB’s position as one of the leading brewers in China. CREB will hold approximately 62 percent of the JV and its total investment cost in the JV, including the contribution of its existing two breweries in Sichuan province, will amount to approximately US$64 million. The total assets of the JV will be in excess of US$240 million. SAB’s contribution to CREB’s shareholder funding with regard to this transaction, will amount to approximately US$26 million. The formation of the JV is subject to the fulfillment of certain conditions precedent.

Graham Mackay, chief executive of South African Breweries said ”Today’s agreement is in line with SAB’s successful China strategy, which leads to low cost expansion and the acquiring and growing of local brands to achieve strong regional positions. Blue Sword will allow us to achieve a dominant position in Sichuan province, similar to the one we have established in the North East region of China.”

CREB already owns two breweries in Sichuan province, with a total capacity in excess of 2.5 million hectolitres. The Mianyang brewery was purchased in 1997 and Leshan brewery in 2000. Sichuan province, which is home to nearly 90 million people, has a per capita beer consumption of 9 litres per annum, which is half of the China average.

Blue Sword is currently the largest brewer in Sichuan with 10 breweries, 9 million hectolitres of capacity and sales in excess of 5 million hectolitres in 2000. Its brand range, primarily under the Blue Sword label, dominates all segments of the market. The JV will own a balanced brand portfolio, including the brands of Blue Sword and CREB’s Xue Hua (Snowflake) brand in the province.

The combination of CREB and Blue Sword’s breweries and brands will make the JV the leading brewer in Sichuan, with an expected 80 per cent market share. CREB and Blue Sword expect to be able to extract significant synergies. This will be achieved by rationalising production, sharing distribution, and improving routes to market.

Today’s agreement increases the number of CREB’s breweries to 25, with a total combined capacity of 32 million hectolitres.

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Notes to editors

  1. South African Breweries is the world’s leading brewer in developing markets, with major brewing and distribution operations in Africa, Central and Eastern Europe and Asia. It is the world’s fifth largest brewer overall by volume with 86 breweries in 22 countries and over 31,000 employees. In the year to 31 March 2001 SAB generated US$646 million pre-tax profit from turnover of US$4.184 billion. The company is listed on both the London and the Johannesburg stock exchanges.
  2. SAB operates in China through CRE Beverage Ltd (“CREB”), a joint venture in which it has a 49 per cent holding. The remaining 51 percent is held by China Resources Enterprise, Limited. Through CREB, SAB is China’s leading foreign brewer. Key brands produced by SAB’s Chinese breweries include: Snowflake and Keller.
  3. The Chinese market is amongst the largest and fastest growing markets in the world, with a total beer market estimated to be 220 million hectolitres per year in 2001, and an estimated growth rate of 7.2 percent per annum, second only to the United States in terms of volume consumed.
  4. Please contact Ciaran Baker for photographs of SAB’s current activities in China.

For further enquiries please contact:

Nick Chaloner, South African Breweries plc
+44 (0) 788 050 2755

Ciaran Baker, South African Breweries plc
+44 (0) 20 7659 0120

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