American Entrepreneur Bringing New Chinese Beer to U.S.

Mao's brew

By Terril Yue Jones

Forbes Magazine

October 5, 1998

MAO TOASTED WITH IT. In 1957 Zhou Enlai anointed it China's state banquet beer. Established in 1915, Five Star beer is an old standard in China, but just about unknown beyond its borders. Jack Perkowski hopes to change that.

A Beijing-based American entrepreneur, Perkowski runs Asian Strategic Investments Corp. (Asimco), an investment outfit that bought control of Five Star Breweries in 1995. Starting with Chinese restaurants, and counting generous dealer incentives, he predicts first-year sales of 600,000 cases in the U.S. -- well below 1% of the U.S. market, but a good start. If Americans like it, Five Star will appear in European, South American and Southeast Asian markets.

Perkowski, 50, is a former head of investment banking at PaineWebber who started Asimco in 1994 to set up auto-component-manufacturing joint ventures in China. It now controls 15 such operations and 2 beer ventures, with combined annual revenues of around $250 million. This June Perkowski brought in GE Pension Trust as a strategic investor, owning a third of the company.

In 1994, after several months of wrangling with bureaucrats, Perkowski agreed to invest $60 million in government-owned Five Star in exchange for 62% of the company. Getting control was the easy part.

Creating a real business from it was a lot tougher. Laughs Perkowski: "After a while I told the general manager at the time, 'Gee, it would be nice if you came to the board meetings and brought some numbers.' So he comes to the next meeting, pulls out three sheets of onionskin paper and says, 'Here's a number.' "

Perkowski replaced the fellow with a former piano factory manager who had impressed him, and brought in Western management techniques and brewing experts to enhance the beer's consistency.

Two previous efforts by Five Star to explore the U.S. market foundered. This time Perkowski lined up Kurt Krause and his Cocoa Beach, Fla.-based Northland Beverage Corp. as distributor. "We liked the Five Star name, which is easy to pronounce, the fact that it was the official banquet beer and that Asimco and GE were behind it," says Krause.

Five Star will be up against Tsingtao beer, made by Tsingtao Brewery Co. Ltd., which dominates the Chinese restaurant market in the U.S. Five Star hopes to edge in on the strength of its light beer -- Tsingtao no longer offers one. At its peak in 1988, publicly traded (in Shanghai and Hong Kong) Tsingtao sold over one million cases in the U.S., but last year the number was 800,000. This in a market where imported beer has been growing at up to 14% annually.

Perkowski is counting on dealer incentives and point-of-sale promotion in Chinese restaurants rather than on heavy advertising. In supermarkets he's counting on cost: Five Star will be priced at $5.99 (retail) per six-pack, at the low end of the premium beer market, along with Tsingtao, Heineken, Corona, Foster's, Beck's and San Miguel. As brand awareness grows, he expects Five Star to invade the mainstream restaurant market: "People drink Corona even though they're not in a Mexican restaurant," Perkowski observes.

Perkowski is by no means ignoring the Chinese market. Chinese swill nearly as much beer as Americans, but there are literally hundreds of beers; Perkowski believes the business is ripe for expansion and consolidation, as China changes from a system of fragmented markets into a true national market.

Asimco also controls Three Ring Brewery, just north of Beijing, maker of Yunhu (Cloud Lake) beer. That could be next for export. Gan bei!