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Lion Q1 Trading Update

Lion today announced its trading update for the quarter ended 31 December 2011.

 

May 2, 2012

2 May 2012: Lion today announced its trading update for the quarter ended 31 December 2011 in conjunction with Kirin Holdings’ first quarter announcement. The first quarter trading update reflects the three months to 31 December 2011 for all Lion business units.

 Lion continues to pursue its strategy of investing in its people and a focussed portfolio of high potential brands to drive sustainable results in the long term.

 Like most companies across retail, grocery and other consumer goods sectors, Lion continued to experience tough market conditions during the first quarter of 2012. Volume and revenue declines were driven by continued low consumer confidence along with poor summer weather, the loss of private label contracts and deep retailer discounting on white milk.

 Lion CEO Rob Murray said: “Ongoing cautiousness amongst consumers, combined with particularly poor summer weather in both Australia and New Zealand, continued to impact the beverage market. In our Diary & Drinks business the ongoing deep discounting on private label white milk continues to impact branded milk sales and the profitability of our white milk business.

 “Despite these tough conditions our Beer, Spirits & Wine business in Australia performed well, with volume and revenue growth in a declining market.”

 Beer, Spirits & Wine 

Australia
Subdued consumer spending and exceptionally poor summer weather continued to impact the total beer market, with first quarter volumes declining 4.1 percent versus the previous year[1]. Despite this challenging environment Lion’s Beer, Spirits & Wine Australia division saw first quarter volumes increase 6.7 percent versus the previous year, resulting in a year-to-date (YTD) revenue increase of 6.3 percent to $502.5 million.

 Lion continued its program of innovation to drive value growth and widen the footprint of its portfolio. Benefiting from two new flavour variants Australia’s number two cider trademark, Tooheys 5 Seeds, continued to experience strong growth, while the country’s number one craft trademark, James Squire, saw first quarter volumes grow over 65 percent versus the previous year[2].  

 Lion’s core trademarks also performed well with XXXX, Hahn and James Boag in growth. Australia’s second largest beer, XXXX GOLD, also posted an impressive performance – growing volume and value share off a large base[3].

Since the conclusion of the quarter Lion welcomed to its portfolio Australia’s largest premium beer, Corona Extra, as well as Stella Artois, and Belgian specialties Hoegaarden, Leffe and Belle-Vue Kriek.

 New Zealand
 Lion’s Beer, Spirits & Wine division in New Zealand saw volumes decline 2.5 percent versus the previous year, resulting in a revenue decline of 5.7 percent to $203.5 million.   
While Lion’s wine, cider, spirits and RTD portfolios experienced strong growth during the quarter, Lion’s core brewing business was impacted by the overall beer market decline of 5.1 percent – driven by low consumer confidence and poor summer weather.

While challenging market conditions persisted, Lion’s Mac’s craft range capitalised on the flourishing craft segment, with pack extensions driving volume growth of 10.1 percent, while Steinlager Classic saw volume growth off the back of a successful Rugby World Cup campaign. New innovations also continued to grow volumes for trademarks across the portfolio, including new flavour variants in the Isaac’s Cider and Mac’s non-alcoholic RTD ranges.

 Dairy & Drinks
 As previously communicated, conditions in both the dairy and juice sectors remain very difficult for farmers and processors alike. Lion’s Dairy & Drinks business is still a long way from achieving an acceptable return on invested capital and continues to face significant margin pressures in both dairy and juice.

 The Dairy & Drinks division delivered a revenue decline of 7.5 percent to $675.2 million, driven by the loss of private label contracts and a decline in branded milk sales as a result of deep discounting on private label milk. Continued white milk discounting activity has seen a transfer of sales volumes from higher margin branded products into private label and from the non-grocery channel to grocery, and continues to impact profitability. Ambient juice category volumes also continued to decline, while input costs increased significantly.

Despite these challenging conditions, dairy beverages continued to perform well, with Dare increasing value share 26 percent versus the previous year and cementing the number one position in the category[4]. Specialty cheese brands South Cape, Tasmanian Heritage and King Island also posted strong value growth, while Berri Australian Grown delivered value growth and increased market share[5] through improved Australian fruit supply and a new marketing campaign communicating the origins of its Australian fruit.   

 For further information, please contact:

Media                                                                 Analysts

Leela Sutton, External Relations Director               Peta Joyce, Stakeholder Communications & Relations Manager

0402 260 540                                                      61 2 9320 2254 / 0400 015 605

 About Lion 
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$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 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.

 

[1] Nielsen ScanTrack, Total Market Vol % Change YA, MQT to 31/12/11

[2] Nielsen ScanTrack, Vol % Change YA, MQT to 31/12/11

[3] Nielsen ScanTrack, Vol % share and growth, MQT to 31/12/11

[4] Nielsen, grocery channel value % growth vs. year ago

[5] Nielsen, grocery channel value % growth vs. year ago and value % share