By Natasha Bach
August 3, 2018

Heineken has its eyes on the Chinese market.

The Dutch brewer announced a $3.1 billion partnership with government-controlled China Resources Enterprise (CRE) on Friday, in the hopes of tapping into the world’s biggest beer market.

Heineken (hkhhf) will take a 40% stake in CRE’s holding company CRH Beer Limited, which owns CR Beer, while CRE will buy a 0.9% stake of Heineken for $538 million and will license the Heineken brand domestically.

While beer consumption in China has declined overall in the last five years, a taste for premium beer has grown significantly, according to Euromonitor, growing into the second largest premium beer market in the world. China’s beer market is also the world’s largest by volume.

The partnership between Heineken and CR Beer is intended to give the former a greater distribution network, thereby bolstering its ability to challenge Anheuser-Busch InBev’s position in China. The perception of Heineken as a premium brand, in turn, will allow CR Beer to add to its premium beer portfolio and thereby reach more consumers.

Heineken CEO Jean-Francois van Boxmeer echoed this sentiment, saying that CR Beer “lacks a premium brand for growth,” while Heineken lacks the “distribution reach” that CR Beer has.

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