Better marketing is needed to capture Chinese drinkers

S&N, which brews Fosters and Kronenbourg, confirmed it is in talks with Chongqing Brewery Group but said "no definitive agreement has been concluded".

Its statement said the talks have "several elements, including the possible injection of new assets and S&N making a minority equity investment in CBG".

CBG, however, gave precise details of an equity injection, saying S&N would buy 50 million non-tradable shares at 10.50 yuan each.

Sour taste

S&N said it hopes to deepen its 10-year relationship with CBG and strengthen the Chinese firm.

Their relationship seemed to have developed a glitch on Friday.

"They've made an announcement because they felt obliged to," S&N spokesman John Kiely told BBC News Online.

"But from our point of view we're not in a position to complete the negotiations...so we're not in a position to provide more details," he added.

S&N brews its McEwan ale brand in China in CBG's facilities, he said.

Amber nectar gold rush

Chinese people drank 40% more beer last year than in 1997, industry figures show.

But consumption still lags behind far behind neighbouring Japan: Chinese drank 18 litres of beer each last year compared to 50 in Japan.

Industry experts see consolidation, brand building and better national distribution as the key to growth.

"S&N will have a say in managing our operations and help us expand, with the eventual aim of marketing our beer in Europe," said S&N spokesman Deng Wei.

The prospect of a huge growth in sales has already prompted Anheuser-Busch and SABMiller to buy stakes in Chinese brewers.

S&N sold off its UK pubs in 2003 to concentrate on selling beer and building its brands.

CBG's shares rose more than 2% in Shanghai on the news.