2 November 2012
Lion today announced its trading update for the nine months to 30 June 2012 (YTD) in conjunction with Kirin Holdings’ third quarter results.
Lion CEO Rob Murray said: “Despite interest rate relief from early May, Australian consumer sentiment remained subdued during the remainder of Lion’s third quarter. Cautious consumers are saving up to five times the historical average and entertaining more at home, which continues to impact sales and product mix in the hospitality and consumer goods sectors.
“Conditions in retail remain very competitive, with discounting on white milk, juice and everyday cheese impacting volumes and margins in Lion’s Dairy & Drinks business.”
Lion continues to invest in its people, brands, production assets and supply chains to deliver sustainable growth.
Beer, Spirits & Wine
Lion’s Beer, Spirits & Wine division in Australia continues to deliver moderate volume and revenue growth in challenging market conditions. Year-to-date volumes increased 1.3 percent, leading to a 3.9 percent revenue increase to $1,338.4 million.
This was achieved against the backdrop of a beer market that declined 5.1 percent over the same period and in part reflects decisions by international brand owners to partner with Lion in the Australian market, including Corona Extra and Stella Artois, which joined the portfolio in the third quarter.
Lion’s cider innovations are performing strongly, while international wine sales continue to be crimped by the high Australian dollar.
XXXX GOLD, now Australia’s largest beer, continues to grow volume and value share off a large base and the Hahn Super Dry trademark is performing strongly. XXXX Summer Bright Lager, now a scale brand, maintained its double-digit volume and value growth trajectory. Lion’s James Squire trademark continued to drive growth in the craft market, posting volume and value growth now over 60 percent.
Since the conclusion of the quarter Little World Beverages shareholders voted overwhelmingly to accept Lion’s offer for the remaining shares in the company it did not already own. Little World Beverages became a fully-fledged part of the Lion group on 8 October 2012, providing a further platform for growth in the attractive craft beer segment. Guinness and Kilkenny will also join the Lion portfolio from November.
Lion’s Beer, Spirits & Wine division in New Zealand saw total volumes decline 4.1 percent leading to a 6.3 percent decline in revenue to $NZ 502 million.
The total New Zealand beer market was down 2.9 percent MAT to June, with the first half result impacted by the unseasonably poor weather conditions over the summer. The rate of decline in NZ beer market volumes reduced to 2.2 percent5 in the third quarter, with Lion performing ahead of the market with volumes declining 1.4 percent5.
This solid result in challenging circumstances was driven by a strong performance from Speight’s, which gained value and volume share ahead of other top 10 beer brands. The quarter also saw Mac’s ascend to the number one brand in the craft category.
Wine, cider, spirits, RTDs and non-alcoholic RTD volumes all grew despite a very competitive pricing environment. Pinot Gris and Pinot Noir remain the highest absolute growth drivers in the wine segment. Strong performances from Wither Hills, The Ned, Corbans and Saints brought Lion’s share of Pinot Gris volumes to 17.6 percent for the quarter, up five share points. Spirits growth this quarter was driven by whiskey and bourbon, with a strong performance from the McKenna Bourbon brand a highlight, growing to the number two bourbon in the market.
Dairy & Drinks
Volumes in Lion’s Dairy & Drinks business declined 13.3 percent, translating to a 9.9 percent revenue decline to $1,917.9 million.
The largest driver of the volume decline was white milk, down 14 percent due to private label contract losses and reduced branded milk sales in the grocery channel as a result of continued deep discounting by retailers.
In June, Lion innovated across its leading branded white milk products, Dairy Farmers and Pura, making them permeate free. At the same time Lion reviewed its pricing in recognition that deep discounting on white milk was likely to continue for the foreseeable future. These initiatives have since resulted in modest volume growth in branded white milk. Despite this, returns from white milk are still a considerable distance from delivering a positive return on capital.
Poor consumer sentiment and aggressive competitive activity in all categories continues to squeeze margins. Fresh juice and everyday cheese remain challenging with category volumes in decline. Fresh dairy was impacted by the loss of ranging in a major retailer for key yoghurt brand, Yoplait, which performed well elsewhere following a brand refresh and reached its highest market share in two years.
Specialty cheese continued to show positive growth, with South Cape, Tasmanian Heritage, Mersey Valley and King Island all performing exceptionally well in the quarter6. In 2012 Dare became Australia’s number one dairy beverage by value in both grocery and petrol and convenience, and has risen from ninth to fourth in the total non-alcoholic ready-to-drink category7.
Lion remains committed to innovation to drive value growth. Since the conclusion of the half, Lion has launched a reduced sugar juice range, ‘be by Berri’, and in September and October added two new juice and four fruit smoothie variants to its successful Berri Super Juice trademark. Berri Australian Grown will shortly launch four new exotic flavour variants and is performing ahead of the category due to concerted marketing investment.
For further information, please contact:
Leela Sutton Peta Joyce
External Relations Director Stakeholder Communications & Relations Manager
61 2 9290 6645 / 0402 260 540 61 2 9320 2254 / 0400 015 605
Lion 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 employs over 7,000 people across Australia and New Zealand and delivers revenues in excess of AU$4.8 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 friends. Dairy, juice, soy and the responsible enjoyment of alcohol beverages are all part of a healthy lifestyle for many people and we aim to maximise the community wellbeing arising from the enjoyment of our products while playing a leading role in helping the community minimise misuse.
 AC Neilson, YTD June 2012
 AC Neilson, MAT June 2012
 Nielsen Scan Data, MAT June 2012
5 Nielsen Scan Data, June 2012 Quarter
6 Nielsen, June 2012 Quarter, value share growth – South Cape (+2.2%), Tasmanian Heritage (+18.8%), Mersey Valley (+1.2%), and King Island (+10.0%)
7 Nielsen, value share MAT June 2012