UPDATE 2-Carlsberg returns to Myanmar after sanctions eased

Fri Feb 1, 2013 2:38pm GMT

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* In joint venture with Myanmar Golden Star

* To own 51 percent in the venture

* JV to build new brewery, distribute Carlsberg beer

* Project will cost $50 mln in first few years

* Sees Myanmar growth in beer consumption exceeding 6-7 pct

By Mette Fraende

COPENHAGEN, Feb 1 (Reuters) - Danish brewer Carlsberg is returning to Myanmar following the easing of international sanctions which forced it out of the country in the mid-1990s.

The world's fourth-largest brewer said on Friday it had signed a deal with its former partner, privately-owned Myanmar Golden Star Breweries, to build a new brewery in a country where it expects beer consumption to grow sharply.

"There is no doubt that this will go fast," Carlsberg's Chief Executive Jorgen Buhl Rasmussen told Reuters from Myanmar before an inauguration ceremony in Yangon on Friday. "With the change Myanmar has seen and will see, there is huge potential in this market."

The joint venture, in which Carlsberg will own 51 percent, will cost at least $50 million in the first couple of years.

Since taking office at the head of a quasi-civilian government in 2011, President Thein Sein has freed political prisoners, lifted restrictions on the media and begun to reform the economy with a new foreign investment law and an exchange rate determined more by market forces.

In response, Western countries have eased sanctions imposed on Myanmar's previous military government.

Previously Carlsberg and Myanmar Golden Star were in a partnership under which Carlsberg beers were imported into the country and sold there.

"When the sanctions were lifted, it was natural for us to contact them again, so we did," Rasmussen said.

Construction of the new brewery marks a further step to increase Carlsberg's foothold in the fast-growing Asian region that has become vital for global brewers seeking growth as Western European markets slow.

CATCHING UP

Myanmar's 60 million inhabitants on average drink about 4 litres of beer per year, a consumption which Carlsberg expects to grow more than 7 percent per year and catch up eventually with neighbouring countries.

Thais on average consume around 25 litres of beer per year, while people in Laos, Vietnam and Cambodia drink 30 litres.

The new brewery is expected to be fully operational next year, with an annual capacity of 1 million hecto litres, which there is potential to expand in the future.

Total beer consumption in Myanmar is around 3.5 million hecto litres per year, the brewer said.

Carlsberg said the investment carried some risks, but it felt the political situation was now stabilising and was confident it could bring its own ethical practices along with the investment.

Asia has become a battle ground for the world's biggest brewers, seeking acquisitions as they rely on emerging markets and price rises to offset sluggish demand in western Europe and stiff competition in mature markets. Toughened regulations for alcohol have also cooled growth in Russia

Asia accounted for 18 percent of Carlsberg's total sales volume in 2011 and 12 percent of its operating profit.

In November, Carlsberg increased investment in Chinese Chongqing Jianiang Brewery Co Ltd to 49.58 percent and raised its stake in Vietnamese brewer Habeco to 30 percent.

Dutch rival Heineken said two weeks ago it would take full control and delist Asia Pacific Breweries in February.

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