Coca-Cola Amatil ponders a beery future
Coca-Cola Amatil has announced plans to become the number three player in the Australian beer market by 2012.
How does the saying go: two’s company and three’s a crowd? Indeed, the comfortable world that’s the Australian beer market with Foster’s and Lion Nathan controlling around 95 percent and sharing things out between them, is about to change if Coca-Cola Amatil has its way.
In April Coca-Cola Amatil (CCA) released its long awaited review of its future strategy (for at least the next three years to five years), in which it outlined its ambitious plans to become the number three brewer in the country.
In Australia, Foster’s (52%) is first, Lion Nathan (40%) second and privately-owned Coopers third. There is also a host of emerging premium micro brewers, such as Matilda Bay, Blue Tongue, Gage Roads, Little Creatures (through the listed Little World Beverages), Empire Brewing and Oz Brewing. Some are listed, some are not, and some are brand names.
According to reports in the media, CCA, which is 35 percent owned by the U.S. parent group, wants to become Australia’s third major brewer; not as large or dependent on huge volumes like the Foster’s Group and Lion Nathan, more an efficient maker and seller of high margin premium beers through its joint-venture with SABMiller.
Group Managing Director Terry Davis said in a statement: "The Australian beer market is one of the most profitable in the world, generating earnings in excess of AUD 1 billion (EUR 607 million). We are aiming to become the clear number three player in the Australian beer market by the end of 2012.’’
The implications are clear: CCA will have to overtake Coopers by either some rapid acquisitions or by spending serious money on building a greenfield brewery. Coopers is strongly independent, having fought off Lion Nathan in recent years. There are no indications that Coopers is considering a sale.
Davis said that a study into starting a local brewery will be completed before the end of 2007. The plan envisages the production of new Australian beer brands and imported labels. Davis also aims to sell alcohol in New Zealand this year.
CCA said it expected its share of the capital expenditure for an Australian brewery would be between AUD 100 million and AUD 125 million (EUR 76 million). The rest of the investment would be shouldered by SABMiller.
Although CCA carefully refrained from mentioning production volumes, the size of the potential investment in beer volume terms is highly significant. Whatever sales volume CCA will be aiming at – an educated guess would be a six-figure hl output - it will have to take it away from others.
The prospect that CCA will set itself up as a powerful competitor cannot please Foster’s and Lion Nathan. Australia’s beer market has been on a long-term decline. In 2005 beer consumption was 16.8 million hl (-0.3% on 2004) or 82.9 litres per capita.
To complement the non-alcoholic beverage portfolio, CCA will accelerate the development of Pacific Beverages, its joint-venture with SABMiller signed last year. CCA already distributes SABMiller’s Peroni Nastro Azzurro, Miller Genuine Draft and Pilsner Urquell brands. Late last year the company agreed to take over the Australian distribution for spirits including Jim Beam bourbon, Absolut vodka and Famous Grouse Scotch.
CCA now gets 32 percent of sales from outside the carbonated market, compared with about 5 percent in 2001, after CCA spent more than AUD700 million (EUR 425 million) on diversifying its product range.
"In doing so CCA has also increased its relevancy to a broader base of customers and consumers, expanded its EBIT margin from 11.4 percent to 13.3 percent, generated EPS growth of 11.3 percent per annum and grew dividends per share by 15.7 percent per annum," Mr Davis said.
Readers may be interested to know that Terry Davis, 49, is no novice to the small world that is the Australian drinks and beverage market. He joined CCA in November 2001 after 14 years in the global wine industry with the most recent appointment as Managing Director of Beringer Blass, the wine division of the Foster’s Group.
