Lion ups market share and volumes in NZ despite falling beer consumption

Thursday 6th August 2015

Increased promotional activity has seen Lion gain market share and grow beer, wine and spirits volumes in New Zealand by 1.3 percent, despite intense competition and continued margin pressure.

Lion, owned by Japanese drinks giant Kirin, reported an overall 7.5 percent drop in operating earnings in a trading update for the half year ending Mar. 31 as mainstream beer sales continue to decline. Total sales volumes in its beer, spirits and wine business fell 2.8 percent in Australia in line with the total market downturn on the back of new drink driving laws and consumers becoming more health conscious.

Its dairy and drinks business also suffered a 19.4 percent drop in sales volumes, mainly due to the loss of some retail own-brand milk contracts in the fourth quarter of the 2014 financial year.

Lion said while market conditions in New Zealand remain challenging, it has a strong innovation pipeline in the growing mid-strength beer segment. The December launch of Speight’s mid-strength ale on tap in December was already exceeding expectations and Mac’s Mid Vicious Pale Ale was performing well as a full-flavoured, mid-strength craft offering, though it didn’t provide sales numbers.

In the craft beer portfolio, Lion said Mac’s was posting solid growth following a “major re-stage” during the half, including new packaging and several new product launches, while the new Emerson’s Brewery in Dunedin is on track to open next year.

Lion also secured a long term agreement during the half year to be the exclusive beer supplier to Air New Zealand on domestic and international flights and all lounges.

Lion chief executive Stuart Irvine said the company had a strategy to invigorate the beer category over the second half as the total beer market drop “intensified” in the first six months. It has a 48 percent market share of the Australian beer market and around 46 percent in New Zealand.

In March this year, Lion sold its low margin everyday cheese business for A$137.5 million, focusing instead on higher value dairy products such as flavoured milk and yoghurt.

Irvine said its dairy and drinks business was in the first year of a three year turnaround with Dare iced coffee now out-selling Coca Cola in the convenience store channel in Australia and Farmers Union Greek style yoghurt hitting number one in Australian yoghurt sales.

“While it’s still early days, our recently formed Lion Asia Dairy business is also making solid inroads. We already have category leading yoghurt brands in Singapore and Hong Kong and a branded white milk presence in China, Singapore and Malaysia.”

Its recently opened Tasmanian specialty cheese site, The Heritage, is supporting its domestic growth plans and its push to take premium speciality cheese brands into Asia, he said.

BusinessDesk.co.nz

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