Carlsberg to tap China growth with giant brewery

A woman walks past the Tetley's brewery in Leeds, northern England November 5, 2008.

COPENHAGEN (Reuters) - Carlsberg (CARLb.CO) is to build a giant brewery in China to tap growth in the world's largest beer market, as the Danish group looks to expand outside sluggish European markets.

The world's fourth-biggest brewer will sign the deal on Friday to coincide with the visit to Denmark of Chinese President Hu Jintao, and spend 4 billion Danish crowns ($670 million) on the project in the southwest province of Yunnan.

China, which overtook the United States as the world's biggest beer market in 2003 and was nearly twice the size by 2010, is expected to grow 5 percent annually in coming years, twice the growth of the global market in 2011.

Copenhagen-based Carlsberg is looking to Asia, especially China, India and Vietnam, to offset stalled growth in its former powerhouse in Russia which brought in big tax rises. It now earns around 11 percent of group profit from Asia.

While Carlsberg is the biggest beermaker in western China where it runs 41 breweries either fully or in partnerships, it lags other foreign and domestic brewing heavyweights elsewhere.

China's four biggest brewers - China Resources Snow (CRS), Tsingtao (0168.HK) (600600.SS), Anheuser-Busch InBev (ABI.BR) and Beijing Yanjing Brewery (000729.SZ) - have nearly 60 percent of the market and are all looking for local partners to strengthen their positions.

CRS - the largest brewer and a joint venture between China Resources Enterprise (0291.HK) and London-listed SABMiller (SAB.L) - makes Snow, the world's biggest beer brand.

The four big brewers are all bidding to buy most of the operations being sold by Chinese peer Kingway Brewery Holdings (0124.HK), worth around $700 million.

Carlsberg's new brewery will start in 2014 and produce local brands as well Carlsberg and Tuborg to become the group's second-biggest site with an annual capacity of 10 million hectolitres, behind its Russian Baltika brewery at 12 million.

"The brewery will be gradually built over a period of time to suit China's growing demand for beer in the future," a Carlsberg spokesman said. Carlsberg's Asian beer volumes grew 14 percent in the first quarter.

Carlsberg shares were down 0.5 percent at 0945 GMT, with Copenhagen's benchmark index .OMXC20 down 0.1 percent.

($1 = 5.9664 Danish crowns)

(Reporting by Mette Fraende and David Jones in London; Editing by Dan Lalor)