Australian beer manufacturers are being affected by the trend toward ready-to-drink (RTD) spirits, but there is solace in the premium beer segment, a new report from research firm IBISWorld says.
According to Beer and Malt Manufacturing in Australia, revenue is expected to decline 1.5% in 2011-12 as weak consumer sentiment, colder than average weather and intensifying competition has weighed on sales and margins.
Revenue in the five years leading up to 2011-12 is expected to increase by a rate of 1.9% to total $5.13bn, with SABMiller owned Fosters Group and Kirin Brewery-owned Lion Nathan National Foods dominating the market.
But revenue in the next five years is expected to increase 2.1% per annum to total $5.68bn, the report predicted.
Health and Wealth driving consumption
Despite overall volume growth being flat, double-digit growth in premium and low-carbohydrate beer sales drove revenue growth early in the five years to 2011-12.
Greater health awareness fed soaring demand for low-carb beers, with Fosters marketing Pure Blonde to great success, while, “rising disposable incomes allowed consumers to shift from mainstream beer to higher priced premium beers.”
The report added that premium beers would continue to gain market share, with flavoured beers, international brands and craft beers all benefiting from drinkers’ ongoing demand for variety and quality.
Major players challenged
Fosters and Lion Nathan would continue to lose market share over the five years through 2016-17, as competition intensifies from both within and outside of the industry.
Both players have seen signs of their domination diminishing thanks to the trend towards RTD spirits and an influx of cheaper foreign-label beer over the past five years.
“Traditional brands such as VB and XXXX will increasingly be displaced as the market becomes more fragmented,” the report said, noting it is likely the two would target export markets in theUS andAsia for growth.
Supermarkets a problem here too
Supermarket power is an issue for the beer industry as well, the report said, stating that Woolworths and Coles have both exploited their growing dominance in the liquor-retailing sector during the past five years.
Between 2005 and 2010, the supermarket giants’ share of the Australian alcohol retailing market increased from 33% to over 45%, and with plans to open more stores the retailing market share is set to grow further.
“The supermarkets reduced shelf space to strike favourable distribution agreements with producers and introduce their own private-label beer brands, often sold at significant discounts to branded products,” the report said.
During the past five years, the supermarket giants have introduced brands including Dry Dock, Platinum Blonde, Maxx Blonde, Gage Roads, Wahoo, Pils and Blue Angel brands that are cutting into the major players’ margins.
Since their launch in 2009, Woolworths and Coles brands, Maxx Blonde and Platinum Blonde, have reduced the market share of Foster’s market leading Pure Blonde brand, from 50% of the low-carbohydrate beer market to just over 40%.
As of 2010, private-label beer accounted for about 3% of beer sold and the report forecasts that this will grow to over 5% by 2015.