Asia Pacific Breweries Limited Business Information, Profile, and History

Company Perspectives:

Corporate Vision: To be the Leading Brewer in the Asia Pacific Region.

History of Asia Pacific Breweries Limited

Asia Pacific Breweries Limited is one of the largest brewers in the Asian region. The company produces a variety of beers, including its prize-winning premium flagship Tiger Beer, as well as a number of other international, regional, and local beers, such as Anchor, Raffles, Heineken, and its latest brew, Touché, released in 2003. In all, Asia Pacific brews more than 40 beers. Originally focused on the Malaysia and Singapore markets, the company has expanded steadily throughout the region since the early 1990s, and now includes operations in Singapore, Malaysia, New Zealand, Indochina, Cambodia, China, Thailand, and Papua New Guinea. Singapore remains the company's largest market, while New Zealand and Indochina are both strong revenue generators for Asia Pacific. The product of a 1930s joint venture between Singapore's Fraser & Neave and The Netherlands' Heineken, the public company remains controlled by both groups, with its shares listed on the Singapore stock exchange. Asia Pacific Breweries is led by Chairman and CEO Koh Poh Tiong.

Founding a Beer Legend in the 1930s

Fraser & Neave had been present in Singapore since the 1880s and had grown into the region's leading soft drinks manufacturer by the late 1920s, when it decided to enter the beer industry as well. By then, too, Heineken, seeking to take advantage of The Netherlands' colonial influence in the region, had begun making plans to launch its beer on the international market, in part to compensate for the effects of the Depression on its European sales.

The two companies came together in 1931 to found Malayan Breweries. Heineken contributed its brewing expertise, while Fraser & Neave added its regional distribution strengths, with branches and production facilities located throughout Malaysia and Singapore and extending into Thailand and Vietnam as well. By 1932, construction on the new brewery was completed, and in that year Malayan Breweries debuted the Tiger Beer brand. The new beer was said to resemble Heineken's own beer in flavor, a natural outcome of Heineken's contribution to the company's industrial development.

The Tiger Beer brand enabled Malayan Breweries to grow quickly into the dominant beer brand in Malaysia and Singapore. The company began exporting to Hong Kong and Thailand during the decade as well. Soon it was forced to increase production capacity, expanding the brewery in 1937, and then again two years later.

In 1941, Malayan Breweries acquired the Archipelago Brewing Company. That purchase gave the company a second brewery and a new brand, Anchor Beer, a pilsener beer that was to remain the company's second main brand into the next century.

World War II had an unexpected consequence for Malayan Breweries, as soldiers returning home after the war created new international demand for Tiger Beer. Foreign sales were to remain a minor portion of the company's business, however, as Malayan Breweries focused its efforts on its core markets in Malaysia and Singapore. Nonetheless, the company made a new international expansion effort in 1958, when it purchased South Pacific Brewery of Papua New Guinea, giving it that company's premium beer brand, SP Lager. At the same time, the company had been expanding its own beer list, launching its stout and ale varieties in the 1950s.

International Expansion in the 1990s

Malayan Breweries took on new business in the early 1970s when it began production of Heineken-branded beer as well. This move was part of the Dutch parent company's move toward a decentralized brewing effort, and Malayan Breweries' production of the Heineken brand remained focused on the export market through the 1970s. In 1984, however, the company began marketing Heineken beer in Singapore as well. By the following year, Heineken had succeeded in capturing the number five position among top-selling beers in that market.

Malayan Breweries' growing portfolio of brands, as well as its market dominance in the Malaysian and Singapore markets, led it to adopt a new branding strategy. The company began a successful repositioning of its flagship Tiger Beer brand into the premium beer category. In this effort, the company was aided by strong advertising spending--including a long-running series of television and cinema advertisements--and also in its growing international recognition. Indeed, by the end of the 1980s, Tiger Beer had come to be viewed by many as among the world's best beers.

The repositioning of its other major shareholder, Fraser & Neave, provided more opportunities for the company. Fraser & Neave had engaged in a diversification drive in the 1980s, in part in response to Malaysia's new nationalization laws, which left the company in need of cash. In 1985, Fraser & Neave decided to convert its prime Singapore city locations--including the Anchor and Tiger Beer breweries--into commercial development, and construction began on a new state-of-the-art brewery, in Tuas. The highly automated facility opened in 1989 and boasted a production capacity of one million hectoliters per year.

The move heralded a new era for the company. At the end of the 1980s, the company's dominance in the Singapore and Malaysian markets had also left it heavily dependent on those countries for its sales and its profits. At the beginning of the 1990s, more than 75 percent of Malayan Breweries' profits came from its domestic sales. Under the leadership of General Manager, and later Chairman and CEO, Koh Poh Tiong, Malayan Breweries began developing a new international growth strategy.

Koh compared its new international strategy to a boxing match. "Tiger was an amateur fighter. So we thought: forget about countries like Japan and the USA with their heavyweight brands. Let's forget about Europe, but focus on Asia Pacific, a very large area. Let's grow in our own front yard and backyard. Markets like Vietnam, China and Thailand--those fit in our strategy perfectly."

The first step in the company's new plans was a change of name, to Asia Pacific Breweries, as a clear signal of the company's international growth plans. Asia Pacific then began targeting its new markets. The expertise gained from the construction of its Tuas facility, backed by Heineken's own expertise on the export market, enabled it to build new and highly efficient breweries in the region at the start of the 1990s.

Chronology

• Key Dates:
• 1931: Heineken and Fraser & Neave set up a joint venture, called Malayan Breweries, to brew beer for the Malaysia and Singapore markets.
• 1932: Malayan Breweries begins production, launching the Tiger Beer brand.
• 1941: The company acquires Archipelago Brewing Company and its Anchor Beer brand.
• 1958: The company acquires South Pacific Brewery in Papua New Guinea and that company's SP Lager.
• 1973: Production of Heineken beer begins for the export market.
• 1984: Production of Heineken beer begins for the domestic market.
• 1988: The company takes a stake in the Shanghai Mila Brewery in China.
• 1989: A new state-of-the-art brewery is inaugurated in Tuas.
• 1990: The company changes its name to Asia Pacific Breweries as part of its regional expansion strategy; the company enters Cambodia.
• 1991: A stake in New Zealand's DB Group is acquired.
• 1995: The company builds breweries in Cambodia and Myanmar.
• 1997: The company acquires full control of Hainan, China brewery.
• 2000: The company acquires full control of DB Group.
• 2002: The company begins construction of its second Vietnam brewery.
• 2003: The Touché beer brand is launched.Thailand, Cambodia, and Vietnam were among Asia Pacific's first targets, but the company's major interest developed in China--soon to become the world's second largest beer market after the United States. Asia Pacific began positioning itself in that country in 1988 with the purchase of a controlling stake in Shanghai Mila Brewery. Backed by Heineken's brewing expertise, that company, later renamed Shanghai Asia Pacific Co., launched its own beer brand for the Chinese market, Reeb Beer. The success of that brand led the company to add two more breweries in the early 1990s.
• Asia Pacific also targeted New Zealand, when, in 1991, it paid S$245 million to acquire a 27 percent stake in that country's DB Group. Formerly known as Magnum, that company operated as a brewer and winemaker, but had extensive hotel and pub holdings as well. Under the influence of Asia Pacific--and Fraser & Neave--DB Group began shedding its nonbeverage holdings, selling off its hotels and pubs in 1993. The following year, Asia Pacific stepped up its shareholding in DB to more than 54 percent.
• In support of its expansion, the company began adding production sites, building its new breweries on the model established by its Tuas site. The company opened new facilities in Thailand and Vietnam and elsewhere, while it continued to supply other markets with its Tuas brewery. Among these markets was Cambodia, which the company entered in 1990. By the middle of the decade, however, Asia Pacific had succeeded in grabbing 60 percent of the Cambodian market. Based on its success there, the company opened a new S$36 million brewery near Phnom Penh.
• That same year, Asia Pacific turned to Myanmar, setting up a joint venture with that country's Union of Myanmar Economic Holdings, in order to construct a S$42.7 million (US$309 million) brewery near Yangon City. The joint venture, Myanmar Brewery Ltd., held at 60 percent by Asia Pacific, began brewing Tiger Beer in 1996. By then, the company operated more than 15 breweries in Singapore and abroad.
• Asia Pacific acquired full control of its Hainan brewery in 1997. Yet despite the company's early success in China, by the late 1990s these operations had begun posting losses. Part of the company's difficulties there came from the slumping sales of Reeb Beer, which had been hard hit by the entry of a number of other, larger competitors, such as Suntory and Tsingtao, into the Chinese market. Asia Pacific struck back in 2001 by deciding to launch a new brand into the Chinese market, and gradually phase out the Reeb brand.
• By then, Asia Pacific had gained full control of DB Group, paying NZ$117 million for the remaining shares in the company. The company then shed DB's winemaking operations to concentrate exclusively on brewing. Asia Pacific had also continued to expand into new markets, entering India in 1999.
• Asia Pacific's strategy of striving to become a big fish in the small ponds of the Asia Pacific region appeared to be paying off, as its portfolio of brands gave it strong shares in most of its chosen markets at the start of the 21st century. Asia Pacific continued to expand its production capacity, such as launching the construction of a second brewery in Vietnam in 2002. That project was expected to be completed in the fall of 2003. In the meantime, Asia Pacific was celebrating the launch of its first new-style beer, Touché. Launched in March 2003, the new beer featured a yeast cultured from champagne grapes, and marked the company's first effort to adopt micro-brewing techniques. With more than 70 years of brewing success behind it, Asia Pacific--and its flagship Tiger brand--remained a key player in the region's beer industry.