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Lion FY15 Trading Update

Lion today announced its trading update for the year ended 30 September 2015 in conjunction with Kirin Holdings’ full year announcement.

Lion FY15 Trading Update

15 February 2016: Lion today announced its trading update for the year ended 30 September 2015 in conjunction with Kirin Holdings’ full year announcement.

Trading conditions in both Australia and New Zealand remained challenging throughout the 2015 financial year. Lion, like most fast moving-consumer goods businesses, is yet to see the recent upward trend in consumer confidence translate into improved spending.

A 5.6 percent decline in Group net sales revenue to $4,709 million was driven by Lion’s decision to sell its low margin everyday cheese operations, the non-renewal of private label milk contracts toward the end of the prior year and a contraction in beer volumes driven by the overall market decline in both Australia and New Zealand.

Despite the revenue reduction, the Group was still able to deliver a 4 percent increase in group operating earnings before interest and tax to $695 million[1] due to a focus on more profitable categories, continued premiumisation and effective cost management.

Lion CEO, Stuart Irvine said: “Despite the tough conditions, we’ve remained firmly focused on managing our business for the long-term and we are continuing to invest in our brands, new facilities and to grow our presence in Asia.

“During the year we made significant progress in re-gearing our dairy and juice businesses to the highest potential segments of the market and launched key initiatives to return the beer market to growth.

“We have re-invested cost savings for future growth, successfully commissioning the largest and most advanced specialty cheese-making facility in the southern hemisphere in Burnie, Tasmania, a new Petaluma Winery and cellar door in the Adelaide Hills, a $70m brewhouse upgrade at our West End Brewery in South Australia and a new White Rabbit Brewery in Geelong. A new spiritual home for Emerson’s brewery in Dunedin is also expected to open in mid-2016.

“Lion Asia Dairy made solid inroads during the year, signing a key distribution partnership with the leading fresh milk processor and distributor in Southern China to import, market and distribute a range of Lion’s branded Australian dairy products across the Guangdong Province. The formation of Lion Global Markets towards the end of the year will also deliver a coordinated approach to building our trusted beer, cider and wine brands abroad.”

Beer, Spirits & Wine

Australia

Total volumes in Lion’s Beer, Spirits & Wine business in Australia declined 3 percent, driven by the overall beer market decline.

While conditions remained challenging, Lion took action to reinvigorate the Australian beer market and encourage a reappraisal of the category through a first-of-its-kind initiative called Beer the Beautiful Truth – which aims to bust common myths about beer and communicate the facts.

In an Australian beer industry first, Lion kick-started the initiative by adding nutrition information panels to bottles and cartons across its entire wholly-owned Australian beer portfolio.

While overall Australian volumes were down, Lion continues to benefit from strong positions in the growing craft and international premium segments. James Squire 150 Lashes Pale Ale and Little Creatures Pale Ale both continue to enjoy double digit growth in the craft segment[2] while Lion also maintained strong share of international premium, growing volume across key brands.

Benefiting from new marketing initiatives, contemporary brands Hahn Super Dry and Hahn Super Dry 3.5 both out-performed the segment and gained share. [3] Lion also innovated against its market-leading leading XXXX trademark, with XXXX GOLD Australia Pale Ale off to a strong start since launching in the last quarter.

Lion’s premium wine business, Fine Wine Partners, closed out a strong year with Petaluma and Croser gaining overall value share[4].  The official opening of the new 2000-tonne Petaluma Winery and Cellar Door in September has now consolidated the winemaking, bottling and packaging for these brands at a single site in the Adelaide Hills to meet growing demand both in Australia and overseas.

New Zealand

Total volumes in Lion’s Beer, Spirits & Wine business in New Zealand decreased 4.4 percent[5] amidst a highly competitive retail market and declining beer category. Pricing was depressed in the market leading to a lower sales revenue number than last year but pleasingly after one off expenses the underlying earnings of the business continue to improve.

Lion saw growth in a number of key brands such as Corona, Steinlager Classic and Mac’s, after a highly successful re-launch during the year, with all brands enjoying strong double digit growth in the last quarter.[6]  

The New Zealand business has also driven, and capitalised on, growth in the mid-strength beer market with Speight’s Mid now the largest seller in its segment in the on premise market. In the craft segment, Mac’s Mid Vicious is now the leading mid-strength offering[7] and Steinlager Mid is also off to a strong start since launching towards the end of the year.

Lion also experienced growth in key premium wine brands with The Ned, Mt Difficulty and sparkling wine Daniel Le Brun all growing volume.[8]

The year ended on a high with Lion named Champion Brewery at the 2015 Brewers Guild of New Zealand Awards, winning 28 medals across ten categories, including four gold medals.

Dairy & Drinks

Year one of the Lion Dairy & Drinks business’ three-year turnaround plan has been successful. While total volumes declined 17.4 percent, the focus on more profitable categories and good cost management delivered a significant up-tick in profitability versus the prior year.

The volume impact was driven by the sale of Lion’s everyday cheese business in May 2015, the non-renewal of private label milk contracts in the last quarter of the prior year, along with a reduction in juice sales, primarily in the ambient category.  The proceeds from the sale of Lion’s everyday cheese business are being reinvested in brands, facilities and innovation in higher-value growth categories.

Positively, Lion’s priority categories of specialty cheese, milk-based beverages and yoghurt all achieved solid growth. Farmers Union yoghurt delivered double digit growth with Farmers Union Greek Full Fat 1kg Yoghurt now the number one selling yoghurt in Australia[9].  Dairy Farmers Thick & Creamy also continued its strong growth trajectory with the caramelised fig variant winning Best Tasting Yoghurt at the 2015 Victorian Dairy Industry Association of Australia (DIAA) awards.[10]

Milk-based beverages also continue to be a stand out in the Lion Dairy & Drinks portfolio. Dare is continuing its stellar growth in all states supported by increased marketing investment and the launch of new flavour and pack variants. [11]

In other brand highlights, the Daily Juice Kids range has already sold more than two million pop tops since launching in April 2015 and Zooper Dooper has achieved close to 70 percent market share, supported by a strong association with Big Bash Cricket.[12]

Lion Dairy & Drinks continues to tap into Australian consumers’ desire for more wholesome, fresh and less processed foods. Following a highly successful first year in Lion’s Goodness Project – in which Lion is innovating and reformulating products and championing the natural goodness of the dairy and juice categories – reformulation initiatives are expected to remove around 170 tonnes of added sugar and 175 tonnes of fat from the Australian food supply in the coming year.[13]

For further media information, please contact:

Tegan Flanagan
External Relations Director – Corporate
61 2 8284 3670/0419 949 767             

           

ABOUT LION
Lion is a leading beverage and food company with a portfolio that includes many of our region’s favourite brands.

We employ close to 7,000 people across Australia and New Zealand predominantly and take great pride in our local manufacturing footprint, which spans 33 sites – including large breweries, craft breweries, wineries, distilleries, dairy farms, milk, cheese, yoghurt and juice sites as well as venues and over 39 Liquor King retail outlets in New Zealand.

Lion is a company focused on long-term, sustainable growth. We have a clear ten year strategy to reinvigorate our beer markets and contribute to vibrant and responsible drinking cultures; transform our dairy and juice businesses and champion the nutritional credentials of our portfolio; and build our presence in high-value categories in targeted Asian markets. To achieve this we invest in our core strategic assets – our people, brands, production facilities and supply chain.

www.lionco.com

 

 

 

[1] Excluding one-time items

[2] IRI MarketEdge Liquor, packaged beer MAT to September 2015 (James Squire 150 Lashes Pale Ale 35.9% volume growth and Little Creatures Pale Ale 14.9% volume growth vs YAGO.)

[3] IRI MarketEdge Liquor, packaged beer MAT to September 2015

[4] IRI MarketEdge Liquor, 12 months to September 2015 vs YAGO

[5] In FY15 total Beer, Spirits and Wine New Zealand volumes increased 3.9% including co-pack volumes. Co-pack volumes will be included in NZ volume figures from FY16 onwards.

[6] AC Nielsen: Corona volume growth 14.7% QTR to September 2015, Steinlager Classic volume growth 15.8% QTR to September 2015, Macs volume growth 15.8% QTR to September 2015. (Packaged off-premise data)

[7] AC Nielsen: Macs Mid Vicious volume share of Lower Alcohol Popular & Boutique Craft 40.8% MAT, 46.8% QTR to September 2015. (Packaged off-premise data)

[8] AC Nielsen: The Ned 5.6% MAT volume growth, 9.1% for the QTR to September 2015. Mt Difficulty 5% MAT volume growth and 9.1% for the QTR to September 2015. Daniel Le Brun 15.6% MAT volume growth to September 2015. (Packaged off-premise data)

[9] Aztec MAT to September 2015. Farmers Union yoghurt value growth at 15.9%.

[10] Aztec MAT to September 2015. Dairy Farmers Thick & Creamy value growth at 26.1%.

[11] Aztec Scan Grocery Data/ Aztec Scan Grocery Data MAT to 30 September 2015 - Dare value growth at 19.1%.

[12] Aztec scan MAT to September 2015.

[13] Based on sales volume Oct 2015.