Why Lion CEO says beer is still recession-proof
The boss of Australia’s second-largest beer company, Lion Group, expects the beer category to show its resilience if economic conditions worsen, because some spirits and wine drinkers will trade down as prices climb in those higher-priced segments.
Sam Fischer, who became chief executive of Lion in mid-2022 overseeing beer brands including Tooheys, XXXX Gold, Furphy, Hahn and West End, said the company was closely monitoring the cost-of-living pressures and fallout from rising interest rates.
But its sales are solid and the return to people socialising in pubs and bars after the restrictions of the COVID-19 pandemic is underpinning it. “There is still a lot of energy around socialising,” he said.
This is already showing up in a slowing of growth rates for some ready-to-drink spirits brands at retail liquor chains Dan Murphy’s and BWS, outlined by Steve Donohue, the CEO of Endeavour Group, when he reported third quarter sales on May 2.
Mr Fischer hopes Australia can avoid a significant economic downturn.
Mr Fischer spent much of the past two decades working as an executive in Europe and Asia with global spirits group Diageo, and before that had an extended stint with soap and toothpaste company Colgate-Palmolive. The South Australian is a passionate Adelaide Crows supporter, and is reinvigorating old-school mainstream beer brands such as Tooheys, complete with the famous jingle, “I Feel Like a Tooheys”.
It was the first major investment behind the brand in 10 years.
Lion’s parent is Japanese conglomerate Kirin Corp, which became the 100 per cent owner of the business in 2009, after acquiring a large stake in the company in Australia in the mid-1990s.
Mr Fischer said Kirin was a long-term, patient owner, right behind the strategy of expanding in higher-growth craft beer and offshore. “They’re always taking a long-term view,” he said.
Kirin is branching out further from beverages, eyeing growth in its health sciences division with a $1.9 billion takeover bid for Australia’s largest vitamins group Blackmores last week which has been endorsed by the Blackmores board. There will be no cross-over between the beer operations.
Lion expanded in Australia in craft beer in 2021, buying Fermentum, the owner of the Stone & Wood beer brand in Byron Bay in NSW, Two Birds Brewing in Melbourne and a host of other brands including the alcoholic seltzer Sunly in 2021. Lion expanded into the fast-growing gin market with the acquisition of a 50 per cent stake in Four Pillars Gin in 2019.
Mr Fischer said the Stone & Wood brand was showing strong growth. He says inflation in input costs and raw materials is starting to slow, although energy costs are rising. Aluminium prices are declining.
“We do think we’re near the end of the cycle.”
Lion in late 2021 made its second large acquisition in craft beer in the United States in three years, with the buyout of Michigan-based Bell’s Brewery from owner Larry Bell, who built up a business with 550 staff, from a start-up in 1985. The US arm acquired a brewery in Daleville, Virginia, in March from US-based Constellation so it can expand output of products including the Voodoo Ranger beer brand.
Mr Fischer said the group would be keeping an eye out for further acquisition opportunities, including in New Zealand, but the main focus was on “empowering” the various business units in all geographies to drive growth.
He is also a non-executive director with the British high-end fashion company Burberry Group. Mr Fischer said this gave him extra insights into global trends. “Lion is all about brands,” he said.
“Keeping brands relevant through these volatile times is a big part of what we do.”