CDS impacts Lion’s half-year profit decline

Dairy and drinks company Lion has announced that its half year net sales have declined due to the challenging trading landscape in the Australia and New Zealand beer and dairy markets.

Lion said in a statement that despite this, its sales in craft and contemporary beer segments and milk beverages remain strong.

The beverage giant blamed the NSW Container Deposit Scheme and the rising energy costs contributed to a 9.2 per cent decrease in the first half in group operating earnings to $241.8 million.

“On-going weakness in consumer spending, coupled with rising cost inputs, means that we face challenging conditions in both the beer and dairy markets.  However, we continue to make good progress in tapping into the growing high-value segments and adjusting our cost base to reflect market realities,” Lion CEO Stuart Irvine said.

The Australian Financial Review reported that the half year financial results, released on Tuesday by Lion’s Japanese parent, Kirin, followed a 6.3 per cent fall in earnings to $609 million and an 8.2 per cent fall in sales to $4.04 billion in calendar 2017.

Lion Beer Australia’s Furphy has rapidly boosted its Lion’s volume share of the premium beer segment while its Iron Jack Crisp Australian Lager also continued its positive momentum, with a 4.5 per cent volume share increase in the contemporary segment. The beverage company also invested in a new packaging and the ‘Now You’re Talking’ marketing campaign leading to an increase in Hahn’s share of the highly competitive contemporary segment.

Lion Dairy and Drinks’ milk beverages Dare and Big M has emerged in the competitive market with a double-digit value growth. A positive momentum is seen in the cheese category from the Christmas sales period carried throughout while its yoghurt brand Farmers Union’s on-the-go “Crunch” range has seen positive growth.

Moreover, it opened its second owned overseas Little Creatures in Singapore, after it opened in Hong Kong and Japan. Currently the craft beer brand is available in 30 cities globally.

Lion has also invested in adjacent categories with its minority stake in Remedy Kombucha in May, following investments in Good Buzz Kombucha in New Zealand and Schibello Coffee in Australia in 2017, according to The Australian Financial Review.