Lion Cashes in on 'Step-Up' Beers

By Ian Neubauer

Lion Nathan has attributed a 6.9 per cent increase in profit to a strong mix shift by Australian beer drinkers to ‘step-up’ brands and the success of its innovations in the premium beer category.

Standout performers in Lion’s beer portfolio include Hahn Super Dry, which grew volume by nearly 50 per cent; James Squire, which grew 14 per cent; and its recently acquired Boag’s trademark, which grew volume by 8 per cent.

The data was released on Wednesday (May 20) along with the company’s half-yearly results, which showed net profit after tax of $176 million for the six months ended March 31.

The result puts Lion in a good position to meet its profit guidance of at least $305 million for the 2008-09 financial year, revised upwards from $300 million following news of the Kirin takeover in April.  

Wine remained Lion’s weakest link, with the company reporting a 55.7 per cent decrease in earnings from the category, down to $3.5 million for the period.

The company attributed underperformance in the category to reduced demand for fine wines, a switch away from on-premise consumption and increases in demands for supplier-funded discounting by retailers in the US and UK.

Lion Nathan CEO Rob Murray said the overall result demonstrates the company’s resilience in the face of a challenging economic environment.

“Our core beer markets have remained robust despite the economic circumstances, with premium beer remaining attractive as an affordable luxury,” he said. “The level of innovation has had a very positive impact and consumers continue to move to more premium beers. 

“In contrast to the strong beer results, the wine business has experienced much greater volatility and exposure to the current economic conditions.” 

Murray added he was confident Lion would achieve a strong second-half result. “Our key beer markets remain healthy and with limited exposure to the more volatile wine market, we are well placed to thrive in the current environment,” he said.

Lion Nathan shares were trading at $11.70 at 3:00pm today (Mar 22) compared to $11.64 seven days ago.