Vancouver-based Russell Brewing Inc. (TSX-V:RB) announced that it has signed a letter of intent (LOI) with Vancouver-based FVI Capital Inc. to provide non-exclusive rights for the import, production, packaging, marketing, selling and distribution of Russell brands and merchandise in China.
"We are extremely pleased that FVI approached us to partner in their entry into China with North American style craft beers," said Brian Harris, Russell's CEO.
"Over time, we believe that the revenues and relationships we derive from this agreement will add substantial shareholder value to our company."
The LOI sets out deal terms, which involve FVI setting up a new company, which would pay an initial licence fee and ongoing royalties to Russell on up to 50,000 hectolitres of beer.
According to Russell, the initial royalty stream would produce over $1 million in revenue for Russell.
As part of the agreement, the new company will have a four-year option to acquire an exclusive licence for the entire Chinese market for an additional license fee payment and ongoing per-hectolitre royalty payments.
Russell expects a definitive agreement to be completed within 30 days.
Wang Guodong, former chairman and CEO at one of China's top 15 breweries, will head up the new company as CEO.
"Even though premium craft beer is still a relatively new concept in China," said Wang, "there are significant business opportunities and potential for craft beer makers as China is now the largest and fastest-growing beer market in the world."
As of press time, Russell stock had risen 20% to $0.03.
In January, Russell posted a loss on the quarter that ended September 30.
