Mon, Jan 05, 2004 page10

• Tingyi, Japanese firms join up

  THE NOODLE MAKER The Taiwanese-owned food-and-beverage giant will establish a venture in cooperation with Asahi Breweries and Itochu to do business in China

  • By Amber Chung / STAFF REPORTER
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  Taiwanese-owned Tingyi Holding Corp (頂益控股), China's largest instant noodle maker, best known for its Master Kong (康師傅) brand, has decided to team up with two Japanese companies to further bolster its foothold in China's soft drink market.

  Under the agreement, Tingyi will control 50 percent of the new venture, with Japanese beverage maker Asahi Breweries Ltd and Japanese trading house Itochu Corp taking the remaining 50 percent stake in the new venture, a Chinese-language newspaper reported Saturday.

  Wei Ying-chou (魏應州), chairman of the Master Kong Group, is expected to serve as president of the new venture that will be created later this month, the Japanese-language Nihon Keizai Shimbun reported yesterday.

  Chen Wen-min (陳文敏), marketing manager of Wei Chuan Food Corp (味全食品), a local food company and also a distributor for Tingyi, refused to confirm the reports. Master Kong Group acquired more than 50 percent of Wei Chuan shares in 1998 when the food company was facing a financial crisis.

  Chen said company officials will announce further details of the venture in a video conference this morning.

  The new venture will make tea, fruit juice, coffee and health drinks for the expanding soft drink market in China, worth some 117 billion yuan (US$14.1 billion), the Japanese business daily said.

  China's soft drink market has steadily grown by a rate of about 15 percent yearly since the second half of the 1990s, the report said, adding that bottled water and mineral water constitute the largest segment of the soft drink market, followed by soda, bottled-tea drinks and dairy drinks.

  Tingyi is counting on the tie-up with international partners that have strong R&D capabilities to survive in the rapidly-changing beverage market, a Chinese-language newspaper said, quoting Wei.

  "We realized the significance of forming strategic alliances with international companies from our experience cooperating with Sanyo Foods Co," Wei said.

  "Asahi's outstanding R&D know-how and Itochu's strong information collection ability, as well as its supply of inexpensive materials, could help the joint venture succeed in China's beverage market" when combined with Tingyi's brands, production bases and retail channels in China, Wei added.

  To achieve its goal, Tingyi will first establish a beverage holding company registered in the Cayman Islands. The holding company will consist of Tingyi's existing beverage operations in China. Then Tingyi will sell a 50-percent stake in the holding company, worth US$950 million, to Asahi and Itochu to set up a new beverage venture exclusively for Chinese operations, the reports said.

  The Asahi-Itochu investment will be the largest Japanese investment ever made in the food and beverage market in China. The Japanese firms will own their half of the joint venture through a holding company in which Asahi will hold an 80 percent stake and Itochu the remainder, the reports said.

  Currently, Master Kong Group's business in China includes instant noodles, with a market share of almost 40 percent, soft drinks and confections. According to its Web site, Master Kong sold nearly US$320 million worth of soft drinks during the first nine months of last year, a decrease of over 2 percent year-on-year.

  Master Kong's bottled tea products seized first place in the market with a 44 percent market share, while its juice products took second place with a market share of 20.4 percent, the reports said. Master Kong may reap profits amounting to as much as US$400 million from the new venture, according to the reports.
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