Lion's CEO talks on taming 2020 and meeting targets

A Q&A with Lion CEO, James Brindley

What is your view of the current trading conditions and how are you and your team meeting the challenges?

It has certainly been a year of unique challenges for Lion. We remain focused on supporting our customers as they continue to recover from this year, and in particular as they navigate the continued restricted trading conditions going into the busy summer months.

How have your team become involved and where are you seeing the greatest benefits of that work?

I think some of the great unsung heroes are the teams in our breweries around Australia, who have kept the beer flowing all year, and our draught quality team who have worked extremely hard to keep draught systems in venues in good working order to pour the freshest and best tasting beer on tap.

What is Lion's focus with becoming carbon neutral and developing your sustainability model?  Are you on track to meeting the 2025 carbon neutral goal?

Action on climate change is a key pillar of Lion’s sustainability strategy. In 2015, we set ourselves the ambitious target of reducing our carbon footprint by 30 per cent by 2025 from a 2015 baseline and in doing so established a ‘whole brewery’ carbon reduction approach across our Australian operations. To date Lion has achieved a 28% reduction with a significant contribution from a 100% renewable power purchase agreement (PPA) that commenced in NSW, with our Tooheys Brewery in Lidcombe as an anchor in 2020. Progress towards meeting this target will be assisted by our commitment to using 100% renewable electricity across all our Australian operations by 2025.

We continue to identify opportunities for carbon emissions reduction through energy efficiency initiatives, biogas utilisation, rooftop solar, renewable electricity power purchase agreements (PPAs) through to providing brewers grain to reduce livestock emissions. 

In 2019, we completed a $100,000 water stewardship study to further understand climate risks in our breweries and raw material supply.

In early 2020, despite being in the midst of a global pandemic, we became Australia’s first large-scale carbon neutral brewer with strategic carbon offset projects that also deliver shared value and co-benefits to the community. Tasman Environmental Markets, Australia’s largest buyer of carbon offsets is providing Lion with a portfolio of verified projects to offset its remaining organisational carbon footprint across its Australian business. Lion is focusing on carbon offset projects that protect vital habitat and food sources for native wildlife including fire management in Arnhem Land Northern Territory, forest regeneration in NSW and forest conservation in New Zealand.

We recognise that to accelerate action on climate change requires partnerships and actively communicates its environmental commitments and performance with customers and suppliers to encourage its value chain to adopt similar aggressive targets and action on climate change.

In terms of new brands to market, few have bigger fanfare than White Claw.  White Claw has made an immediate impact in the much talked about Hard Seltzer category.  How do you view this category and where do you think Hard Seltzers will recruit it’s consumers from?  Do you feel that Hard Seltzers resonates with Australians, or is the offer a different one, more connected to the occasion, or the RTD category with a health focus?

White Claw is the market-leading brand in the $2.5 billion US alcoholic seltzer market with 60% market share. It has seen volume growth of nearly 300% since its launch in 2016. White Claw outsold Budweiser in the summer of 2019 in the US. [Source: IRI]. We are confident the alcoholic seltzer category has enormous potential in Australia. It’s hitting all the macro trends around lighter options, lower alcohol, lower calories, and lower sweetness in a way that no other category does. The enormous success of the category in the US and White Claw in particular is testament to this. White Claw is the signpost for the category. After months of anticipation, it is flying off shelves right around Australia. Since the launch of White Claw in mid-October, we have seen unprecedented demand, which has surpassed all our expectations for the brand and deliver almost $5 million in retail sales value in its first week in market alone. We make no health or therapeutic claims in relation to the product, and as a signatory to the Alcohol Beverages Advertising Code, take our commitment to responsibly marketing all our products extremely seriously. What we are seeing is a consumer trend towards lower sugar, lower calorie products and that’s what White Claw and the broader seltzer category delivers. Beyond this, White Claw is the signpost for the hard seltzer category. Its appeal goes far beyond its contents. It represents a completely new style of beverage – pure, uncompromised refreshment.  Calories are just one factor in a much bigger picture here, and ultimately consumers do want transparency when it comes to calories, carbs, sugar and ingredients.

Considering White Claws dominance overseas, what do you think is the opportunity for the number of  Hard Seltzers that have launched in recent months?

White Claw is the market-leading brand in the US alcoholic seltzer market. While the category is still in its infancy in the Australian market, the incredible consumer response we have seen since launching White Claw has shown that the category is now entering a new phase – heralded by the arrival of the hottest beverage on the planet – White Claw. We believe the macro trends and consumer preferences are all as prevalent here as they are in the US. We may see a steadier growth trajectory here than in the US but we believe seltzers will become a significant category here in Australia as it has in the U.S.

What is the reasoning behind closing the West End Brewery in South Australia?

This has been a very sad time for West End, for the industry, and for South Australia. West End has been operating well below its full production capacity for some time now and unfortunately this is no longer viable. We have come to this proposal as the best way to ensure we have a sustainable brewing network for the future. The Australian beer market has been in long-term decline for the past decade as Australian drinkers choose other beverages, like wine, over beer. Per capita beer consumption has dropped around 20% in this time.

Our input costs have continued to rise against this backdrop of declining volume, and a further drop in draught beer sales as a result of the pandemic. Our priority right now is the wellbeing of our team at the Brewery. This is no reflection on the dedication or capability of our team at West End and their contribution to this brewery and our brands over many years.

We recognise this is very difficult news and it comes at a particularly challenging time for our people. We will support each and every team member through this proposed change. Around a third of our existing team would remain in South Australia under this proposal across sales and sponsorship roles.

We acknowledge West End’s 160-year history. We are a proud supporter of sports at all levels - sponsoring many competitions and teams in SA including the SANFL, the Strikers and the Redbacks – and of the pubs and clubs that bring communities together.

We are committed to doing all we can to see as many of our events and traditions continue and working alongside our customers during this difficult period as they recover from a very challenging year.

Lions’ investment in Four Pillars and in Vanguard Luxury Brands 18 months ago announced a drive into the premium and craft spirits business. How has the impacted your core focus and how are your complementary strengths benefiting both businesses?

Our craft spirits business is really complementary to our core beer business. It is fair to say that Australian drinking preferences have changed considerably over the last decade, and as a leading adult beverages business it is absolutely crucial that we have a portfolio of great brands to suit all tastes and occasions. There is a lot of excitement around this category, and we are proud to have the world’s best gin – Four Pillars – as part of the Lion family.

During your tenure as MD, do you remember a time as challenging as the year we have just experienced, and no doubt the year ahead?

There is no doubt about it - 2020 has been a devastating year for our industry. It is clear that the recovery will take years not months but what I do know is that as an industry we are incredibly resilient, and very much a part of Australia’s culture. It is so important that we all remember the importance of being able to meet at the local pub or club for a beer, and a chat, and to connect with your community. After so many months of virtual contact, I think people are really looking forward to a social summer, and while it still might look a bit different to summers past, the beer on tap will certainly taste the same.