JAPANESE-owned Lion is looking to its new Asian dairy unit to boost its international presence as weak consumer sentiment and intense competition hit sales in its alcoholic beverages and dairy and drinks businesses.
Nanjing Night Net

Lion, a subsidiary of Japanese food and beverage giant Kirin, employs more than 7000 people in Australia and New Zealand, and owns brands including Berri juice, Coon cheese, Dare iced coffee and Tooheys and XXXX beer.

The company has struggled in recent years, and has been pursuing a premium brand strategy to alleviate margin pressure from the lack of pricing power on the shelves of retailers such as Coles and Woolworths.

On Thursday Lion reported a 3.1 per cent drop in revenue to $5 billion for the year ended 30 September 2014, while earnings before interest and tax fell 4.3 per cent to $668 million.

Over the 2013-14 year Lion’s total beer, spirits and wine volumes fell 2.7 per cent while volumes in the dairy and drinks division fell 7.3 per cent.

“Australian and New Zealand consumers are drinking less alcohol overall than any time in the previous 15 years,” Lion chief executive Stuart Irvine said.

In the dairy and drinks business, soaring dairy commodity prices last year put a rocket under the cost of milk and further crimped margins.

Lion has taken billions of dollars of write-downs in dairy, including a $338.8 million impairment in the segment in the 2013 financial year.

“While conditions remain challenging we have made a fast start implementing our three-year turnaround strategy,” Irvine said.

“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 “.

Dairy and drinks boss Peter West has been slashing the number of brands Lion puts on shelves and is backing the company’s best performers such as Greek yoghurt under the Yoplait brand and specialty cheese brands like King Island and Mersey Valley.

Mr Irvine said the “premiumisation” strategy was working. Even though overall beer sales are falling, consumers are trading up to premium beer.

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