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Big brewers changing tack: IBISWorld

July 1, 2015

Beer-Full-storyAustralian 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.

Read more:
Pale Ale safe with us: Tooheys
Resch’s the quiet achiever for CUB
Melbourne Bitter continues stealthy rollout
Australia’s newest microbreweries

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3 Responses to Big brewers changing tack: IBISWorld

  1. Peter Elzer on July 4, 2015 at 1:16 am

    Its true mostlly that when a big brewer buys a craft beer that at some point the quality of the beer changes.
    I.E. – different less expensive ingredients and different brewers.
    Also, the beer starts getting made in other facilities so the water is not the same either.
    The internet is a great leveler of the deception that these big brewers cant hide behind these craft beers.
    The consumer cares what they are drinking most of the time.

    • Editor on July 7, 2015 at 7:03 am

      I think it’s incorrect to say they use cheaper ingredients, large brewers have access to and select the highest quality ingredients they can source, it’s important to consistency. That need for consistency and also their constant demand for greater efficiency is where they sometimes differ from smaller brewers. There’s a difference between that and ‘quality’.

      Water is a bit of a furphy these days, particularly with so many small breweries brewing across multiple sites themselves.

  2. Peter Donaghy on July 1, 2015 at 1:06 pm

    Sorry but as soon as one of the two major breweries or Coles and Woolies acquire craft breweries they loose the craft beer tag and I for one will never buy again. Notably Matilda Bay, Little Creatures, White Rabbit and Sail & Anchor.

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