Big brewers changing tack: IBISWorld
Australian beer manufacturers have struggled over the past five years due to a sharp decline in beer consumption coupled with increasingly discerning consumers preferring quality craft and premium beers over traditional brands. As a result, major Australian brewers Lion Pty Limited and SABMiller Beverage Investments Pty Limited are realigning their business strategies to capitalise on craft beer production.
IBISWorld expects the craft beer production industry to grow by a massive 10.0% annualised over the five years through 2014-15. This shift in consumer preference will likely stimulate growth for brewers, with the broader beer manufacturing industry anticipated to grow steadily over the next five years, driven in part by the strength of the craft beer segment.
Lion Pty Limited – a fully owned subsidiary of the Japanese Kirin Brewery Company Limited – has shifted well with consumer preferences. Lion controls the largest share of the broader beer manufacturing industry, at 43.1% of revenue. Lion maintains an extensive brand portfolio that includes both traditional brews, such as Tooheys and XXXX, and a range of international premium beers like Kirin and Beck’s.
Lion has focused heavily on brewery acquisitions to complement its production and distribution contracts with overseas brands. In 2012, the company acquired WA craft brewer Little World Beverages, which produces the Little Creatures and White Rabbit beer brands. Lion subsequently invested $60 million dollars into a new Little Creatures brewery in Geelong to service the east coast market and in early 2015 relocated its White Rabbit brewery from Healesville to the Geelong site to better cope with increasing demand for craft beer. As a result of these initiatives, Lion’s beer manufacturing revenue is expected to grow by a compound annual rate of 3.0% over the five years through 2014-15, to $2.1 billion, with much of this growth driven by the booming craft beer market.
SABMiller trades as Carlton and United Breweries (CUB) in Australia following its purchase of CUB in 2011 for $12.3 billion. Since the purchase, CUB has struggled to adapt to changing consumer dynamics. The company has been slow to get on to the craft beer bandwagon, instead focusing on its key beer brands, which include Victoria Bitter, Carlton Draught and Crown Lager. It also produces and distributes a variety of international premium beers such as Peroni Nastro Azzurro and Grolsch. In 2012, CUB lost the distribution rights for Corona and Stella Artois to rival Lion, as well as the rights to international brands Guinness and Asahi. Compounding this has been the continued decline in popularity of Victoria Bitter, which in 2012 was eclipsed by Lion’s XXXX Gold as Australia’s highest selling beer.
Increased competition – particularly from Lion – has seen CUB’s market share fall by almost 10% to 40.1% of industry revenue. CUB has, however, worked to expand its presence in the growing craft beer market through its subsidiary Matilda Bay Brewing Company, which produces a variety of craft brands including Fat Yak and Beez Neez. CUB has been slow to adapt its business model, focusing too heavily on its traditional brands. As a result, it has struggled to capitalise on the craft beer boom, losing market share.
While IBISWorld expects beer consumption to continue trending downwards, with traditional brands losing market share to craft and premium brands, Lion has worked quickly to make major inroads into the more lucrative and developing craft and premium beer market leaving CUB with some catching up to do. Given the direction that the market is heading, IBISWorld expects these two brewing behemoths to continue pursuing distribution deals and acquisitions of smaller brewers.