Milk is set to experience its greatest transformation in 100 years with two of Australia’s largest brands simplifying the milk manufacturing process to omit permeate, a watery by-product of milk production. As a result, shoppers across Australia will be able to choose milk that is as close to how it is on farm as possible. 

Responding to consumer demand for purer, simpler and less processed food that comes from local sources^1,2,3, PURA in Australia’s western and southern states and Dairy Farmers in the eastern states are two of Australia’s leading milk brands to provide fresh milk that’s less processed – the way consumers want it – from 1 July.

“We have listened to our consumers. Three out of four told us they’re becoming more concerned about how processed their food is¹,” said Libby Hay, External Relations Director, Lion.

 The latest research into the nation’s attitudes to food quality highlighted that nine out of ten Australians who check for additives and preservatives and the level of processing a product has undergone would choose a less-processed option if available¹.

 “We looked at our manufacturing process and realised that adding permeate was not essential, so it was an easy decision to remove it from our milk,” said Hay.

 “By not using permeate, the natural seasonal variations in protein will flow through into our rich, creamy milk, providing a product that is the purest quality milk.”

Consumers who prefer their milk closer to nature should look out for the ‘permeate free’ label on PURA milk in WA, SA, Victoria and Tasmania and Dairy Farmers in NSW and Queensland.

Accredited Practising Dietitian Geraldine Georgeou believes this is a great initiative because it gives consumers another milk option that is naturally full of milk’s nutrients like calcium.

“With access to more information than ever before, consumers are demanding high standards when it comes to the food and beverages they give to their loved ones, with recent research into food trends highlighting almost half need to know where their food comes fromas well as what’s in it,” she said.

ENDS
For further information or interviews with Libby Hay and/or Geraldine Georgiou, please contact:

 What is permeate?

Permeate is a watery by-product of milk processing. Some dairy companies add it to milk to dilute the protein levels throughout the year. Protein levels in milk fluctuate due to seasonal variations . Not adding permeate simplifies the milk manufacturing process and delivers milk which is closer to how it is on farm.

Dairy Farmers permeate free milks include: Dairy Farmers Original New Lite White Skim   Available in NSW and QLD   PURA permeate free milks include: Pura Original, Pura New (VIC/TAS), Skimmer (SA), Hi-Lo (WA) Pura Light Start Pura Tone

About PURA
The PURA brand was established in 1935 when German farmer Albert Siebel purchased a dairy in Preston, Victoria and named it PURA Dairy.

From a one-cart dairy delivering to only a few streets, 75 years later PURA has helped build generations of happy, healthy Australians around the country through the simple pleasure of great tasting milk.

PURA permeate-free fresh white milk can be purchased in Victoria, Tasmania, South Australia, Western Australia and Northern Territory from 1 July 2012.

About Dairy Farmers
Dairy Farmers has been proudly sharing its quality milk since 1900. Dairy Farmers’ farmers are committed to producing the highest quality milk, which is used to create some of the nation’s best loved dairy products.

In 2011 Dairy Farmers was voted Most Trusted Dairy Brand by Australians in Readers Digest.

Dairy Farmers permeate-free fresh white milk can be purchased in NSW and Queensland from 1 July 2012.

References
¹ Online survey conducted by TNS from 27-29^th April 2012 amongst 1346 Australians aged 16-64 years
² Hartman Group – Looking Ahead. Food Culture 2012 Pages 13, 29, 53
³ Innova Market Insights – Top Ten Trends in Food for 2012

 Brent Whelan, Lion Dairy Beverages Marketing Manager says the unique concept targeted the hard to reach 20 to 30 year old audience, traditionally Dare Iced Coffee’s greatest brand adorers.

 “Many of our target audience find commercial breaks annoying, so Dare has set out to fix their boring moments by making it entertaining and worth tuning in for,” he says. “The three minute ad break concept was conceived by SMV and centres on providing engaging content with an irreverent and switched on solution to an everyday problem.

” Fans will be able to upload their everyday dilemmas on the Dare Facebook page for their chance to win $30,000 and have their problem fixed Dare-style on national TV during the final segment. The three minute ‘A Dare Iced Coffee Fix’ll Fix It’ ad break series will run every fortnight from 17 April to 26 June.

Dare Iced Coffee belongs to the dairy beverages category, whose total market size is 234 mL and growing at seven per cent, with the iced coffee segment growing at 17 per cent.¹ “We’re seeing real growth in the iced coffee segment because it is on trend and delivers to busy consumers’ need for energy and convenience, capitalising on Australia’s growing love affair with coffee,” says Mr Whelan.

 “The success of the dairy beverages category overall is uniquely Australian and in particular, the rising popularity of iced coffee variants such as Dare is driving this growth.” The campaign premieres on Channel 9 on Tuesday 17 April from 9pm. Watch the segment here: http://youtu.be/I7nwwM2XyQk ¹: Source: Dairy Australia, 2011

Media contact: Libby Hay 0419 368 744

While no formal business names will be used other than Lion, category and geography will be employed informally to distinguish between business units as required:

• Beer, Spirits and Wines, Australia (formerly Lion Nathan Australia)
• Beer, Spirits and Wines, New Zealand (formerly Lion Nathan New Zealand)
• Dairy and Drinks (formerly National Foods)

Lion Chief Executive Officer Rob Murray said the change to the corporate brand is the next stage in the evolution of the company. “We became Lion Nathan National Foods in October 2009 when Kirin Holdings purchased the remaining shares in Lion Nathan, and merged the company with its foods business, National Foods.

“Since then we have come a long way in integrating our business, and our new name reflects our shared purpose and identity.”

The formal rollout will occur in August and continue through to November.

For further information please contact:

Leela Sutton

Corporate Affairs Manager

02 9290 6645 / 0402 260 540

Leela.sutton@lnnf.com  

LNNF’s overarching strategy is to invest in its people and a focussed portfolio of high potential brands to drive sustainable results in the long term. Business integration is progressing to plan.

Like most operations in the retail and consumer goods sectors, LNNF’s key business units experienced tough market conditions in the December quarter.

LNNF CEO Rob Murray said: “Rising interest rates and power costs, increased saving and the ongoing economic uncertainty have impacted consumer spending in the FMCG and retail sectors in both Australia and New Zealand. Conditions in the December quarter were particularly challenging. For LNNF, this flowed into early 2011 where circumstances were compounded by two external shocks, the earthquake in Christchurch and floods in Queensland.”

Lion Nathan

While premiumisation and improvements in mix lifted revenue per litre by around 4% on the prior period, lower volumes lead Lion Nathan Australia (LNA) to deliver revenues of $430.2 million, down 11%.

Overall market share fell slightly; with the majority of the decline due to a contraction in the Queensland market with the floods a key contributor. Queensland is LNA’s highest share market.

LNA’s master brand portfolio grew its share of portfolio mix. The XXXX trademark extended its impressive growth with new variant XXXX Summer Bright Lager delivering the biggest incremental sales growth of any brand in Australia.

Australia’s leading craft beer trademark James Squire delivered impressive growth of 23%¹ following a focus on innovation and marketing initiatives.

During the quarter, the Australian beer business conducted a recall on select batches of key brand Boag’s due to a packaging fault. While significant effort was made to minimise impact on supply, there was a one-time volume impact in the quarter.

The New Zealand market continued to be challenging due to tough economic conditions and ongoing cautiousness among consumers. 

Lion Nathan New Zealand (LNNZ) delivered revenues up 9% at NZ$204.7 million assisted by the first time inclusion of revenue from wine brands acquired from Pernod Ricard, in particular the Lindauer trademark.

While the quarter saw a decline in beer volumes, particularly on packaged beer, this was broadly in line with the decline in the total beer market. Spirits volumes increased by 5%, while ready-to-drink volumes reduced 3%.

Despite the sluggish market conditions, revenue per litre growth was encouraging with solid value performances from mainstream brands and volume growth in key premium brands, particularly Steinlager Pure and Corona.

Conditions in the wine industry are very challenging with the global slowdown combined with an oversupply of grapes maintaining downward pressure on pricing in domestic and international markets. The strong Australian dollar is undermining returns from key export markets. However, despite this, the Lion Nathan Wine Group saw only moderate volume and revenue declines in the quarter. Wine remains a very small part of LNNF’s business.

National Foods

As previously communicated, conditions in both the dairy and juice sectors remain very difficult for farmers and processors alike.

The combined business has quality brands that require investment to reach their full potential. LNNF is committed to patient investment in NF’s core strategic assets – its people, brands and production assets – to deliver sustainable growth over the long term.

NF is still a long way from achieving an acceptable return on invested capital and faces some considerable headwinds. NF is experiencing significant margin pressures in both dairy and juice. Since the end of the year, the white milk market has seen deep discounting on private label and control brands which threatens to further dilute the profit pool available to all players in the supply chain. In the current year, National Foods return on invested capital is now expected to be well below an acceptable level.

Against this backdrop, the NF business is making good progress in integrating the former NF and Dairy Farmers businesses. The Company recently announced the results of a review of its cheese manufacturing assets as part of the ongoing integration with the former Dairy Farmers business.

As expected, revenue declined 11% to $729.8 million in the first quarter. The white milk market is very challenging, with NF’s white milk volume declining 11%.

There were some noteworthy successes during the December quarter. Dare Iced Coffee again performed well and is growing into a national brand, while the South Cape cheese brand has responded well to increased marketing and sales focus.

For further information, please contact:

Media                                                                  

James Tait                                                          
Corporate Affairs Director                           
61 2 9320 2236                                                  
0400 304 147                                                      

Analysts

Peta Joyce

Stakeholder Communications & Relations Manager

61 2 9320 2254

0400 015 605

About Lion Nathan National Foods

Lion Nathan National Foods brings together great household brand names including Tooheys, Dairy Farmers, XXXX, PURA, Hahn, Berri, Speight’s, King Island Dairy, Boag’s, Yoplait, Wither Hills and COON.

We believe business success comes from investing in our people and brands and by constructively engaging our stakeholders. Lion Nathan National Foods employs close to 8,000 people across Australia and New Zealand and delivers revenues in excess of AU$5 billion.

In addition to direct employment, we make a significant contribution to the Australian and New Zealand economies. We are one of the region’s largest purchasers of agricultural goods and an integral component of the retail, hospitality and tourism industries.

Our products accompany life’s sociable moments, whether it’s a family meal or good times at the pub with mates. The consumption of milk, dairy foods and juice and the responsible enjoyment of alcoholic beverages are all part of a healthy lifestyle for most people, and we aim to maximise the community wellbeing arising from the enjoyment of our products while playing a role in helping the community minimise misuse.

The decision to make a significant upgrade at Burnie followed a six month review of the following National Foods cheese manufacturing sites:

•  Heidi Farm, Burnie, Kings Meadows and King Island in Tasmania
• Murray Bridge and Jervois in South Australia
• Simpson and Campbellfield in Victoria
• Malanda in Queensland.

 The Allansford site did not form part of the review however minor adjustments will occur as National Foods transitions to its new manufacturing platform. National Foods’ Managing Director Andrew Reeves said the National Foods cheese business had evolved through brand and site acquisitions over the past 10 years with little or no manufacturing optimisation. “The review was driven by the need for National Foods to support its market leading brands and develop a long term sustainable business model based on modern and market leading manufacturing practices,” Mr Reeves said

 The six month review considered the duplication in the network (both assets and process), the safety and wellbeing of our people, limitations in productivity and growth, innovation, technology and the long-term viability and sustainability of the sites.Capital requirements to meet environmental standards and plant replacement were also key factors considered.

 The review concluded that it was not sustainable for National Foods to operate multiple manufacturing sites and that investment in world class manufacturing should be focused.  As a result, all specialty cheese manufacture, other than King Island brands, will be consolidated into a single site, preferably to be located in Burnie, Tasmania.

•  In South Australia, 103 people will be transitioned to another manufacturer following the sale of the Murray Bridge and Jervois sites to another interested party.   
• Over the next three years the Simpson and Campbellfield sites in Victoria will be wound down and closed.  This will affect 133 of our people in Victoria. 
• The Kings Meadows site in Tasmania will be closed within three years, affecting 40 roles. Operations at Heidi Farm will be transferred to the Burnie site in Tasmania.  
• National Foods will continue to manufacture high quality products under the King Island brand on King Island and will invest $12 million to ensure this capability.   
• The Malanda site in North Queensland will continue to produce mozzarella cheese in an effort to utilise milk from suppliers in Far North Queensland. 

As part of its planned $120 million investment in the Burnie site National Foods intends the site to have a 25,000 tonne cheese making capacity per annum which requires an additional 10,000m2 building expansion.  Mr Reeves said the proposed Burnie investment was a major commitment from the company to the Tasmanian dairy industry. “Tasmania’s reputation for clean, green and exceptional environmental standards is a good fit for the future direction of the National Foods strategy to create high quality, sustainable market leading brands. “We’re looking forward to working with the Tasmanian government on ways to enhance Tasmania’s position as the premium state for speciality cheese manufacture and innovation.  

“National Foods’ restructure of its cheese business is the key to unlocking further profit and growth potential from the specialty cheese category and our preferred investment in the Burnie site will bring a high level of automation to the plant and realise that potential,” Mr Reeves said. Mr Reeves said that it was unfortunate that sites had been earmarked for closure as a result of the review.

 “We did not take these decisions lightly. Our people at these sites have done a great job producing high quality product for many years. It is critical for our long-term viability that we continually review our operation and make sure we are running as efficiently as possible, minimise duplication and optimise use of our resources. “As a result of this review National Foods will be able to deliver an improved and efficient manufacturing platform to support future growth and innovation. It will also enable us to optimise current and new technology,” Mr Reeves said.  

Mr Reeves said that National Foods would work closely with its affected people.“Many site closures will not be taking place for two to three years, providing our people as much time as possible to consider their future plans. “We will work closely with our people to fully support them through the process, offering outplacement support and free, confidential counselling for our people and their families through the Employee Assistance Program,” Mr Reeves said. 

For more information:                      

Julia Fraser                                                           Suzanne Lewis
Corporate Affairs Manager                                       National Foods
National Foods 
0409 075 308                                                          0467 526 944

julia.fraser@lnnf.com

Lion Nathan National Foods (LNNF) today announced its financial results for the 2010 financial year in conjunction with Kirin Holdings’ full year announcement.

Alignment of reporting year ends to September 30 2010 means the full year results represent a full twelve months for the Lion Nathan (LN) business unit* (October 2009 to September 2010) and nine months for the National Foods (NF) business unit (January to September 2010). NF’s October to December performance was disclosed on 10 February 2010.

LNNF continues to invest in its people and a focussed portfolio of core high potential brands to drive sustainable results in the long term. Business integration continues to progress to plan.

Like most operations in the retail and consumer goods sectors, LNNF’s key business units experienced increasingly tough market conditions in the second half of the financial year. A confluence of poor weather, tighter fiscal conditions due to rising interest rates and a lack of stimulus and also utility price rises combined to dampen consumer spending and reduce the rate of growth achieved in the second half after a relatively strong start to the year.

Lion Nathan

Over the year, LN[1] delivered operating earnings before interest and tax (EBIT) of $597.7 million, an increase of 7.3%.

A solid performance from Lion Nathan Australia (LNA) underpinned this result. Net sales revenue grew 4.1% to $1,654.1 million, while volumes increased by 0.7% including cider or 0.2% excluding cider.

The second half was characterised by strong competitive activity which failed to stimulate volume growth. Despite a strong start, at the end of the year the market was broadly flat in volume terms.

LNA’s ‘master’ brand portfolio continued to grow its share of portfolio mix and now represents 82% of total volume. XXXX Gold continued its impressive growth. The Hahn Super Dry trademark also had a particularly strong year with volume growth of 31% off a large base. Recent innovations XXXX Summer Bright Lager and Tooheys Extra Dry 5 Seeds are now firmly established in the marketplace with both brands exceeding launch expectations. The Boag’s portfolio continues to grow, benefiting from the reach of LNA’s route to market and a significant increase in marketing investment. James Boag’s Premium volumes grew by 21%, while Boag’s Draught grew 11%.

Lion Nathan New Zealand (LNNZ) performed well in challenging market conditions which were exacerbated further by poor weather and the Christchurch earthquake. Total revenue grew by 4.4% to NZ$612.7 million.

The core beer business grew revenue by around 1% against the prior year, realising value in a market in which volume declined overall. Steinlager Classic was a standout performer with double digit value growth, supported by a packaging refresh. The Wines, Spirits and RTD businesses benefitted from the acquisition of distribution rights for Bacardi brands and the successful launch of Mac’s Isaac’s Cider, which has driven strong cider category growth in the New Zealand market.

Conditions in the global wine industry remain very challenging with the economic slowdown combined with an oversupply of grapes putting downward pressure on pricing in domestic and international markets. The strong Australian dollar continued to undermine performance in key export markets. Despite the new acquisitions, wine remains a relatively small part of LNNF’s business and the company remains focussed on driving improved returns from its existing asset base as opposed to transformational growth.

After the conclusion of the financial year, the Company acquired wine brands from Pernod Ricard, including popular sparkling wine brand Lindauer.

LNNF CEO, Rob Murray said: “Our alcohol businesses delivered a solid performance against the backdrop of increasingly challenging market conditions. Consumers continue to trade up to more premium brands and this is driving revenue growth.”

National Foods

While the NF business continues to make progress towards its integration goals, conditions in both the dairy and juice sectors remain very challenging for farmers and producers alike.

While revenue for the 9 months to September declined 5.8% to $2.32 billion, this was impacted by the divestment of the Freshco and Ski assets. Despite an increase in operating EBIT to $99.9 million, the business is still some way from achieving acceptable margins and faces some considerable headwinds. While they have moderated, input costs remain relatively high by historical standards and the business faces ongoing challenges to maintain adequate operating margins in a very competitive retail environment.

NF increased focus on brand investment delivered some significant successes during the year. Dare Iced Coffee was one of the fastest growing NARTD brands in the convenience market, delivering volume growth of 30%. Yoplait Formé launched its ‘Satisfy’ range which saw instant success and cemented the brand as the leading weight-management brand in yoghurts.

NF Managing Director Andrew Reeves said: “While the results are an improvement against the prior year, the business is still some distance from delivering an acceptable profit margin. National Foods intends to remain focussed, continue our integration progress and invest in our strategic assets to create a business fully focussed on the needs of customers and consumers.”

Management changes

Earlier in the week, LNNF announced management changes relating to NF and LNNZ and Global Wine.

Peter Kean, currently Managing Director of LNNZ and Global Wine businesses has been appointed Managing Director NF, from 1 April 2011.

Peter Kean will take over from Andrew Reeves, who is leaving the business to take on the role of CEO for George Weston Foods, based in Sydney.

An announcement on Peter Kean’s successor will be made in due course.

Outlook

Since the end of the year, market conditions for both all key business units have further eroded.

NF continues to experience significant margin pressures in both dairy and juice. Since the end of the year, the white milk market has seen deep discounting on private label and control brands which threatens to further dilute the profit pool available to all players in the supply chain.

Recent weather events have directly impacted key LNNF production facilities and prevented distribution to affected areas. Reflecting the iconic status of our business, particularly in Queensland, the Company has made an investment in aiding the recovery and providing support to its key stakeholders – suppliers, customers and consumers – through a range of programmes.

LN also recently conducted a recall on select batches of key brand Boag’s due to a packaging fault during the peak summer sales period. While significant effort was made to minimise impact on supply, the company is currently assessing the scale of the financial impact.

LNNF CEO Rob Murray said: “Rising interest rates and the ongoing economic uncertainty have had an impact across the FMCG and retail sectors in both Australia and New Zealand. Since the end of the year, this has been compounded by a series of weather events, particularly in Queensland which is a relative stronghold for our business.”

- Ends –

For further information, please contact:

Media

James Tait
Corporate Affairs Director
61 2 9320 2236
0400 304 147

Analysts

Peta Joyce
Stakeholder Communications & Relations Manager
61 2 9320 2254
0400 015 605

View File (PDF, 201kB)

[1] ‘Lion Nathan’ is a reference to the Company’s alcohol businesses, including Australia, New Zealand and Wine unless otherwise referenced

Peter Kean, currently Managing Director of Lion Nathan National Foods’ New Zealand and Global Wine businesses, has been appointed Managing Director of food and beverage company National Foods, from 1 April 2011.

National Foods is one of Australasia’s largest FMCG companies, employing over 4,000 people and producing category-leading brands in milk and dairy beverages, juice, fresh dairy, cheese and soy.

Peter Kean will take over from Andrew Reeves, who is leaving the business to take on the role of CEO for George Weston Foods, based in Sydney.

Mr Kean has been with Lion for almost 25 years, the last six as Managing Director. In 2010 his leadership responsibilities were extended with the integration of Lion’s Global Wine business into Lion Nathan New Zealand.

In making the announcement, Rob Murray, Chief Executive of Lion Nathan National Foods, said Peter Kean’s appointment is a reflection of his success in consistently delivering EBIT targets in a very challenging and highly complex market environment.

“Under Peter’s leadership Lion Nathan has successfully implemented a number of sustainable growth strategies and transformational initiatives including the evolution of the NZ business to a multi-category model comprising New Zealand’s best-loved beverage brands.

“Peter has relentlessly focussed on innovation, brand health, sales execution, increasing customer engagement and developing a manufacturing excellence platform.

“That same commitment will now be applied to National Foods as the organisation continues to invest in its strategic assets to create a business fully focussed on the needs of customers and consumers.

“There is no doubt the operating environment for National Foods is a challenging one, not least of which is because the conditions in both the dairy and juice sectors remain very challenging for farmers and producers alike. Peter’s experience over the past five years in transforming the New Zealand business in similarly challenging circumstances will be critical going forward,” concluded Mr Murray.

Mr Murray also paid tribute to Andrew Reeves’ achievements at Lion Nathan National Foods over a career of eight and a half years with the business, initially as Managing Director of Lion Nathan Australia and for the last year and a half as Managing Director of National Foods.

Mr Murray said: “During his time with our business Andrew has worked tirelessly to build great brands, innovate for growth, create a world class asset base in Lion Nathan Australia and invest in culture and people capability. I would like to thank Andrew for his significant contribution to the business and wish him every success in his new role.”   

Mr Murray indicated the company’s primary focus between now and 1 April would be on facilitating a smooth transition and ensuring National Foods remained fully focussed on delivering on the needs of customers and consumers.

An announcement regarding the role of Managing Director for Lion Nathan New Zealand will be made in the near future.

End

For further information:

Leela Sutton                                                                       Elise Sullivan

Corporate Affairs Manager                                                    Corporate Affairs Manager

0402 260 540                                                                      0405 386 706

Leela.sutton@lnnf.com                                                        Elise.sullivan@lnnf.com

Frequently Asked Questions

What is aseptic stored (cold stored) juice?

Aseptic stored juice is also referred to as cold stored juice.  

Cold stored (aseptic stored) juice is simply fresh juice that has been heated for a short period (in the same pasteurization process we use for all juice), filled in a sterile environment and then refrigerated.  Cold stored (aseptic stored) juice is not boiled; it is not frozen (except for the Berri Australian Grown Winter Blend which contains frozen and then cold stored juice) it is not reconstituted; it does not contain added preservatives or other additives.

Is aseptic stored juice used in Berri Australian Fresh Juice and Daily Juice Company products?

Yes, National Foods uses cold stored (aseptic stored) juice in its products across the Berri Australian Fresh (soon to be called Berri Australian Grown) and Daily Juice Company ranges.  

Why does National Foods use aseptic juice?

National Foods uses cold stored (aseptic stored) juice as a blend depending on fruit availability. This ensures we are able to provide consumers with a consistent product all year round.

How long has the aseptic juice been stored prior to its use?

National Foods typically uses cold stored (aseptic stored) juice within around six months of it being extracted from the fruit.

How much aseptic juice is used in the products within the Berri Australian Fresh and Daily Juice Company ranges?

When cold stored (aseptic stored) juice is used, the amount varies and it is generally a relatively small percentage of the product.

Does aseptic juice contain preservatives?

Our cold stored (aseptic stored) juice has no added preservatives.

Is aseptic stored (cold stored) juice used to reduce costs?

No. Using cold stored (aseptic stored) orange juice actually adds to our costs but we do it so that the taste profile of our orange juice can be kept consistent when fruit availability is low. The fruit used is purchased at the normal contracted prices, then the sterile filling process and refrigeration storage are added expenses.

Does Berri Australian Fresh and Daily Juice also contain reconstituted (concentrate) juice?

There is no reconstituted (concentrate) used in Berri Australian Fresh and there will not be any in Berri Australian Grown.

The Daily Juice Company orange juice contains a proportion of orange juice concentrate which enables us to offer consumers a juice product at a lower price than our Berri Australian Fresh product which is made using 100% Australian grown fruit. The use of concentrate in our Daily Juice Company products also helps to deliver a more consistent taste throughout the year.

Why are we changing the Berri Australian Fresh name?

The ACCC considered that the Berri Australian Fresh packaging suggested to consumers that it only contained juice that was recently squeezed when in fact the products within this range may contain either fresh juice or a blend of fresh juice and cold stored (aseptically stored) juice.

National Foods accepts that the Berri Australian Fresh packaging is likely to have misled some consumers and contravened the Trade Practices Act 1974.  We have agreed to change the brand name of our Berri Australian Fresh Juice to ensure no consumers are misled in the future.

Berri Australian Fresh will become Berri Australian Grown in March 2011 – it will be the same great tasting product range and will continue to be made in Australia using 100% Australian grown fruit.

The Company has written-down the value of brands and goodwill by ¥38.8 billion (A$485 million) following a strategic review of core brands and reflecting difficult trading conditions, especially in the white milk and juice sectors.

As previously communicated, conditions in both the dairy and juice sectors have eroded since Kirin purchased National Foods in 2007 and Dairy Farmers in 2008 and remain very challenging for farmers, processors and brand owners alike.

National Foods is still a long way from achieving acceptable margins with FY09 EBIT margin at less than 5 per cent and the business faces some considerable headwinds. Input costs remain relatively high by historical standards and National Foods endures ongoing challenges to maintain adequate operating margins in a very competitive retail environment.

Against this backdrop, the National Foods business is making strong progress in integrating the former Dairy Farmers business. The Company continues to optimise its manufacturing footprint and undertake initiatives to leverage its scale and route to market. The combined business has quality brands that require investment to reach their full potential.

National Foods is committed to patient investment in its core strategic assets – our people, brands and production assets – to deliver sustainable growth over the long term. National Foods has instituted a new strategy of focussing marketing investment around a portfolio of core ‘Power Brands’ to drive value. This initiative involved an assessment of the cashflow generating potential of brands, including the none-core brands, and contributed to the revaluation.

For further information please contact:

James Tait

Lion Nathan National Foods

02 9320 2236 / 0400 304 147

Alignment of reporting year ends to September 30 means the third quarter trading update reflects a nine month result for the Lion Nathan (LN) group[1] (October to June) and six months for the National Food (NF) business unit (January to June). NF’s October to December performance was disclosed on February 10.

All LN results are quoted on a year to date basis for October 2009 to June 2010 unless otherwise stated. Similarly, all NF results are year to date from January to June 2010.

LNNF invests in its people and a focussed portfolio of core ‘power brands’ to drive sustainable results in the long term. The business integration process is progressing to plan.

Lion Nathan

The Company’s alcohol businesses across Australia and New Zealand delivered a solid revenue performance of $1,756.5 million, growing 5 per cent on the prior corresponding period.

Following a very strong start to the year, in the third quarter the Australian beer market slowed, consistent with trends seen across the broader consumer goods sector. The third quarter also saw intensified competitor activity.

These factors contributed to some moderation in the very high revenue and volume growth seen earlier in the year. At the end of the third quarter, the beer market was flat on a year to date basis, while Lion Nathan Australia (LNA) performed slightly ahead of market on a volume and value basis. Tooheys Extra Dry 5 Seeds cider is performing strongly and supporting LNA’s volume growth.

LNA’s power brand portfolio grew its share of portfolio mix. Premiumisation across the market combined with successful innovation to drive solid revenue growth of 5 per cent.

XXXX Gold, the leading brand in the LNA portfolio, continued its impressive growth. Hahn Super Dry also performed well with new variant Hahn Super Dry 3.5 performing ahead of expectations. The Boags portfolio grew strongly, benefiting from the reach of LNA’s route to market and a significant increase in marketing investment, while recent innovation in the James Squire craft beer portfolio contributed to improved volumes.

After a challenging start to the year, driven by a weakness in consumer spending in the New Zealand economy that resulted in a decline in the total alcohol and beer markets, the market has recovered. The total New Zealand alcohol market is now stable on a year to date basis compared to the prior period, with Lion Nathan New Zealand (LNNZ) holding a stable volume share.

Innovation in recent years continues to account for a significant proportion of the Company’s revenue. In the year to date, LNNZ has brought to market two low carbohydrate beers, Speight’s Traverse and Stella Legérè, along with Mac’s Isaac’s Cider. The addition of the Bacardi and 42 Below portfolio of brands continues to deliver growth for LNNZ’s spirits business.

Good revenue growth was delivered by LNNZ’s beer portfolio despite modest beer market volume decline. Despite sluggish market conditions, solid performances from core brands and a continued focus on innovation helped LNNZ maintain total revenue growth at around 4 per cent. Reflecting the Company’s commitment to investing in its New Zealand business, Prime Minister John Key recently officially opened LNNZ’s new state-of-the-art Auckland production facility, ‘The Pride’.

Conditions in the wine industry remain very challenging with the global slowdown combined with an oversupply of grapes putting downward pressure on pricing in domestic and international markets. The strong Australian dollar is undermining returns from key export markets. However, despite this, the Lion Nathan Wine Group grew volume and revenue. Wine remains a very small part of LNNF’s business, at less than 1 per cent of group profit.

National Foods

As previously communicated, conditions in both the dairy and juice sectors remain very challenging for farmers and producers alike.

NF is still a long way from achieving an acceptable return on invested capital and faces some considerable headwinds. While these have moderated a little, input costs remain relatively high by historical standards and the business faces ongoing challenges to maintain adequate operating margins in a very competitive retail environment.

Against this backdrop, the NF business is making strong progress in integrating the former NF and Dairy Farmers businesses.

The combined business has quality brands that require investment to reach their full potential. LNNF is committed to patient investment in NF’s core strategic assets – its people, brands and production assets – to deliver sustainable growth over the long term.

As expected, NF revenue for the 6 months to June declined 9 per cent to $1.52 billion. This was significantly impacted by the divestment of the Freshco and Ski assets and as reported at the half year, EBIT performance is improving, albeit off an unacceptably low base.

There were some noteworthy successes during the June quarter. In particular, Dare Iced Coffee performed well, with a successful marketing campaign contributing to strong volume growth.

NF is focussed on innovation to drive value in its power brands and priority categories. Diary Farmers New Milk, launched in the second half of 2009, is progressing encouragingly. Yoplait formé Satisfy was launched in April 2010, designed to be high in protein and fibre to help consumers feel fuller for longer in between meals. In the third quarter, Yoplait formé was the Adult Everyday Yogurt category’s fastest-growing brand.

For further information, please contact:

Media Analysts

James Tait
Corporate Affairs Director
61 2 9320 2236
0400 304 147

Peta Joyce
Stakeholder Communications & Relations Manager
61 2  9320 2254
0400 015 605

About Lion Nathan National Foods

Lion Nathan National Foods brings together great household brand names including Tooheys, Dairy Farmers, XXXX, PURA, Hahn, Berri, Speight’s, King Island Dairy, Boag’s, Yoplait, Wither Hills and COON.

We believe business success comes from investing in our people and brands and by constructively engaging our stakeholders. Lion Nathan National Foods employs close to 8,000 people across Australia and New Zealand and delivers revenues in excess of AU$5.6 billion.

In addition to direct employment, we make a significant contribution to the Australian and New Zealand economies. We are one of the region’s largest purchasers of agricultural goods and an integral component of the retail, hospitality and tourism industries.

Our products accompany life’s sociable moments, whether it’s a family meal or good times at the pub with mates. The consumption of milk, dairy foods and juice and the responsible enjoyment of alcoholic beverages are all part of a healthy lifestyle for most people, and we aim to maximise the community wellbeing arising from the enjoyment of our products while playing a role in helping the community minimise misuse.

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[1] ‘LN’ refers to all of LNNF’s alcohol businesses