E-Malt.com News article: 2630

Australia, Sydney: Lion Nathan, Australia's second-biggest brewer, aims to enlist the help of Dutch giant Heineken to challenge local leader Foster's Group in the A$10 billion ($7 billion) beer market. Lion Nathan rushed out a statement on May 11, after its shares rose on a rumour about a deal, that it was in joint-venture talks with Heineken to make and distribute the Dutch brewer's premium beers in Australia. Heineken spokeswoman Veronique Schyns in Amsterdam confirmed that talks were advanced. An industry source in Australia said the alliance was nearly finalized, under the Reuters reports.

Lion Nathan Ltd is 46 percent-owned by Japan's Kirin Brewery and has been scrambling to catch Foster's, following it into wine and other businesses to capture market share. Analysts said its portfolio of beer brands, which includes Tooheys, has been light on the high-growth premium side. "It (the venture) should make Lion a more effective competitor against Foster's," said Luke Sinclair, an investment manager at fund manager Invesco Australia.

Lion Nathan shares closed up 1.1 percent at A$6.30 in a litle-changed overall market, after earlier rising as much as 2.1 percent to a record A$6.36.

For Heineken NV, a deal would not be a major move for the company, said industry analysts in Amsterdam. The brewer currently has a 0.7 percent share of the Australian beer market, or 7.5 percent in the premium sector. "Australia is not a big market for Heineken and it is also not a growth market, so this will not be major for the company," said analyst Richard Withagen at brokers Delta Lloyd. Another analyst said the deal was more of "an irritant" for Foster's Brewing Group Ltd than a big deal for Heineken.

The premium Hahn and Steinlager brands produced by Lion Nathan, which sells about A$3.5 billion worth of beer a year, have struggled to rival the Crown Lager and Cascade beers of Foster's, which sells about A$6 billion annually.

Heineken brands include Amstel, Murphy's and Tiger, of its APB Breweries Ltd affiliate. APB has made no secret of its ambition to boost Tiger's position in Australia. Fraser & Neave of Singapore has a minority stake in APB.

Heineken operates in 170 countries and is the world's third-largest brewer by volume. Its sales in Australia rose 44 percent in calendar 2003 to A$47.5 million, but the bulk of the growth came from the one-off benefit of its sponsorship of the Rugby World Cup, held in Australia in October and November. "This allows the (Heineken) brand to fight pound for pound with its global weight," an industry source said of the link-up. Elsewhere, Lion Nathan has targeted its China beer business and its small premium wine unit for growth.

Lion Nathan is to report first-half earnings on May 18, and analysts expect a flat profit of about A$111 million before one-off items. The company has flagged an annual net profit for fiscal 2004 to September 30 of about A$200 million.



12 May, 2004