1 August 2013
Lion today announced its trading update for the half year ended 31 March 2013 in conjunction with Kirin Holdings’ first half announcement. The first half trading update reflects the six months to 31 March 2013 for all Lion business units.
Lion continues to pursue its strategy of investing in its people, brands and production assets to drive sustainable results over the long term.
Lion CEO Stuart Irvine said: “Like all retail and consumer goods businesses we continue to be challenged by low consumer sentiment and subdued discretionary spending in our key geographies. This environment is exacerbated in our Dairy & Drinks business, where we face heightened competition and margin pressure in price-driven categories such as white milk, everyday cheese and juice. We expect this to intensify in the latter half of our financial year, due to increased milk input costs.
“We will continue to invest in initiatives to further improve our efficiency and competitiveness, however we cannot achieve sustainable growth with a focus on costs alone. The strength of our brands and our consumer insights remain pivotal, and will enable us to build comprehensive category and channel strategies to unlock sustainable value for both Lion and our customers. This means we will continue to invest in growing brands and innovating to give consumers more reasons to choose from our portfolio.
“In our Australian Beer, Spirits & Wine business we have continued to gear our portfolio to the growth segments of the market and innovate to reignite interest in the beer category – including the recent launch of Tap King, a new in-home draught beer offering. In New Zealand the beer market decline has slowed, with volumes now flat, and while competition continues to intensify we are managing our business for the long term through a sustainable balance of volume, pricing and mix.”
Beer, Spirits & Wine
Lion’s Beer, Spirits & Wine divisions in Australia and New Zealand increased revenues 20.7 percent to $1,445.5 million and delivered operating earnings before interest and tax (EBIT) of $410.5 million, an increase of 21.7 percent.
While the beer market remained challenging with pack volumes down 3.2 percent, the addition of new international premium and craft brands to Lion’s portfolio saw volumes increase 12.1 percent. Improvements in mix from resulting portfolio premiumisation increased revenues 23.5 percent to $1,147.1 million.
Building on the legacy of XXXX GOLD, new mid-strength innovation Hahn Super Dry 3.5 continued its double digit growth, with strong performances also recorded by fellow contemporary brands Hahn Super Dry and XXXX Summer Bright Lager.
Lion’s leading craft portfolio continued its impressive growth, with Little Creatures Pale Ale growing volume by 15 percent1 and new addition to the James Squire portfolio, 150 Lashes Pale Ale, growing over 160 percent1.
Lion’s leading premium international brands all grew volume, including Heineken, Stella Artois, Becks, Budweiser, Guinness, Kilkenny and Corona Extra, the latter of which recorded double-digit growth off a large base1.
While wine remains a small part of Lion’s Australian business, Lion saw volume improvements through strong performances from owned-brands Knappstein and Wither Hills as well as third-party agency brands distributed through Fine Wine Partners, Villa Maria and Bollinger.
While the beer market decline has slowed and volumes are now flat versus the previous year, the competitiveness of the overall alcohol market continued to intensify, particularly in wine, and contributed to a 3 percent volume decline. In this environment Lion continued to manage its business for the long term through a sustainable balance of volume, pricing and mix and increased revenues 6.8 percent to $NZ 373.9 million.
During the half Lion saw strong performances from new innovations across both beer and wine. Lion’s craft trademark, Mac’s, benefited from the addition of new variants to the portfolio, while its wine label Two Tracks experienced growth from the introduction of ‘Keg Wine’ – a new dispensing innovation, which provides high quality wine by the tap on premise. Lion also saw strong growth from its US wine label MacRostie, as it extended sales focus outside California and increased distribution throughout the US.
Dairy & Drinks
Lion’s Dairy & Drinks division saw revenues decline 5.5 percent to $1,243.9 million and delivered operating earnings before interest and tax (EBIT) of $44 million, a decrease of 11.6 percent.
The market remained highly competitive in price-driven categories such as white milk, juice and everyday cheese, with continued discounting, product rationalisation and expansion of retailer-owned-brands crimping margins. While Lion continues to pursue opportunities to optimise its cost-base and improve competitiveness it remains a long way from achieving an acceptable return on invested capital, with revenue pressure offsetting efficiency gains.
Lion’s brands continued to perform well in higher value dairy segments such as dairy beverages and specialty cheese. A star of the portfolio, Dare, continued its impressive growth and is now the number four non-alcoholic-beverage brand in the convenience channel, behind Coke, V and Red Bull. Yoplait and Farmers Union continued to flourish, while specialty cheese brands South Cape and Tasmanian Heritage both grew in volume and value3.
Lion also continued to pursue new growth opportunities through innovation – launching Kakao in the dairy beverages category and MACS in the non-alcoholic-beverages category.
For further information, please contact:
Leela Sutton, External Relations Director Jo Gracie, Stakeholder Communications & Relations Mgr
0402 260 540 61 2 9320 2253 / 0416 152 621
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.
 Aztec, VOL Change % vs. YA MAT to 31/03/2013 (pack beer only)
 Aztec, VOL Change % vs. YA MAT to 31/03/2013 = 39% (pack beer only)
 Nielsen ScanTrack, MAT to 31/03/13