Lion buys into local gin distiller Four Pillars

Australia | Are spirits the new beer? After AB-InBev snapped up a US distillery, Australia’s number two brewer, Lion, did not want to be left on the side-lines. The Kirin-owned brewer has bought a 50 percent stake in gin distiller Four Pillars. The transaction was announced on 22 March 2019, though financial details were not disclosed.

Four Pillars was established in 2013 by Stuart Gregor, Cameron Mackenzie and Matt Jones in Healesville, Yarra Valley, a wine growing region in the state of Victoria. IWSR, a drinks industry data firm, reports that Australian gin consumption has risen 52 percent between 2013 and 2017. Consumption of locally-made gin has increased 33 percent between 2016 and 2017.

This surge has allowed the pure-play gin distillery Four Pillars to grow into a 500,000 bottles-a-year business, which makes it a fairly large company as far as craft distilleries are concerned. Four Pillars’ sales are estimated at AUD 35 million (USD 25 million), indicating an enterprise value of AUD 80 million (USD 57 million), insiders say. Most of the proceeds from the sale will go to the founders.

Comparing AB-InBev’s recent purchase of San Diego’s Cutwater distillery with Lion’s investment, you begin to wonder what Lion is seeing in Four Pillars. Cutwater has a huge side business in canned cocktails, which will sit nicely in AB-InBev’s brand portfolio and distribution system.

As to Lion, it cannot assist Four Pillars in reaching its ambitious growth targets domestically – Four Pillars seeks to dethrone Scottish gin Hendrick’s in the super-premium segment – because Lion itself has little presence in Australia’s drinks category. Moreover, Lion will find it difficult to boost international sales, except perhaps in Japan where gin consumption is growing off a tiny base.

Lion’s investment highlights that its Australian beer business, including brands like XXXX, Tooheys, Hahn, James Boag, James Squire, Little Creatures and White Rabbit, is declining, not least because of overall beer consumption decreasing. Therefore, it is desperate to diversify into non-alcoholic and non-beer beverages. It will be remembered, though, that only in 2016 did Lion move out of wine, when it sold its entire Australian wine portfolio to Accolade Wines. Last year, Lion also put its Australian dairy business on the block, but no buyer has come forward yet.

Buying into Four Pillars uncannily smacks of a finger-in-the-dyke strategy.