Australian premium beer market forecast to grow at 3% volume CAGR through 2016, while standard lager will see 3% CAGR decline, analysts predict
February 3, 2012
– Following its recent acquisition of the beer assets of Foster's Group in Australia, SABMiller has already started to increase its presence in the country. The company has announced that its Peroni Nastro Azzurro, Miller Genuine Draft, Miller Chill, Grolsch and Pilsner Urquell brands will join the group's Carlton United Brewers' (CUB) portfolio of international beers.
Premiumisation has been a major trend in Australia in recent years. Although overall beer consumption has declined, premium lager registered 2% growth in 2011. In addition, according to Euromonitor International, the category is forecast to grow at a 3% volume CAGR over 2011-2016 while standard lager is predicted a further 3% CAGR decline over the same period.
SABMiller is the least exposed of the top brewers to high-margin mature beer markets, thus growth of the premium segment and Foster's strong cash generation were the main factors attracting it to the Australian brewer. With the purchase, SABMiller has become the leading brewer in Australia with nearly a 50% share of total beer volumes, and it is getting ready to push its premium brands in the country to enhance its value generation, as it has done in other mature beer markets in Western Europe in recent years. In the past five years the company has significantly outperformed the wider market, for instance in the sluggish UK beer market by taking advantage of the growing popularity of premium lager and pushing its Peroni Nastro Azzurro, Miller Genuine Draft and Pilsner Urquell brands. The company's premium-focused strategy has proved to be a great success. It managed to deliver subsequent double-digit volume growth and Peroni Nastro Azzurro became the best-selling imported premium lager brand in the country.
SABMiller has also been enjoying strong growth through its premium brands in Australia in the past couple of years. Its brands were distributed by its Pacific Beverages joint venture, although subsequent to the purchase of Foster's, the company will buy out Coca-Cola Amatil and all of its operations in Australia will be integrated into CUB. Through CUB, SABMiller will take advantage of a wider distribution network and the company might even switch to local production, although this could impact the image of some of its brands; for example, Peroni Nastro Azzurro relies heavily on its Italian heritage. Nevertheless, Japanese player Kirin Holdings, which currently leads the premium segment in Australia with a 34% volume share, slightly ahead of Foster's Group, will surely face increased competition from the London-based brewer.
Although Australia is a small beer market, accounting for less than 1% of global beer volumes in 2011, it does offer value growth potential through the premiumisation trend. Foster's Group was one of the last major acquisition targets in the highly consolidated global beer market, and as the company has been leaking market share in the last five years, it will be interesting to see whether SABMiller will be able to revive CUB and enhance its finances.