Lion’s net profits slide 20%

The full year’s net profits for New Zealand’s biggest drinks company, Lion, have slipped 20% as consumption declines and consumers trade up.

Reports filed by Japan’s Kirin Holdings, which owns Lion, show that profits for the year ending 30 September 2014 declined as consumers in Australia and New Zealand drink less and “premiumisation” of those markets continues.

As reported by the New Zealand Herald, Kirin reported that total volumes of beer, wine and spirits in Australia and New Zealand declined 2.7%, while its sizeable dairy and soft drinks business declined 7.3%.

Total revenue fell to NZ$564 million, down just over 7% from $611m a year earlier. Pre-tax earnings fell from $73.6m to $66m, while net profits tumbled from $55.2m to $44m.

Last month, Lion’s chief executive, Stuart Irvine, said that Australian and New Zealand cnsumers were drinking less alcohol than at any time in the previous 15 years.

New Zealand’s beer consumption has been declining for three decades and in 2013 consumption was down to 288.8 million litres down from 400m litres in 1987.

Nonetheless, as volume falls, value is rising, off-licence beer sales hit $717.9m in the year ending 31 July 2014.

Taxes can artificially inflate value rises but the switch to more premium products is also a key driver. Lion is putting more weight behind its “contemporary, craft and mid-strength brands” and noted that sales of its Speight’s and Steinlager “Classic” brands saw growth of 3% and 4% respectively.

The struggles of its Antipodean subsidiary, mirrors that of parent company Kirin, which is floundering in a declining Japanese beer market.