Lion Nathan’s shares up on Kirin’s offer – Market analysis
Statistics for 2008 indicate that New Zealand ranks 16th among the world’s beer markets with 75.5 litres of beer per capita consumed in 2008, down from 90.5 litres in 1996.
To call New Zealand’s beer market highly competitive is a polite way of putting things.
The market is structured like a duopoly with Lion Nathan and DB Breweries (100 percent owned by Asia Pacific Breweries, in which Heineken has a 42.5 percent stake) controlling 90 percent. Lion Nathan says it has a beer market share of over 50 percent.
While Lion Nathan is in bed with Heineken in Australia, it isn’t in New Zealand, which is probably one of the reasons DB Breweries can act like a discounter. It has been selling Heineken beer at prices significantly lower than the comparable Heineken selling prices in Australia, the report by Lonergan Edwards & Associates says.
Also, de-regulation of the New Zealand liquor industry in 1999 allowed supermarkets to sell alcohol for the first time. As a result, off-premise sales have increased at the expense of on-premise sales. Supermarkets, which represent some 30 percent of all alcohol sales and 22 percent of beer sales, now hold a significant buying power in what is already a very competitive market.
The combination of the impact of supermarkets, discounting and other minor factors has resulted in a 6 percent reduction in the real price of off-premise beer since 1999, the report says.
The price of on-premise beer has increased 11 percent in the same period.
Competition in New Zealand is expected to remain tough, with price discounting from DB Breweries and smaller participants expected to continue.
Originally from New Zealand, Lion Nathan is now headquartered in Australia where 75 percent of its assets are and 80 percent of its operating profit are derived.
Still, it remains a significant New Zealand business. It employs 1400 people, operates four breweries, owns wine companies, RTD brands and distributes Diageo’s brands.
"While beer consumption per capital has decreased over time it still remains by far the most popular alcoholic beverage in New Zealand, representing 66.3 percent of total alcoholic beverages consumed," the report says.
The report drives home the point of how important new brands have been to Lion Nathan’s profits. A total of 10 percent of New Zealand’s net sales revenue has been derived from new products and innovations in the last three years.
