12 February 2015: Lion today announced its trading update for the full year ended 30 September 2014 in conjunction with Kirin Holdings’ full year announcement.
A year of subdued consumer sentiment fuelled highly competitive and deflationary market conditions across Lion’s businesses. Total Beer, Spirits & Wine volumes across both Australia and New Zealand declined 2.7 percent, while volumes in Lion Dairy & Drinks (LDD) declined 7.3 percent. With a focused strategy of building high value brands and categories Lion was able to soften the volume impact, with group sales revenue decreasing 3.1 percent to $4,990 million.
While Lion implemented a range of efficiency measures throughout the year, the rising global milk price intensified margin pressure in the final quarter and operating earning1] before interest and tax decreased 4.3 percent to $668 million.
Lion CEO Stuart Irvine said: “Australian and New Zealand consumers are drinking less alcohol overall than any time in the previous 15 years, however this is positively coupled with a trend towards premiumisation, as consumers opt for quality over quantity and trade up to higher equity brands. This is benefiting our long-term strategy of marketing and innovation investment in premium growth categories, and our market-leading brands in international premium, contemporary, craft and mid-strength continued to flourish.”
In Australia James Squire over-indexed growth in the craft segment – the fastest growing segment of the beer market – boosting volumes over 23 percent across the year. Contemporary brand Hahn Super Dry and mid-strength variant Hahn Super Dry 3.5 also flourished, growing at 3.8 percent and 6.3 percent respectively2. Lion’s portfolio of international premium brands continued to benefit from Lion’s leading in-market execution, with the portfolio growing 8.6 percent during the year2.
In New Zealand Lion’s wine portfolio was a standout, boosted by innovation and brand investment. Wither Hills achieved strong growth domestically and through export markets, while Huntaway became the fastest growing premium wine brand in grocery in the country. Pleasingly Lion’s two biggest beer brands were also in growth, with Speight’s growing by 3 percent and Steinlager Classic by 4 percent.
Lion’s Dairy & Drinks business continued to face challenging market conditions, which were exacerbated by historically high global milk prices that impacted returns across the dairy sector.
“While conditions remain challenging we have made a fast start implementing our three year turnaround strategy,” continued Irvine.
“Core to this strategy is a focus on our most profitable growth segments, brands, customers and channels, a health and wellness portfolio positioning and strategic milk procurement – supported by a new organisational structure established in FY14.
“Our portfolio of natural dairy and juice products is highly aligned to Australians’ increasing desire for better quality and less processed food, and their preparedness to pay more for quality, provenance and nutritional benefits, and this renewed focus on nutrition and ‘better for you’ foods will be a core driver of growth in future years.
“Of course key to any dairy business’s success is strong and mutually rewarding farmer partnerships, and in FY14 we introduced a new milk pricing model to improve and deepen these relationships – offering a compelling mix of pricing, tenure and other benefits, tailored to each market. The new model was well received, and as a result we have been able to secure supply in an increasingly competitive environment.”
LDD leads the market across high value and growing segments such as milk-based-beverages, yoghurt and specialty cheese, which are benefiting from renewed focus and investment. Lion’s milk-based-beverages grew value 7.4 percent, with a particularly strong performance from market leader Dare, which posted double digit volume and value growth across grocery and the convenience channel.
During FY14 Lion established a fourth business unit, Lion Asia Dairy, signaling an intention to ramp up its international presence and pursue a focused strategy of building brands and high value categories in growing Asian markets, as well as domestically.
“While the international business unit will take time to grow, we are making solid inroads. We are already the number one yoghurt manufacturer in Singapore and following the conclusion of the financial year launched one of Australia’s most trusted dairy brands, Dairy Farmers, in China’s largest retailer China Resources Vanguard, with plans for significant expansion across southern and eastern China,” finished Irvine.
For further information, please contact:
Leela Sutton, External Relations Director
61 2 9290 6645 / 0402 260 540