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Abstract

Asia Pacific Breweries (APB) began more than 70 years ago as a result of a joint venture

between Heineken Breweries, a European company seeking to expand into new markets,

and Fraser and Neave, a leading soft drink manufacturer. Together, the Malayan

Breweries Limited (MBL) was created as an Asian brewery. Asia Pacific Breweries, the

name given in 1990, is well known for its global marketing efforts and internationally

awarded beers. APB’s signature brand is Tiger Beer, and is sold not only in Asia, but the

beer also has a niche market in the United States and UK. APB is listed on the Singapore

stock exchange under (A46).

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Table of Contents

Introduction…………………………………………………………………………..4

History of Acquisitions ………………………………………………………..4

Operations……………………………………………………………………..5

World Renowned Taste - APB's Beer Brands……………………………………...6

Tiger Beer………………………………………………………………….......6

Tiger Beer Accolades and Awards…………………………………………….6

Heineken………………………………………………………….……………7

Anchor Beer……………………………………………………………..……..7

Baron's Strong Brew…………………………………………………………...8

ABC Extra Stout………………………………………………………………..8

Tour of the Brewery…………………………………………………………………..9

Logistics………………………………………………………………………..9

Where it all begins……………………………………………………………..9

Packaging Facility…………………………………………………………….10

Unwinding……………………………………………………………………..12

Community & Environmental Impact……………………………………………...12

Creativity Development………………………………………………………..12

Humanitarian Causes………………………………………………………….13

The Future of APB……………………………………………………………………14

Expansion in Laos……………………………………………………………..14

Indian Market………………………………………………………………….15

Forward Looking………………………………………………………………15

Key Questions………………………………………………………………………...16

References…………………………………………………………………………….17

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Introduction

The year was 1931, and the company was Malayan Breweries Limited (MBL), an Asian

brewery that was the spawn of a joint venture between Heineken and Fraser & Neave.

Seventy-seven years later MBL is still brewing award-winning beers as Asia Pacific

Breweries (APB). APB, known for its variety of beers and acclaimed internationally for

its award winning brews, is a company that defines excellence in the products they

create. Enclosed you will find the story of a company's humble beginnings to the multi-

national mega-conglomerate that oversees a portfolio of over 40 beers and brand

variants. The APB group operates an extensive global marketing network that spreads

across 60 countries and is currently supported by breweries in 12 countries. APB has

been consistently ranked as one of Asia's top companies by the Far Eastern Economic

Review, as well as by KPMG for consistently delivering a value added product to

customers and shareholders (5a).

History of Acquisitions

In 1932, MBL completed construction of a new brewery where Tiger Beer was

introduced. Tiger Beer, a rich pale lager known for its smooth taste was the beginning of

several other acquisitions and investments that would define MBL as a respectable and

successful company. As strong demand for Tiger Beer grew the brewery was forced to

expand in 1937 and again in 1939. MBL's huge success resulted in the 1941 acquisition

of the Archipelago Brewing Company, which accommodated demand, launched into new

markets and gave the company a new brand, Anchor Beer. Although demand reduced

temporarily during World War II, MBL’s focus was to continue its international growth

pattern. In 1958, MBL purchased South Pacific Brewery of Papua New Guinea; thus

resulting in another premium beer, SP Lager, being added to MBL's list (9). Until

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1990, MBL had dominated the Malaysian and Singapore markets and decided to adopt a

new branding strategy to enter the premium beer category. This effort led to high

advertising spending in long running television series and exciting cinema-style

advertisements. Also, in 1990, MBL took on the name Asia Pacific Breweries (APB).

During the 1980s, ABP decided to partake in a diversification initiative to commercially

combine its Anchor and Tiger Beer breweries. The result was a state-of-the art brewery

in Tuas (Singapore). Attempting to position itself into China, APB purchased a

controlling amount of shares in Shanghai Mila Brewery, which developed and launched a

Chinese beer called Reeb Beer. This beer's success helped create two more breweries in

the early 1990’s. One of its last major pushes to move internationally during the 1990s

was garnering a 27% stake in DB Group for $245 million. The DB group, formally

known as Magnum, operated a brewery and a wine-making facility with holdings in

hotels and pubs. Under the influence of APB and Fraser & Neave, however, the DB

Group gained a 54% share of the company displaying its growth strategy (9).

Operations

The group's operations are supported by a network of 14 breweries throughout Singapore,

Thailand, China, New Zealand, Papua New Guinea, and Indochina countries. They brew

such brands as Tiger Beer, Heineken, Anchor, Baron's Strong Brew, ABC Extra Stout,

Guinness Foreign Extra Stout, Reeb, Tui, DB Draught, Export Gold, Monteith's, Touche,

SP Lager and Amber Stout. In May 2006, Anheuser-Busch was appointed the importer

of Tiger Beer in the USA. The tie-up has since given APB access to a strong network of

500 wholesalers and Tiger Beer is currently traded in 48 of 50 states in the US.

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World Renowned Taste - APB's Beer Brands

Tiger Beer

Tiger Beer is available in over 60 countries worldwide including Europe, USA, Latin

America, Australia and the Middle East. In the western markets such as the UK and

USA, Tiger Beer has been embraced as a leading premium lager that hails from the Far

East. Currently this authentic Singapore brand can be found in over 8,000 premium

bars/clubs and distribution outlets in UK's major cities such as London, Manchester,

Leeds, and Newcastle (5a).

Tiger Beer Accolades and Awards

Over the years, Tiger has received scores of acclaim from the world's leading newspapers

and journals. The Asian Wall Street Journal rated Tiger "the best among 18 brands".

The London Sunday Times singled it out from a

field of 250 brands for its "balance, clean taste,

and aroma". The New York Times attributed

Tiger's success to its "carefully brewing process".

The Washington Magazine, in a blind taste-test

involving several hundred brands, unanimously voted Tiger as "positively the best beer in

the world". In 1994, the Tiger Brewing Company out-shined the competition and

redefined the brewing standards in Asia by winning the prestigious ISO 9002 certificate

by Lloyds of London. This was the first time an Asian brewery was granted this award

and becoming one of the only few in the world to be a part of this elite fraternity of beer

makers. APB continued on to win the 1998 Brewing industry International Award

(BIIA), considered the "Oscars of Beers". Tiger Beer has become such a recognizable and

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much sought-after import premium beer in UK that it was named UK Cool Brand Leader

each year from 2004 to 2006. Tiger Beer also topped a list of 50 beer brands and was

crowned the "NUTS" Beer of the Year 2004. That same year it won a gold medal at the

World Beer Cup for European Style Pilsner. In 2005 it won a silver medal for in the

premium Lager category at the Wine and Spirit International Beer Challenge. In total,

Tiger Beer's award-winning taste has picked up over 40 internationally acclaimed

accolades and awards since 1939 (5a).

Heineken

Established in 1864, Heineken is one of the APB staple beers brands. It is embraced by

drinkers in over 170 countries and enjoys the widest international

presence of any international beer brand. Distinctive for its green bottle,

its exclusive image finds rapport with consumers who enjoy cutting-edge

music experiences and premier sporting events. It is the flagship product

of the company and is made of purified water, malted barley, hops, and yeast and is force

carbonated. Heineken beer is a Dutch beer, brewed by 40 breweries in 39 countries

around the world (21a).

Anchor Beer

Anchor, APBs third main beer brand, was first brewed in Singapore

over 70 years ago using German technology and brew masters. "The

Smooth Pilsner Beer" branded beer is positioned in the market as a

value-for-money product with a refreshing and crisp taste that appeals

to drinkers in over 10 countries throughout Asia. In 1998, it was awarded the gold medal

from at the Australian International Beer Awards (21).

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Baron's Strong Brew

Baron’s Strong Brew was launched in Singapore in 1997 and is regarded as "European to

the last drop". Traditionally blended from the finest European hops and

malt for a strong smooth taste, Baron's delivers a message of solid

European heritage, along with high alcohol content. The packaging is

distinctive in design, reflecting its premium image and quality. Golden

amber in color, it is comprised of dried apricot, wet barley, and panettone which gives

off a slight floral bath oil aroma. A round, frothy entry leads to a fruity medium-full body

of fruit bread, praline, and peppery spice flavors. Finishes with a warm bread, sea salt,

and honeyed herb fade of hops. This brew won the selection Mondaile gold medal in

2007 and the Brewing Industry International Awards gold medal in 1998 and 1999 (18).

ABC Extra Stout

APB's proprietary ABC Extra Stout reflects its core drinker's values and self-image.

Appreciated for its full-bodied and robust taste, ABC is the leading

premium stout in Cambodia. In conjunction with the Chinese New Year

APB had introduced a ginseng infused version of their flagship ABC

Extra Stout. Brewing manager, Tai Seng Kong, said "We felt that

adding ginseng, a traditional Chinese herbal root known for its

medicinal properties, would give a refreshing twist to the original version of the stout." It

is black in color with decent brown head but has a sweet alcoholic nose with notes of

roast, coffee and licorice. The flavor can be described as wet burning wood/smoke as

well as sweetish bitterness like old black coffee. In 1995 it won the bronze medal at the

Australian Beer Awards (7).

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Tour of the Brewery

Logistics

To see how all these award winning beers are made you do not have to travel all around

the world. Your only stop need be at The Tiger

Brewery Tour in Singapore. Opened in 1989 as a

technical marvel amongst breweries it is a top-notch

facility that produces the beers of APB.

Visitors can look forward to experiencing the sights, sounds and smell of beer in the

making at the brew house as they are embarking on a fascinating journey to gain insight

into fine natural ingredients of the beers of APB. The tour is conveniently conducted in

English and lasts about 30- 45 minutes (4). Below is the description of what one will find

when touring the brewery.

Where it all begins

The brewery’s friendly Tour Ambassadors will lead your beer journey. Your first stop

will take you to the visitor’s gallery that displays the brewery's humble beginnings as

Malaysian Breweries to its current state as a mega international company. The next stop

on the tour is to the brew house where you will find large metal tanks churning away at

high temperatures as it transforms malt from its roasted state to the chilled beverage

(19). Beer in general is made of malt, hops, yeast, and water. Malt in the form of barley,

sorghum or wheat supply starch is converted by yeast into alcohol and carbon

dioxide. Mixing the ingredients is only a small portion of beer making, APB strives

to only using the best and finest ingredients from around the globe. The malted barley

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hails from Australia and Europe, only the choicest hops from Germany, and a unique

strain of yeast is cultured in Holland especially for the Tiger brand. With a nice even 5%

ABV (alcohol by volume), the Tiger Beer brand is said to go perfect with a curry dish by

some of the locals. It is legend that only 10 living people in the world know the recipe to

Tiger beer (19).

As you stroll through the brew house, you will smell the unmistakable happy

fragrance. As you continue on you will be able to examine the barley grains on display

and smell the empty cans of hops extract. According to the tour manager, the brew house

make 8 brews a day, with each brew taking 8 hours to complete. As you are walking

around you may begin to wonder why it seems like a ghost town with not a soul to be

seen. This is largely because the workers are primarily in the control room. There you

will find technicians working away on specialized computers that automates the exact

amount of grain and water that passes through the process. This is a state-of-the-art $240

million dollar facility that turns out one million hectoliters (26 million gallons) of beer

per year. In an effort to continually exceed customer expectations, APB benchmarks

itself against international brewing standards and observes the most stringent brewing

process. The process includes taste testing over 10 different water samples a day for the

freshest water available, and more than 250 quality checks. This is 50 more than most

other beers and makes up part of a brewing process, which takes over 500 hours (19).

Packaging Facility

Next on the tour is the packaging

area where you will find horizontal

and vertical tanks containing the

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final product. Heineken beer is found in the horizontal tanks and is positioned that way

because that is how the Europeans do it, no other reason. In turn, those with Tiger beer

sit upright. One of the quirky things you will get to experience is the beer trivia provided

by the tour guides. You may be asked trivia such as "Why was Tiger Beer called Tiger

Cub during WWII"? Answer: During the war, many ingredients were scarce and much of

the beer was watered down.

As you continue on the packaging facility, you will notice another absence of people.

This is also due to the fact that the $40

million packaging facility is automated

with robotic arms and conveyor belts

doing most of the work. They are able

to package 40,000 cans and 80,000

bottles in 1 hour! With such high

demand for its product, APB has recently decided to invest $24.3 million to upgrade this

production facility. Such upgrades include replacing two 15-year-old beer bottling lines

in their facility with modern, high-technology lines from KHS AG.

The new facility is designed to boost operational efficiency while allowing for the

creation of complex products and packaging. As a result, the company will be able to

compete more effectively against other beers in its export markets in the United States

and the United Kingdom. APBS are also aiming to cater to niche market demands. In

today's alcohol beverage market, packaging is just as important to the consumer as the

product (16).

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Unwinding

After a trying day of touring the facility, you may find yourself exhausted and ready to

wind down. You can stop off at the souvenir

shop for some mementos to remember such a

special occasion. Then it's off to the Tiger

Tavern, which serves beer straight from the brew

house. For half an hour you can relax, shoot

some pool, and enjoy the fresh beer that is served bitterly cold (16). So enjoy your time at

the brewery and drink up.

Community & Environmental Impact

The Singapore Art Museum and Asia Pacific Breweries Foundation have a long term

partnership aiming at recognizing and promoting contemporary art in Singapore and in

the Asian Pacific region. The Foundation's philanthropic commitment spans three major

areas, which include creativity development, human excellence, and humanitarian causes,

two of which are described below. The Foundation proudly provides grants, as well as

other forms of financial support to over 150 countries around the world. The financial

support provided by the Foundation benefits disadvantaged homes and charitable

organizations, medical research entities, theatre and music groups, as well as scholarship

programs (2).

Creativity Development

The Foundation launched the APB Foundation Inspire Program, which is designed to

fund plans drawn up by adopted arts organizations and artists that would bring their work

to the next level. Through the program the adopted beneficiaries each receive

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S$30,000/year ($22k), not to exceed three years. The APB Foundation has partnered

with the Singapore Art Museum in order to promote contemporary art in Singapore. This

partnership has introduced the APB Foundation Signature Art Price, which is the highest

juried Art Price in the region. This prize recognizes unparalleled contemporary artworks

and is organized once every three years over a period of 15 years (2).

Humanitarian Causes

Over the years, the APB Foundation has engaged in providing aids to disaster relief

missions and funding associations and charities such as Beyond Social Services and Bone

Marrow Donor Programme. More recently, the Foundation also supported the Singapore

Volunteers Overseas Specialist Team (Palliative Care) Project to enable Vietnamese

medical professionals to provide better palliative care for the cancer stricken patients in

Vietnam(2). As a responsible beer company, APB believes in contributing to the

communities in which its breweries operate. While the Asia Pacific Breweries

Foundation has been fulfilling a philanthropic commitment to society, APB's breweries

have also demonstrated their dedication to the society in which they are based. The

breweries have each in their own ways, supported causes in education, community

welfare and the advocacy of responsible alcohol consumption. The commitment of APB

to environmental protection and worker safety extends throughout the organization. Apart

from seeking to continually improve its environmental performance by operating more

efficiently and reducing waste, APB also takes the responsibility of providing a safe

workplace very seriously. The company's Environment and Safety Report provides a

comprehensive overview of APB's activities, which include how the company's

performances measure up to the standards it sets for itself (2).

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The Future of APB

Realizing success from its early entry into the Indochina region and actively participating

in the world’s largest beer market, China, APB’s relentless desire to be the leading

brewer in the Asia Pacific region has driven it to chart new growth paths into emerging

markets – South Asia, Mongolia and Laos in recent years. Continuing its rationalization,

APB’s growth and regional presence shall continue to increase in the years to come (2).

Consider the growth of the beer market in recent years and the aggressive predictions for

future growth in China, Laos, and India alone. These countries have enjoyed significant

increases in disposable income and that translates into increased beer sales. APB has

every intention of being well positioned to benefit from the growth as evidenced by its

already strong presence in China, the completion of a new brewery in Laos, and the

recent announcement that Tiger beer will now be locally produced in India (6).

Expansion in Laos

Vientiane, Laos is the latest addition to APB's growing list of breweries. Barely a year

after opening the new brewery in Mongolia, APB will now be able to introduce the

people of Laos to its locally produced Tiger beer. The significance of the brewery in

Laos is that now APB has complete presence in Indochina. The brewery will be a state-

of-the-art 80,000 gallon facility and represents the company's long standing ambition of

having a brewery in each of the Indochina countries. Much of the company's future

success rides on this fast growing region, which accounted for almost 50% of total profit

last year (2).

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Indian Market

In addition to new breweries, APB has big plans for India. First, by making Tiger beer

more available as a result of local production in Mumbai, discerning Indian drinkers will

now have better access to high quality, premium lager. Next, by running a strategic

marketing campaign to attract young, trendy Indian beer drinkers, APB will build a brand

appeal that will allow further success to the north in New Delhi and to the south in

Andhra Pradesh. Finally, APB plans to roll out the Tiger brand to the entire country of

India; a country whose beer market is expected to reach almost 6.2 million gallons by

2012 (6). Beyond the Tiger beer brand, APB has just recently launched Baron beer in

India and a few other south Asian countries. Baron is a strong beer, which will do well in

a country that reports some 70% of its beer market from the strong beer category (12).

Forward Looking

North Vietnam is also a major contributor to the Indochina region and will now be able to

enhance its contribution with the expansion of the Hatay location complete. This

expansion is in line with the company's future plans to "grow bigger and stronger in that

market" said CEO, Mr. Koh Poh Tiong (2). He states, "Regional expansion has always

been a critical cornerstone of APB’s growth strategy as we work towards our aspiration

of becoming the leading brewery group in the Asia Pacific region. As we press on with

our regionalization strategy, we shall continue to set our sights on new markets where our

entry and participation will allow us to further extend our footprint and capture a larger

share of the profit pool in those markets,” explained Mr. Koh (2).

New product development will continue to be the fulcrum for many players in the

alcoholic drinks industry with their long-term lenses focused on attracting the younger

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drinking population to their brands. Considerable amounts of effort by alcoholic drinks

companies have been channeled into creating value for their drinking consumers that

extends beyond simple novelty. The increased focus on lifestyle marketing, brand-themed

events, exciting new cocktail infusions as well as new product variants and flavors are set

to ripple through the local industry for alcoholic drinks. The prospect of elevating into the

evoked set of brands of the affluent younger consumers during repeat purchases remains

an attractive aim for leading alcohol brands and distributors (16).

Key Questions

1. As your presence continues to grow throughout the Asian Pacific region, what are

your intentions for expansion into North America, if any?

2. How do you respond to shareholders asking about your falling stock price?

3. With your recent CEO, Dr. Michael Fam stepping down, how does the change in

leadership with Simon Israel impact the direction of APB in the short-term?

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References (1) Asian Pacific Breweries (2001). Asian Pacific Breweries 2001 annual report, pages 20-24. Retrieved April 14, 2008. (2) Asian Pacific Brewery (2007) Singapore art museum and Asia Pacific Breweries Foundation announce a 15-year partnership and the APB Foundation signature

art prize series. Retrieved April 10, 2008, from http://www.apb.com.sg/newsroom/news_071030.html.

(3) Asian Pacific Breweries (2008). Asian Pacific Breweries reports a good head start for

the first quarter. Retrieved April 6, 2008, from http://www.apb.com.sg/newsroom/news_080214.html.

(4) Asian Pacific Breweries (2008). Brewery tour. Retrieved April 19, 2008, from http://www.apb.com.sg/exp-breweryTour.html. (5) Asian Pacific Breweries (2008). Investor Relations Stock Charts. Retrieved April 2, 2008, from http://www.apb.com.sg/ir-StockCharts.html. (5a) Asian Pacific Breweries (2008). Tiger beer fact sheet. Retrieved April 21, 2008, from http://www.apb.com.sg/brand-tigerfactsheet.html (6) Bloomberg (2008). Asian Pacific Breweries. Retrieved April 19, 2008, from www.bloomberg.com/apps. (7) Beer Pal (2006). ABC extra stout. Retrieved April 4, 2008, from

http://www.beerpal.com/ABC-Extra-Stout-Beer/26830/. (8) Beverage Manager (2008). Asia Pacific Breweries inaugurates new brewery in Vientiane. Retrieved April 16, 2008, from

http://www.bevmanager.com/article/article/laos-asia-pacific-breweries-inaugurates-new-brewery-in vientiane.html?tx_ttnews%5BbackPid%5D=8&cHash=5999e6c1b7.

(9) Cohen, M.L. (1988). Asia Pacific Breweries Unlimited. International

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(10) Homebrewer (2007). ABC extra stout with ginseng. Retrieved April 11, 2008, from

http://homebrewer2005.blogspot.com/2007/03/abc-extra-stout-with-ginseng.html. (11) Hoovers (2008). Asia Pacific Breweries Limited. Retrieved April 18, 2008, from

http://www.hoovers.com/asia-pacific-breweries/--ID__61376--/free-co-competition.xhtml.

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(12) India E-News (2008). Asian Pacific Breweries launches new beer. Retrieved

April 19, 2008, from www.indiaenews.com/business.

(13) Stout, J.C. (2007). Big brewers pour into emerging marketing. Retrieved April 4, 2008, from http://www.businessweek.com/investor/content/jun2007/pi20070604_644419.htm

(14) Kwock, V.W. (2008). United breweries chairman wants back Heineken's stake.

Retrieved April 5, 2008, from http://www.forbes.com/markets/2008/03/28/united-brands-heineken- markets-equity-cx_vk_0328markets02.html.

(15) Marketing Interactive (2008). Tracking the Asian tiger. Retrieved April 18, 2008,

from http://www.marketing-interactive.com/news/5103. (16) Packaging Gateway (2008). Asian Pacific Breweries production facilities upgrade,

Singapore. Retrieved April 10, 2008, from http://www.packaging-technology.com/projects/asia-pacific/

(17) Richardson, M. (1991) Singapore brewer building a regional presence. Retrieved

April 5, 2008, from http://www.iht.com/articles/1991/08/10/brew.php (18) Tastings (2008). Baron's strong brew malt liquor. Retrieved April 3, 2008, from

http://www.tastings.com/scout_beer.lasso?id=181969. (19) Tan, Y. (2006). Simply Her. Pg 110. (20) Wall Street Journal (2008). Heineken: Asia Pacific Breweries opens new brewery in

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