[Intl-tobacco] Taiwan tobacco co. looks for foreign investors

[Robert Weissman]

primarily but not only about the liquor side of the company --

Published on TaipeiTimes <http://www.taipeitimes.com>
http://www.taipeitimes.com/News/biz/archives/2005/10/14/2003275761

TTL seeks more partners

STRATEGIC INVESTMENT: Taiwan Tobacco & Liquor Corp is trying to find
foreign investors to expand its sales and to become more internationally
competitive

BLOOMBERG
Friday, Oct 14, 2005,Page 11

Taiwan Tobacco & Liquor Corp (TTL, =E5=8F=B0=E7=81=A3=E8=8F=B8=E9=85=92=E5=
=85=AC=E5=8F=B8), which controls about
80 percent of the country's US$1 billion a year beer market, is seeking
overseas partners as rivals like Heineken NV and Tsingtao Brewery Co (=E9=
=9D=92
=E5=B3=B6=E5=95=A4=E9=85=92) cut its sales and crimp profits.

"We're willing to talk if any international tobacco, liquor and beer
company is interested," Chairman Ray Dawn (=E8=91=A3=E7=91=9E=E6=96=8C), 47=
, said in an
interview in Taipei. International investors "can be our long-term
strategic partners."

State-owned Taiwan Tobacco has seen its share of the beer market fall by
a fifth since the island was opened to imports in 1987. Its share of the
wine and hard liquor markets has declined by more than two-thirds since
2002, when private companies were first allowed to produce alcoholic drinks=
.

"With profit growth stagnating, the government should look for a better
future for the company, such as seeking international strategic
investors," said Simon Chao (=E8=B6=99=E6=B0=B8=E5=AE=8F), a fund manager a=
t President
Investment Trust Corp (=E7=B5=B1=E4=B8=80=E6=8A=95=E4=BF=A1).

Heineken, which entered the Taiwan market in the late 1980s, "will
always review the possibilities" of producing beer locally in Taiwan,
though the company has no immediate plan to do so, spokeswoman Veronique
Schyns said.

Taiwan Tobacco's sales will probably fall 5.4 percent from this year to
NT$66 billion (US$1.99 billion) in 2006, while net income is forecast to
rise 3.9 percent to NT$5.87 billion, according to its 2006 draft budget
sent to lawmakers late August.

Sales of beer, which now make up 45 percent of the company's revenue,
are expected to fall by 5.6 percent next year, according to the draft
budget.

"Foreign companies may be interested in buying stakes in local companies
such as Taiwan Tobacco & Liquor, because they have distribution networks
and the markets," Chang Yue-shan (=E5=BC=B5=E7=8E=89=E5=B1=B1), director of=
 the finance
department at National Sun Yat-sen University in Kaohsiung, said.

"Cooperation with foreign investors can bring industry know-how for
local companies," said Chang, who has studied privatization of
state-owned companies in Taiwan.

Taiwan Tobacco plans to work with competitors, including using spare
capacity to produce products for others, as the company aims to help the
government attract buyers for its stocks by making itself more
competitive, Dawn said. His company is already brewing beer for Sapporo
Holdings Ltd, Japan's third-largest brewer. Dawn aims to extend such
cooperation to other brewers, such as Heineken. He declined to disclose
names of companies Taiwan Tobacco is in talks with for partnerships.

"If we can brew beer for Heineken, our costs can drop" by boosting
capacity utilization rate, Dawn said.

Heineken is the second best selling beer in Taiwan with about 8 percent
of the market. Taiwan Tobacco expects to use 71 percent of its breweries
and 11 percent of its distilleries next year, according to the company
2006 draft budget.

Taiwan consumes about 475 million liters of beer a year, according to
figures from Taiwan Tobacco. That equals about 21 liters for each of
Taiwan's 23 million people, compared with 80 liters in Europe.

Tsingtao Brewery, the biggest beer brand on the island after Taiwan
Tobacco's Taiwan Beer and Heineken, already has a partner in Taiwan,
making it less likely for the Chinese brewer to tie up with Taiwan
Tobacco, Dawn said.

Taiwan Tsing Beer Co (=E5=8F=B0=E7=81=A3=E9=9D=92=E5=95=A4), which first wo=
rked with Tsingtao as a
sales agent, started to brew the Chinese beer on the island in May this
year. The government lifted the ban on beers from China in 2002. Since
then Tsingtao Brewery has grabbed 5 percent of Taiwan's beer market,
according to Dawn.

China, Taiwan's biggest trading partner, is one of Taiwan Tobacco's
target overseas markets, Dawn said. Some of the company's alcoholic
drinks are now available in Japan, South Korean and the US west coast,
he said.

Partnerships may help Taiwan Tobacco boost sales in overseas markets,
which now contribute less than 2 percent of the company's revenue, Dawn
said.

"In the Netherlands, maybe Heineken can brew beer for us," Dawn said.