TOKYO -- Suntory will unwind its joint beer venture with Tsingtao Brewery in the face of stalling sales growth and stiff competition in the Chinese market.
The Japanese company will sell its stakes in 50-50 sales and production ventures to China's second-ranked brewer in the first half of 2016. The transaction is expected to total 10 billion yen to 20 billion yen ($83.3 million to $166 million).
The units make and market both Suntory and Tsingtao beer in Shanghai and part of Jiangsu Province, with annual sales estimated at around 40 billion yen. Sales volume reached 86 million cases in 2014, with one case holding 20 large bottles. Suntory holds about a 30% market share in Shanghai, equaling about 34 million cases.
Tsingtao will continue producing Suntory beer under a licensing agreement.
Suntory entered the Chinese beer market in 1981. Though the company enjoyed the largest market share in that country among Japanese brewers, that still amounted to only 1.4%, putting Suntory eighth among all companies, according to British research firm Euromonitor.
The Japanese brewer sought to expand its business by switching to the joint venture in 2012, but stiff price competition from industry leader China Resources Snow Breweries and others ended up driving the operation into the red.
Though China makes up roughly a quarter of global beer consumption, the slowing economy and austerity measures caused consumption in 2014 to fall below the previous year for the first time.