Lion has announced its overall net sales revenue was down 9.5% to $2.176million in the six months to March 31.
The company said the result was “largely due to the termination of a distribution agreement with AB InBev in Australia and the sale of Fine Wine Partners. While the underlying performance of the Group remained solid, the portfolio changes contributed to a 12.9% decline in operating earnings to $334.7 million.”
The loss of distribution rights to Corona following the AB InBev move was one of the most significant blows, as beer makes up close to 90% of Lion’s Australasian operations.
The Australian noted: “The brewer is finding the $14 billion Australian beer market tough going as drinkers turn away from traditional beers in favour of craft, or turn off beer completely.”
On the upside, investment in the Kirin brand lead it to triple volumes in Australia, while the XXXX Summer Bright Lager expanded its volumes by 10%.
Craft beer remains a bright spot
While mainstream beer sales lagged, Lion’s craft beer portfolio, which includes Little Creatures, James Squire and Furphy, made strong gains in the first half.
James Squire has again been a top performer with 150 Lashes Pale Ale growing by 14%, while Furphy has become a favourite in Victoria, more than quadrupling its volume during the half.
Lion CEO Stuart Irvine noted: “Sections of the Australian beer market remain challenging. However, our craft offerings continue to post strong growth, helping to offset softness in mainstream beer. We remain focused on strengthening our core brands and growing the category in order to support profit growth in the medium to long-term.”
However, not all craft beer has been a winner for Lion. It announced earlier this week that it will close the Enterprise Brewery in Clare, South Australia and stop brewing Knappstein Reserve Lager from August 11.
“This is due to declining volume of the brand over the last few years and the brewery operating significantly below capacity,” said Lion. “None of our people are impacted by this decision, as they will continue to work throughout our brewing network.”
Lion no longer owns the Enterprise Brewery site, having sold Knappstein along with its other wine brands to Accolade Wines in November last year.
New Zealand still booming
Lion’s New Zealand operations performed strongly, lead by the launch of Steinlager Tokyo Dry.
The biggest launch from our New Zealand business in over a decade, Steinlager Tokyo Dry became the division’s fastest beer ever to sell a million litres, bucking prevailing trends in a challenging beer market.
The strong first half result was further driven by success in craft, with volume up 31% for Mac’s and 90% for Emerson’s. Lion’s commitment to world-class brewing was recognised at the International Brewing Awards in London, with the company taking home five medals across the Mac’s range.
Panhead Custom Ales continued its impressive growth trajectory, with volume up 76%. An upgrade of its Upper Hutt brewing facilities trebled its brewing capacity, with Panhead looking to the future in both the domestic and global market.
Lion’s New Zealand portfolio continued to grow, with the agreement of a deal for the exclusive distribution of AB Inbev’s portfolio of Australian beer and cider from August 2017.
