Lion changes tack on Asia

05 Aug, 2016 10:58 AM
Comments
0
 
Lion Co CEO Stuart Irvine still has ambitions in Asia despite merging a stand-alone Asian unit into the domestic dairy business. Michael Clayton-Jones
To grow into Asia you really have to put in the direct resources ...
Lion Co CEO Stuart Irvine still has ambitions in Asia despite merging a stand-alone Asian unit into the domestic dairy business. Michael Clayton-Jones

Food and beverage company Lion Co. is changing tack on its Asian expansion strategy, pulling the plug on a new stand-alone unit and integrating it into the core dairy and drinks business.

Lion chief executive Stuart Irvine established Lion Asia Dairy as a dedicated business unit in 2014 to focus on growing the group's market-leading dairy brands, including Pura, Farmers Union, Dairy Farmers and Yoplait, in South East Asia and China.

"To grow into Asia you really have to put in the direct resources, you can't do it with just an export department. You need to be very patient," Mr Irvine told industry players at an Asian business forum in Sydney last October.

Lion's yoghurt sales rose 26 per cent in Asia last year – three times the rate of growth in the broader market – and Lion is now the market leader in yoghurt in Singapore, Malaysia and Thailand.

The Farmers Union, Dairy Farmers and Yoplait brands are distributed in south-east Asia through partners such as Fraser & Neave and sold in major retail stores including Fairprice, Cold Storage and Giant in Singapore, Aeon and Cold Storage in Malaysia and Foodland, BIG C and Lotus in Thailand.

In China, Lion Asia Dairy was pursuing a direct to consumer model for fresh dairy products, marketing Farmers Union and Dairy Farmers Thick & Creamy on social media sites such as WeChat and selling through influential daigou networks.

Despite strong sales growth, Mr Irvine has decided to close the Asia unit, which is run by Duncan Makeig, and integrate it into Lion's domestic dairy and drinks unit, run by Peter West.

"The international strategy is still as important as it has always been," a Lion spokeswoman said.

Integrating the two business units would accelerate growth by aligning decision-making, product development and supply chains.

Lion's Asian ambitions would be "front-of-mind" as the group invested in innovation, milk procurement, manufacturing and brand decisions, the spokeswoman said.

Mr Makeig will play a key role in integrating the two businesses between now and the end of September.

The Asia dairy decision was unveiled on Thursday as Lion, which is wholly owned by Japanese brewer Kirin, released sales and earnings for the six months ending March.

Lion's underlying revenues slipped 2.1 per cent and actual revenues fell from $2.5 billion to $2.4 billion, reflecting the sale in May last year of Lion's every-day cheese business to Warrnambool Cheese & Butter and the loss of private label milk contracts. This followed a 5.6 per cent decline in group sales to $4.71 billion in 2015.

Underlying group earnings rose 2 per cent to $406 million, buoyed by cost savings and Lion's focus on higher margin products such as yoghurt, flavoured milk and premium cheese. Actual earnings, excluding every-day cheese and foreign exchange movements slipped from $389 million to $384 million.

Mr Irvine said Lion was on plan to deliver full-year earnings growth, but noted that consumer confidence remained fragile and volumes had declined in key categories market-wide.

Total volumes in the beer, spirits and wine division in Australia fell 3.2 per cent, although beer volumes rose in the March quarter, for the first time in years.

In the dairy and drinks division, volumes fell 11 per cent, with weaker modified white milk sales and the loss of private-label contracts offsetting strong growth in flavoured milk.

During the half-year Lion announced plans to invest $87 million to transform its white milk and milk-based beverages manufacturing footprint on the eastern seaboard and a $40 million investment into a dairy manufacturing site in Western Australia.

Lion has terminated its Australian distribution agreement with AB Inbev following the global brewer's acquisition of SABMiller/Fosters. The transfer will occur in October.

Ari Mervis, the man at the helm of Lion's biggest Australian competitor Carlton and United Breweries, is expected to leave the brewer in October when Anheuser-Bush InBev is expected to complete its takeover of SABMiller.

SABMiller bought Foster's Group, which owns CUB, in 2011 and installed Mr Mervis to run its local operations.

ABInBev said on Thursday it would restructure the combined group's operations including creating an Asia Pacific trading zone, which will be based in Melbourne.

It will be one of nine trading zones and managed by Jan Craps, currently the head of Canadian beer company Labatt.

WITH JULIE-ANNE SPRAGUE

Page:
1
AFR

POST A COMMENT


Screen name *
Email address *
Remember me?
Comment *
 
Improving pasture consumption was the focus of recent pasture coaching groups organised by the Tasmanian Institute of Agriculture Dairy Centre as part of the Dairy On PAR project.
05 May 17 Improving pasture consumption was the focus of recent pasture coaching groups organised by the Tasmanian Institute...
Australian dairyfarmers are missing out on the opportunity for more profit by not better managing their home-grown feedbase, according to Gardiner Dairy Foundation chair Dr Bruce Kefford.
24 Mar 17 Australian dairyfarmers are missing out on the opportunity for more profit by not better managing their home-grown...
light grey arrow
Farmers angry at the unfairness to them or to other farmers who switched, and / or who are
light grey arrow
Where was the ADF support for dairy farmers back in April 2016? Nobody from ADF spoke out
light grey arrow
I always buy Norco milk have done for tears now Aus product Aus owned i wish the rest of Aus
South Australian dairyfarmers are investing in generators to help guarantee their power supply in response to electricity outages. 
03 May 17 South Australian dairyfarmers are investing in generators to help guarantee their power supply in response to...
VIRTUAL fencing for cattle is set to be commercially available later this year, following Melbourne-based agri-tech company Agersens’ success in raising $2 million.03 Apr 17 VIRTUAL fencing for cattle is set to be commercially available later this year, following Melbourne-based agri-tech...
Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition opportunities.25 Sep 16 Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition...
Monopoly market may confront cropping sector under mega-merger proposal.22 Sep 16 Monopoly market may confront cropping sector under mega-merger proposal.