Kirin to pay $38 mln for 25 pct of China brewery

TOKYO/SHANGHAI, Dec 15 (Reuters) - Japan's Kirin Brewery Co. (2503.T: Quote, NEWS , Research) said on Friday it would pay $38 million to take a 25 percent stake in China's Hangzhou Qiandaohu Brewery Co. Ltd, as it steps up its efforts to expand in the world's biggest beer drinking country.

The deal gives Kirin, which vies with Asahi Breweries Ltd. (2502.T: Quote, NEWS , Research) for the title of Japan's largest brewery, a base to build its business in the important Yangtze delta area that includes Shanghai and the Zhejiang and Jiangsu provinces.

Faced with a saturated home market, partly because of a shrinking population, Japanese breweries are shifting their focus abroad -- in particular to China whose market is growing at about 7 percent annually.

Kirin, the maker of Ichiban and Kirin Lager beers, said it had also obtained the rights to lift its stake in Hangzhou Qiandaohu, which makes the Cheerday brand of beer, to 49 percent in the future.

Kirin said Hangzhou Qiandaohu, which will likely have brewed some 140,000 kilolitres (37,000 U.S. gallons) this year, was the only beer maker with an annual production capacity of over 100,000 kilolitres in the Yangtze delta area that had not already been snapped up by a foreign brewer.

"The Qiandaohu brand is not especially famous," said ABN AMRO analyst Yang Lei in Shanghai.

"They will most likely use their production facilities and their distribution network in Zhejiang."

Competition is extremely fierce in China, with top global beer producers such as SABMiller Plc. (SAB.L: Quote, Profile , Research) or Anheuser-Busch Cos. Inc. (BUD.N: Quote, Profile , Research) jostling to cash in despite paper-thin profit margins with a bottle of beer often selling for 25 U.S. cents or less.  

Last year, Kirin set up a Chinese unit -- Kirin (China) Investment Co. Ltd. -- to crystallise its business strategy there.

It plans to concentrate on three regions -- Shanghai, the northeast, and the southern province of Guangdong.

The company is currently investing 6 billion yen ($51.6 million) to double its capacity in the southern city of Zhuhai to 200,000 kilolitres. The new capacity comes onstream in 2007.

Kirin has bought a remaining stake in a Zhuhai plant from its joint venture partner Unit-President Enterprises Corp. (1216.TW: Quote, Profile , Research) from Taiwan, becoming the sole owner of Kirin Brewery (Zhuhai) Co.

In the northern port city of Dalian, it owns a quarter of a local producer, Dalian Daxue Brewery Co. Ltd.