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1、2003 PricewaterhouseCoopers.PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation.All rights reserved.,Targets profileSedrin,2,New full wheat Red qingshuangGreen qingshuang Blue qingshuang,New Wheat Gold Wheat Gold Wheat 518 Special Black
2、Jingpin Red Jingpin Gold Teshuang,Teshuang Jingpin Teshuang Chaoshuang,Blue Draft New ICE Red Draft ICE ICE(small)ICE518 NewICE518,Premium,Standard,Savings,Rmb/Quart Bottle,Rmb/Quart Bottle,Rmb/Quart Bottle,Sedrin brands and products,Gold century chaoshuang,Fuzhou Jingpin,JingpinWheat,3,Sedrin consu
3、mer awareness,4,Sedrin Sales Volume 2002 Sales volume 4,290,000 HLS Sales vollume in Fujian 3,850,000 HLSMarket share of Fujian 30%,Unit:HLS,Sedrin Key Sales Regions 2002Fuzhou 1,185.000 HLS Putian 990,000 HLS%of Sedrin total sales 56%,Sedrin account for more than a quarter market share in Putian,Fu
4、zhou,Xiamen,Zhangzhou and Longyan,Sedrin volume share,5,Sedrin media expenditure,6,Typical Margin Structure,Unit:RMB/Case(24*640ml bottle),Trade TermsPayment terms for distributorCash payment without credit terms is the mainstream(see chart opposite)Rebate to distributorsQuarterly and yearly rebates
5、 are mentioned during our interviewKey retail clientsWe understood from distributors,there is specific policy to some major retail clients(major hypermarket chains)Support for distributorsAbove half of distributors comment Sedrin has given strong support to distributors,especially promotion activiti
6、esKey promotion methodsThe top three promotion methods mentioned are prize within package,complimentary and lucky card(刮刮卡),Sedrin distribution,7,Sedrin-penetration,*Supermarket including hupermarket and coveniene store*Tsingtao including Tsingtao,White Shark,Rongcheng,Wuxing,Yingcheng*N/A:not menti
7、oned by interviewers most probably due to very few of products or not sold at all,8,Key Brands In Supermarket,ICEGold bottleGold WheatStandard,Key Brands In Convenience Store Kiosk,Gold bottleChaoshuangNew WheatICE,Key Brands In Off-premise,Gold bottleICEChaoshuangStandard,Sedrin products in off-pre
8、mise channels,9,Sedrin production and technology,SupplyingMalt is generally imported from Australia.Proprietary bottles are used and purchased from Shandong and Guangdong province.Around 500 million bottles were purchased in 2002.Cans are normally purchased from Shenzhen.Rice and water are supplied
9、locally.Labels are supplied by an affiliated company,Putian Printing Co.,Location,plant and productionSedrins home is in Putian,close to Quanzhou,where Huiquan is located.In 2002 Sedrin acquired Riyuexing,located in Sanming,central west of Fujian province.Total capacity is about 550,000 tonnes(about
10、 5.4 million HLS),including 450,000 tonnes(4.4 million HLS)at the headquarters and 100,000 tonnes(1 million HLS)of Sanmin(Riyuexing).Production facilities are claimed to be advanced,including fully automated fermentation tanks,bottling lines etc.Some key equipments are imported from Germany.Capacity
11、 of headquarter was increased from 50,000 tonnes in 1992 to 300,000 tonnes in 1997,and further increased to 450,000 tonnes through technical renovations.Capacity are highly utilized,especially in 2002 and a plan for expansion to 800,000 tonnes has been discussed and feasibility studies performed.,10
12、,Sedrin SWOT analysis,StrengthsNo.1 in Fujian in terms of sales revenue and volumeGood brand awareness and penetration in FujianWide products range covering all levels(premium,standards and savings)Quite new and advanced machineryManagement and employee owns significant portion of the business,which
13、 will motivate the passion of working and improve performancesManagement relatively young,WeaknessesNot being strong out of FujianLess profitable compare to HuiquanHighly geared,high financial expensesLocated in Fujian,transportation not convenient into other provinces,OpportunitiesExpand into adjac
14、ent regionsBuild Sedrin into a national brand,ThreatsMarket relatively stable,not growingFierce competition,especially from Tsingtao and Huiquan,as well as other major market players,Yanjing etc.Possible deterioration of profitability following increasing market and promotion expenditure,11,Sedrin f
15、inancials,Grasping the opportunity that Huiquan has been focusing on IPO in the past two years,Sedrin has adopted aggressive marketing and experienced significant expansion since 2000.Sales revenue and volume are all doubled in two years.And with introduction of premium product,like Sedrin Ice,Pure
16、Draft etc,the average selling price and GP margin has been increasing.As a result of aggressive marketing,selling expenses increased dramatically.Highly geared by bank borrowings,financial expenses has been a major expense items.Overall,the business has been making a minimal profit during the past f
17、ew years and successfully built itself as the biggest brewer in Fujian.,12,Sedrin financials,The trade debtors has been managed very well,guessing cash on delivery should be the major payment terms.Amount of inventory appears to be high.Further investigation would be necessary to understand the cost
18、 and inventory structure(may include bottle cost).Huge investment in fixed assets,and it appears overall fixed assets are depreciated over 20 years,which may be a bit longer.,Around Rmb390 million(including Rmb350 million long term)borrowing have been raised from the bank to finance the investment i
19、n fixed assets.,13,Before the recent restructure,Sedrin was a 100%state-owned company.Its parent is the Putian Economic Committee which is a government body managing the economy of Putian.An ownership restructure has been done in later 2002,now the Putian Economy Committee is still the largest singl
20、e shareholder holding 38%of interests,however the tricky arrangement is that management and employees in total hold 39%of interests which overtaken Putian Economy Committee by 1%and become the biggest shareholder in substance.We do not have further information about the detail shareholding structure
21、 of management and employees,as well as the other companies.In November 2002,Sedrin successfully acquired Riyuexing in Sanmin,located in central Fujian,providing additional capacity of 100,000 tonnes.As a major company in Putian city,Sedrin also has investments in other businesses which may need to
22、be disposed prior to any deal.,Ownership Structure,Sedrin ownership,Sedrin,Putian Thermoelectricity,Sanming Sedrin,100%,100%,90%,Putian Alcohol,53.7%,20%,20%,10%,10%,Other Companies,Fujian Sedrin Sales Co.,Ltd,Putian Baoyuan Electric Co.,Ltd,Putian Glass Co.,Putian Printing Co.,Putian Industrial Tra
23、ding Co.,Putian Economy Committee,Employees,Management,38%,23%,21%,18%,14,Sedrin organisation and management,15,Sedrin as a target,As the largest volume beer brand in Fujian,Sedrin is obviously an attractive target.As it is 100%state-owned,the governments attitude and interest will be the key for a
24、potential deal.Compared to Huiquan,it is more likely that a majority interest could be acquired,but it is by no means certain.The key issues for Sedrin would be similar to Huiquan:How to maintain current market share and profitability in Fujian threat from Tsingtao and fightback from Huiquan?How to
25、expand out of FujianIf HAPB want to acquire a majority interest in Sedrin or be involved in its operations,cultural conflict may be the biggest issue.Sedrin has been a state-owned enterprise for a long time and the cultural differences are clear.On the other hand,management are demonstrating their s
26、trength in the province and appear young.,16,LocationThe plant,10 kilometres away from No.324 national highway,is located in the centre of Hanjiang district,which is about 15 kilometres away from the downtown of Putian.The plant is surrounded by residential buildings,farms and areas that armed polic
27、es are stationed.Plant and equipmentPlant area is approximately 270,000 square meter(900m300m).The plant buildings are well arranged and the brewery equipment appears to be new.There are 2 entrances in the plant.One is specially for transportation.According to our site observation,the transportation is very busy.No obvious pollution noticed around.No space for expansion inside the plant,may could expand into farms behind.,Sedrin summary of site observation,
