Kanpai to the Great Aussie Brew by Melissa Parker

Kanpai to the great Aussie brew

WITH THE NEWS OF ASAHI GROUP HOLDINGS AGREEING TO PART WITH A PROPOSED A$16 BILLION TO PURCHASE CARLTON & UNITED BREWERIES FROM ANHEUSER-BUSCH INBEV COMBINED WITH KIRIN OWNING AUSTRALIA’S OTHER BIG BEER PRODUCER LION CO. SINCE 2009, JAPANESE BREWERS WILL DOMINATE THE AUSTRALIAN BEER MARKET. THAT IS, SHOULD THE DEAL GO AHEAD ONCE IT PASSES MUSTER WITH THE ACCC AND THE FOREIGN INVESTMENT REVIEW BOARD.

Words Melissa Parker

The deal will mean that two breweries will hold roughly 90% of the market with Lion currently holding 41%, CUB 48% and Asahi 2% according to IBISWorld.

Asahi is set to inherit big Australian beer brands such as Victoria Bitter, Great Northern, Melbourne Bitter, Pure Blonde and Carlton Draught as well as craft brands 4 Pines and Pirate Life. Recently it exapanded its craft portfolio in Australia with the purchase of Green Beacon in Queensland, a craft brand launched by two school mates, Marc Chrismas and Adrian Slaughter, in 2013 and since won three consecutive Champion Brewery Trophies at the Australian International Beer Award plus struck a deal with Singapore Airlines to supply beer for Business Class.

Asahi has shown an interest in Australian beer companies before. The Japanese brewer has had its sights on CUB for some time since it acquired a 19.9% stake in Elders IXL in 1990, then owner of CUB before it became Foster’s Group and was sold to SABMiller.

It is thought the clincher in this final decision was the huge success of CUB’s Great Northern product which according to IRI statistics Great Northern had 12 per cent of the market in the year ending June 30.

The questions lies as to why Japan’s big brewers are paying the big bucks to acquire Australia’s big brewers.

The answer could lie in the fact that despite the preferred alcohol Japan is experiencing an ageing and declining population so Japanese companies are seeking to expand market share overseas for future growth.

André Sammartino , Associate Professor in International Business & Strategic Management

Department of Management & Marketing at the Faculty of Business & Economics, University of Melbourne has researched the beer market in Australia and has been following the state of play closely. In terms of the ‘why’ he supports this theory.

“These companies are dealing with the fact that Japan is not a growing market, in fact it is a declining market, more so than any other major western market, it is declining at 2% a year in population with an ageing demographic.”

This bid to expand began in earnest in 2016 when Asahi purchased Grolsch, Peroni in Italy and UK’s Meantime Brewery from AB InBev allowing Asahi to gain access to key European markets. In the same year when AB InBev acquired SABMiller it agreed to sell Asahi its Eastern European business and assets in Poland, the Czech Republic, Slovakia, Hungary and Romania to Asahi which included beer brands such as Pilsner Urquell among others.

It would appear the strategy is buy into markets that are faster, younger and holding bigger futures for the profitability of beer whilst realizing profits in a broad band of currencies that perform stronger than the weaker Yen.

But is also works both ways, since Kirin has got its hands on Aussie brands such as Little Creatures it has invested in expanding the reach of these brands to export markets such as China and turning these brands into global beer juggernauts. Since Kirin’s investment in Lion it has invested heavily in Australian beer brands, Hahn in Sydney, Tooheys and XXXX as well as Tasmanian premium brand James Boag.

“Asahi has clearly targeted Australia as part of its international expansion. Kirin is not really expanding, but utilising the Australian operation to get into China. It seems sticking in the region is what Kirin want to do whereas Asahi have boldly picked up pieces of AB inBev when the big

“Lion remains focused on growing its core beer brands in Australia and overseas, as well as developing new products that cater to changing drinker tastes,” Spokesperson for Lion Co.

“Obviously CUB represents nearly half the whole market and if you add Asahi (brands) that’s 50%, and to have such a big player adopting a more rational approach to business as opposed to a short-term transactional approach will be a good thing” – Dr Tim Cooper

“Over the past 20 years it (Japan) has taken advantage of the lowest cost of capital in any developed economy to expand to international markets” – Tony Boyd, Australian Financial Review.*

merger happened a few years ago and now they have substantial operations in Europe owning Grolsch, Pilser Urquell and Peroni.” Says Assoc Prof André Sammartino.

Professor Sammartino believes Asahi over In Bev for CUB is a positive result. He says Asahi look better in Australia because it seems to care about being here where as AB InBev had no particular interest based on the fact they tried to spin the business off after the big merger with SABMiller.

“AB InBev is pretty ruthless in terms of how it runs operations in terms of the growth and Australia is not going to deliver that growth. We are not Japan, but like many other western markets we have plateaued and I suspect these (CUB) businesses were a little bit harder to run than they would have liked.

“Instead they are targeting growth in Latin America, Africa and Asia etc. where the business can continue to grow and where there are enormous efficiencies to be made. I think AB InBev realised with CUB they were going to have to make incredibly hard decisions about shutting down plants and breweries or do a lot of wholesale change in terms of business culture and I don’t think they were prepared to. I suspect that Asahi will go down the Kirin path and be relatively hands off and let the business run as it does,” he says.

Tim Cooper, CEO of Coopers Brewery, weighs into the debate and also believes the takeover will have a positive impact on the Australian beer economy. “I think the sale of CUB will be a good thing. The Japanese companies and particularly Japanese brewers will take a long term view of their investments than what obviously AB InBev have done, and they will be more likely to invest in the market. It is generally positive and will see a more stable market.”

He said that Asahi’s longer–term view of the market should hopefully grow the whole beer market here, because the market has experienced decline since 2009 when the market represented 1870 million litres and is now down to 1700 millon litres.

Cooper said AB InBev is a more transactional player and that it created a far more competitive landscape in Australia for breweries. He believes the long-term building of brands is more in line with the way Asahi operates and will bode benefit the whole Australian beer industry. The alternative was the grab for the quick sell that saw InBev go for the keg contracts, buying stock positions and inducing retailers to give prominent positions for their brands.

“Anheuser-Busch InBev have done amazingly well around the world, not in terms of growing brewing companies but in terms of buying brewing companies, removing assets they don’t need and trying to increase their sales volumes in one way or another and then moving on to the next target,” explains Cooper.

Indeed, AFR business writer, Tony Boyd mimics this sentiment when he recently wrote about the benefits of bringing home the Japanese corporate ethos of thinking in ‘multi-decade time spans’ rather than three to five years as is the norm here. This Australian big business short-term thinking, he says, is “tied to the tenure of the chief executive being paid a lot more than his equivalent in Japan” and says there is a lot Australian business leaders can learn from their Japanese counterparts.

So what does this mean for the smaller craft brewers? Jamie Cook, president of the Independent Brewers Association believes the transaction will deal a real blow to the boutique and craft brewing industry. He laments the fact that these two foreign brewers will control almost all of the Australian beer market and says it presents a real threat to competition.

“We will now see these two foreign brewers use their market power to restrict access to the market by using tap contracts to block the other 600 plus brewers from penetrating the market,” says Cook.

The IBA have said it will call on the Federal Government to use this recent acquisition as a catalyst to review the beer market to ensure the small independent brewers are given a fair and equal opportunity to compete in the marketplace.

“In these times beer drinkers are demanding real choice and diversity with their beer choices and are increasingly preferring to choose beer from local independent brewers.

“Our members and other independent brewers are driving real economic benefit to the local economy through job creation and fostering strong communities around their businesses. Stifling this growth by allowing the beer industry to be dominated and controlled by foreign owned brewers seems

I think the IBA are doing the right thing in terms of making noise to remind people their members are not owned by these guys but I don’t think it is changing the landscape as much as they are making out – Prof André Sammartino, Associate Professor in International Business & Strategic Management at the University of Melbourne .

at odds with the government’s reward for ‘having a go’ mantra,” says Cook.

Professor Sammartino says he doesn’t believe the impact will make much difference to the current sales landscape for the independents.

“The IBA would be worried because the portfolio of craft beer in the CUB stable is pretty extensive and in terms of beer contracts in pubs there is a really good offering. It has a full portfolio that gives the punter the impression of diversity. That is part of the discussion around buying Green Beacon because that now means they have a Queensland brand.

“An interesting point I raised recently is whether they might at some point try and get the Western Australian portfolio because they notionally have the Matilda Bay brand but nobody remembers that as being from WA because it isn’t anymore.

“It’s going to get a little bit harder for mid to large size craft brewers in the sense that their growth at some point has to come from breaking into the pubs that are dominated by Lion and CUB. There is only so far you can grow without that, so if you are Stone & Wood or you’re Hawker’s or Bolter you are at some point going to bang up against that. Your saving grace is you can still get into Dan Murphy’s and all the major retail outlets. And given that craft segment is a growth segment, the independent brewers will grow alongside that. I think the IBA are doing the right thing in terms of making noise to remind people their members are not owned by these guys but I don’t think it is changing the landscape as much as they are making out. “

Meanwhile the company line from CUB is one of confident anticipation.

“Carlton & United Breweries is very excited to be joining Asahi. We are a great Australian business with iconic brands, world-class breweries and great people. These have made us the market leader in Australia and we look forward to growing the business and the beer category with Asahi.

“Not only will we continue to brew our famous beers such as VB and Carlton Draught in Australia, but we’ll join a company that has fantastic beers such as Asahi and Peroni.

“We look forward to continuing to be a vital part of the Australian community that we’ve served for more than 180 years as we grow the business with Asahi.”

And with that we can get a glimpse into the future for the Aussie beer landscape for the next few decades because when it comes to consolidation I think we’re done.

The two key brewers behind Two Suns, Geoff Day from Australia and Yosuke Tajika from Japan

TWO BREWERS FROM TWO NATIONS CREATE AN EASY DRINKING BREW

TWO SUNS PREMIUM DRY IS THE NEW EASY DRINKING BEER LAUNCHED BY ASAHI PREMIUM BEVERAGES, THE RESULT OF A COLLABORATIVE EFFORT BETWEEN TWO BREWERS FROM AUSTRALIA AND JAPAN, GEOFF DAY AND YOSUKE TAJIKA.

Launched in draught from September, Two Suns introduces a premium low bitter and carb option to the easy drinking category. It is made in Australia from 100% Australian grown malt and wheat and is brought to life with precise Japanese brewing techniques for crispness and purity. It is this combination of Australian and Japanese methods that has contributed to the uniqueness of Two Suns.

A spokesperson from Asahi Premium Beverages says the beer is hitting the market as a response to data** showing that Australians are changing their beer preferences from classic beers to lighter, crisper and more refreshing alternatives. This easy drinking category now makes up 31%*** of the total bee category and is growing with forecasts expected to overtake classic beer in the next twelve months.

“Two Suns has a unique flavour profile of low bitterness with a subtle malt aroma and character. It’s distinctive crisp taste and dry finish makes for a really nice easy drinking refreshment. It truly is the result of marrying the best of two very passionate brewers that are excited to show off what’s best about our home countries,” says Day.`

Two Suns is Asahi Premium Beverages first entry into the easy drinking category and will be available on tap at at select venues and in pack from September.

150 YEARS OLD. STILL FEELS 150 YEARS OLD. LIKE NEW. STILL FEELS LIKE NEW.