Does Lion Nathan Really Have A 20% Stake In Lc?

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Apologies for the "old" article but I found it pretty interesting as I wasn't even brewing back then.
From The Age newspaper in Melbourne.

Beer barons think small to stay afloat
November 4 2002

Smaller "craft" beers are receiving considerable attention from the major breweries in their efforts to boost beer sales. Brian Robins reports.

Melbourne Cup week has for years, since the two major breweries grabbed the naming rights to the event, meant beer.

While such big sporting events attempt to highlight the big brands, there is also a more low-key push underway, under the rubric of "craft beers". And with a handy 3 per cent of the American beer market, local investors have been running the slide rule over prospects for craft beers to win a similar share of the local market.

The start of summertime kicks off the seasonal uplift in beer sales, which is also coupled with increased marketing.

The big brewers, Foster's and Lion Nathan, have seen a slide in the market share of their mainstay products for years, most recently at the hands of premium beers and the ready-to-drink line-up of alcoholic beverages.

Higher margin, premium beers now have an estimated 8 per cent of the beer market. And with demand growing at an estimated 15 per cent a year, premium beers, along with imports, will soon boast more than 10 per cent share.

Even so, in other mature markets premium brews make up well over 15 per cent of the total, which leaves considerable scope for growth locally.

The four top premium brands - Crown Lager, Hahn, Cascade and Boags - hold an estimated 55 per cent share of this segment, with imports 25 per cent.

Even though "craft" beers have a miniscule share of the market, they are coming in for increased attention from the majors, as they take a leaf out of the wine market in seeking to revive beer sales.

The sheer cost of developing a new beer and getting it to market - estimated at upwards of $5-$6 million - means that toying around with different tasting beers at microbreweries is highly cost-effective.

Smaller brands have to work hard to hold their own against the sustained marketing of the big players.
Beers such as Victoria Bitter and Tooheys may dominate the landscape now but few recall the fact that 25 years ago Foster's was the main brand, with an estimated 25 per cent of the market, and Victoria Bitter was only a marginal player. Other former mainstay products such as Tooth no longer exist.

Now, Victoria Bitter is the largest brand and Foster's is an also-ran. Hence the ongoing interest by the industry majors to keep tinkering with new products, especially as the beer market continues to fracture.

Wine and ready-to-drink alcopops have taken market share away from beer, at a time when drinkers are drinking less and are increasingly willing to pay up for premium products.

"People are trading out of the casks and into brands," says Howard Cearns, a director of Little Creatures, of the shift underway with wine.

"It's the same with beer: people are trading up."

Little Creatures is one of the new breed of microbreweries that have launched over the past few years, with some success. The backers of Little Creatures started the original star of the microbrewery sector, Matilda Bay in Perth, which was bought about a decade ago by Foster's.

It is not common knowledge but Lion Nathan has a 20 per cent stake in Little Creatures which adds to its small but growing portfolio of microbreweries, which includes Chuck Hahn's Malt Shovel Brewery in Sydney.

Within the industry, Lion Nathan is rumoured to be negotiating for a stake in St Arnou, another emerging player in the microbrewery sector which is starting to make the running with its St Arnou beer cafes. St Arnou is chaired by Kevin Stratful, former managing director of Lion Nathan New Zealand.

"It's a very clever strategy by Lion Nathan," says Lyndon Adams, director of J. Boag & Sons of its positioning in this end of the market.

If these brands kick on, then it is in the right place, he says.

The struggle by independents to gain share in a crowded marketplace is not easy.

Melbourne's Mountain Goat is in the middle of a $500,000 capital raising to finance a shift to new premises and a bottling line. It is running at full capacity of about 300,000 litres, which it is seeking to boost significantly.

It acknowledges that it is only barely covering costs, and the clear risks involved in expanding another notch.

"We'd regret it if we never did it," says Cam Hines of Mountain Goat.

Smaller brands have to work hard to maintain their core market, to hold their own against the sustained marketing assault of the big players, while positioning themselves for inevitable shifts in public taste.

"It's very difficult to get to the next level," Adams says.

Industry-wide, the model for the craft brewers is Little Creatures Brewery, which has capacity to produce 2 million litres of beer annually.

For Lion Nathan, the toehold it has in the craft-beer sector gives it direct access to new drinking fads, although the prospective returns are nebulous.

For the craft brewers, access to the Lion Nathan infrastructure and distribution network has been fundamental to their success.

In the United States, craft brewers have an estimated 3 per cent of the market, with annual sales of $US3.3 billion ($A5.9 billion). Here, a 3 per cent share would give craft beers sales of close to three litres per person a year; hence the interest.

The foot that Foster's and Lion Nathan have in the door of the craft breweries also gives them a direct link to the push to create more pubs as "destination venues", with drinkers going out of their way to visit a trendy pub brewing its own beers.

Dr Chuck Hahn, who runs Lion Nathan's Malt Shovel Brewery, which is enjoying some success with its James Squire product line-up, says developing small breweries in pubs is on the agenda as the market for premium beers continues to grow.

"Maybe some James Squires pubs, brewing some James Squire brews and selling our mainstream beers," he says. "The aim is to try to develop more of a beer culture.

"In Sydney, you need some old heritage hotels. You need to pick a hotel with room, brew once a week as a point of difference."

The increased interest of the majors in this corner of the market comes as draught beer is, for the first time in at least 30 years, starting to regain market share against packaged beers.

In the 1960s and early 1970s, draught beer accounted for about 80 per cent of the market, and packaged beers the balance.

Tighter drink-driving laws saw that begin to shift to the point where those market shares were neatly reversed.

Data from Foster's over the past six months has shown the start of a turnaround.

It operates the Gunn Island Brew Bar in Albert Park where it has put to good use some of the lessons learnt from the Sail and Anchor Hotel in Perth, which it acquired as part of its purchase of Matilda Bay a decade ago.

Foster's won't talk about its present plans, but the roll-out of additional brewing pubs is on the agenda. St Arnou, meanwhile, is developing three microbreweries on the Gold Coast, New South Wale's Hunter Valley and Mildura. They join operations in Sydney, Melbourne and Brisbane.

One of St Arnou's first deals was to supply Arthur Laundy, the state's largest hotelier with a swathe of hotels throughout western Sydney, with a premium brand to use in his outlets.

St Arnou joins Belgian Beer Cafe, a concept developed and controlled by Interbrew of Europe, which owns the Stella Artois brand. It has an outlet in each of the main capital cities.

Of the other independents, Lion Nathan controls the Malt Shovel Brewery in Sydney (the former Hahn Brewery), while Foster's has the Masthead Brewery in northern Queensland (Sanctuary Cove) and the Gunn Island Beer Bar in Albert Park.

A decade ago Foster's bought Perth's Matilda Bay, - one of the first of the microbreweries, and one of the most successful.

"They're acknowledging this is an important part of the market," Mountain Goat's Hines says of the push by the majors into the craft-beer sector.

Other pub breweries include Geoff Scharer's George IV in Picton, NSW, and the Lord Nelson in the Rocks area of Sydney.


Black Label Society
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Hi Johnno,
Iam not exactly sure of the stake but sadly i heard its closer to 49% stake now! don't quote me on this but the source i heard this from i take as being in the know.
It was proberly 20% when LC first started.
At nearly half owned by a swiller and producing nearly 2 million litres a year i think that calling them a micro brewery is a bit of a understatement.



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johnno said:
One of St Arnou's first deals was to supply Arthur Laundy, the state's largest hotelier with a swathe of hotels throughout western Sydney, with a premium brand to use in his outlets.

I was running pubs for the Laundy group when they put this beer on. It was really very ordinary. We sold it @ $2.20 per schooner while charging $2.90 per schooner of VB etc, and it still would not move. I wouldn't call it premium. The guys that drank it loved the price, the others just turned their noses up at it. It opened my eyes to how hard it is to sell beer in this country.

Backlane Brewery

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Neither the Lion Nathan or Little Creatures websites make any mention of this- the LC site has no corporate info at all.
But I did see this on the Lion site-
Craft Brewing At Home
The quality craft brew brands such as Brewtec, Black Rock and Wander are the starter for many a fine beer produced by the passionate home brewers in Australasia and around the world. Combining high quality malt extract and hops, our master brewers take a lot of the difficulty and quality variation out of the base raw materials to make brewing at home far more rewarding for our beer enthusiasts. Home brew kits cut out certain aspects of the brewing process and give the craft brewer the opportunity to focus on fermenting the quality raw materials to produce a range of natural, bottle-conditioned beers. Many of the smaller microbreweries and brew pubs also use our malt extract products as the base for the beers they produce.
So you are consuming Lion Nathan product in your K&K brews even if you would rather die than drink Tooheys...the bastards get you coming & going.

Plastic Man

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I think Lion Nathan have their fingers in a few of the otehr Kit brands as well, Malt shovel being one at least. Who says you can't buy a Tooheys in a supermarket....

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