Australia: Australian beer turning Japanese in a mature market

It was a sunny day back in the 80s and star Australian cricketer Allan Border was lounging on a beach under a sunhat, feeling "a XXXX coming on".

In one of Australian television's biggest commercials of the time, he was promoting the beer Castlemaine XXXX, with a bit of help from fellow cricketers including legendary fast bowler Jeff Thomson, the Brisbane Times reported on July 25.

About the same time as Border spruiked XXXX, one of Australia's most popular celebrities of the decade, Paul Hogan, was promoting Fosters on British television.

Fosters was basically being painted as the national drink and "Hoges" was persuading the Brits to imbibe.

Fast forward 30 or so years, and the TV beer commercials have changed. The people promoting beer these days often have bushy beards, women in bikinis have disappeared from the ads and the stars aren't as recognisable as AB or Hoges.

But there's another thing that has changed: The drinking habits of Australians. Beer drinkers are turning to contemporary brews such as Pure Blonde (did beers have names like this in the 1980s?), Great Northern and Hahn.

The age old names like Victoria Bitter, Carlton Draught, Tooheys and XXXX are still big sellers, but they're increasingly fighting for space in the bar fridge, esky and ice buckets at parties with a constellation of other beer brands.

In the 1980s, countless TV commercials told us that Fosters Lager had the flavour "that's taken it all round the world". While that may have been true, when did you last see a Foster's Lager ad on TV?

But try and count how many ads for Great Northern you see on TV over the course of a week these days. Great Northern is owned by Carlton & United Breweries, Australia's biggest beer maker which commands almost 50 per cent market share.

That market is in the spotlight after it was revealed last Friday that Japan’s Asahi had agreed to buy CUB from its Belgium-headquartered owner Anheuser-Busch InBev (AB InBev) for A$16 billion.

Great Northern was highlighted by Asahi's local executive chairman Peter Margin as a success story in Australian brewing, and one of the things about the CUB portfolio that attracted Asahi, which currently only has a small share of the Australian beer market.

According to industry statistics obtained by The Age and Sydney Morning Herald, Great Northern was the equal top selling beer at Australian retail outlets in the year ending June 30, on an equal share with Carlton names such as Carlton Draught and Carlton Dry.

According to the IRI statistics, Great Northern had 12 per cent market share, comfortably ahead of third-placed XXXX (produced by Lion) with 9.2 per cent share, fourth-placed Victoria Bitter (7.3 per cent), and fifth placed Corona (6.9 per cent). Corona's high placing is a notable change from the 80s, given that back then the word Corona was better known as the name of a (popular) small car.

The "Top 15 Master Brands" list includes the likes of Coopers (at number 7), Asahi (12th) and Iron Jack (14th). But one of the heavyweights from the 1980s, Foster's Lager, doesn't even rate a mention.

So what's happened in the Australian beer market since the 1980s, and why?

In the 80s, and the decades before, drinkers were more parochial, sticking to brews manufactured by the brewer in their state. The Victorian market was dominated by CUB brands like Victoria Bitter and Melbourne Bitter, NSW by beers made by Tooheys and Tooths, and Queensland by XXXX.

But corporate beer manoeuvres through the 1980s and early 1990s jumbled and tested drinkers' parochialism, exposing more brands from interstate.

Another significant change has been the emergence of craft breweries. This trend commenced in the 80s and accelerated through the 90s and 2000s. Some of the many hundreds of craft brewers today include Two Birds Brewing and Balmain Brewing.

CUB's Julian Sheezel says parts of the beer landscape across Australia "would be almost unrecognisable to a beer lover from the 1980s. For example, when we started investing in low and mid-strength beer in the 1980s, we never could have predicted how popular they would become."

Today, low, mid and non-alcohol beers now make up about 25 per cent of CUB beer sales. "This is a monumental shift in Australia's drinking habits and shows the moderation message is getting through as Australians have demanded more options to modify their alcohol consumption," Sheezel says.

Assuming Asahi's purchase of CUB goes ahead, and approval is needed from the competition watchdog and Foreign Investment Review Board, it might put a lid on further consolidation for some time.

"I don't think there can really be much more," says Coopers Brewery managing director Tim Cooper, when asked if more significant consolidation was likely in the beer market.

If the Asahi/CUB deal goes ahead, Japanese-owned beer makers will have about a 90 per cent share of domestically produced beer based on the value of beer manufactured, according to IBISWorld statistics. Japanese brewer Kirin first bought into Lion in the late 1990s, acquiring 100 per cent ownership about 10 years ago.

Today Lion has about 41 per cent market share, CUB about 48 per cent and Asahi about 2 per cent, according to IBISWorld.

"The Japanese companies take a long term view of things...Kirin will hang on to its beer business (Lion). And I think Asahi will hang on to its Australian beer business," Cooper says.

"Because they are very well respected and competent brewers and I think they see the Australian market as being more profitable than Japan. And the Japanese market's not growing, and therefore their only opportunity for growth is outside of Japan."

Cooper says the 1980s Australian beer market was very much a lager market, "with about 99 per cent of the beer being lager beer and the other one per cent being Coopers, with ale and stout".

Lager now accounts for about a 90 per cent share, with ales nearly 10 per cent, he says.

Aside from the arrival of the Japanese brewers, much more has happened since the 1980s. Drinkers are drinking much more light and mid-strength beers, even zero alcohol beers, presumably as tastes and drinking habits have changed, and as drink-drive laws got tougher.

Lion Beer Australia's external relations director Dan Holland says consumers tastes have broadened over the past three decades and beer lovers have become more diverse.

"Lion has been at the forefront of this - from The Malt Shovel and Hahn Brewery, James Squire, Little Creatures to more recent brands like Geelong-born Furphy and the recent introduction of global leader in zero alcohol beer Heineken Zero.

"And just this year we launched gluten-free Hahn Ultra Crisp – something we would never have considered 30 years ago," he says.

Nathan Cloutman, senior industry analyst at IBISWorld, says the Australian beer market is a mature one but it's still big business.

Cloutman says the value of the beer produced in Australia is about A$4.5 billion per year, while the retail market for beer is worth about A$14 billion.

Another modern trend is the enthusiasm of the bigger brewers towards buying successful craft breweries.

"They are just being bought up, slowly, by the larger companies, who want to keep their branding. Because it disassociates the larger company, and just gives them an avenue to enter that craft beer market," Cloutman says.

Consumers are willing to pay more for craft beer and it can be quite a profitable enterprise, he says, particularly with the backing of a large company that can deliver production savings.

"Asahi have shown that they're not unwilling to purchase craft beer brands, like Cricketers Arms and Mountain Goat. So considering the way the market's going there's a very good chance that they would purchase some more, smaller craft beer brands to boost their portfolio," he says.

27 July, 2019