Tough times for big Aussie brewers

Add a comment
Falling beer consumption is bad news for Australia's brewing giants.
Falling beer consumption is bad news for Australia's brewing giants.

Australians revel in their image as beer swilling larrikins. But we're not doing a great job at living up to our reputation.

New data reveals that alcohol consumption in Australia is at a 50-year low and is likely to fall further.

Generation Y, it seems, prefers going to the gym over going to the pub and baby boomers are a lot less thirsty than they used to be.

Business forecaster IBISWorld expects total annual per capita alcohol consumption to drop by 0.8 per cent in 2016-17 to 9.37 litres of pure alcohol.

Over the past seven years, annual consumption has dropped from 10.53 litres.

IBISWorld expects consumption to fall to about 8.5 litres by 2023-24.

This is good news for public health advocates and wowsers, but bad news for alcohol companies, especially breweries.

Wine producers will for the most part be OK because they can export their products, and have a huge opportunity as Asia's middle class grows rapidly and starts spending more on luxury and Western goods.

In fact, the share price of ASX-listed Treasury Wine Estates, which owns Penfolds and Wolf Blass, has more than doubled in the past two years because of booming exports to Asia.

Beer, however, is not an export product, especially not the mass-produced beers made by Australia's two big brewers, Carlton & United Breweries, which makes Victoria Bitter and Carlton Draught, and Lion, which produces XXXX and Tooheys.

The brewers are confined to the shrinking domestic market.

Adding to their woes are the craft beer makers nipping at their heels. Although not a big segment of the market, craft beer sales are growing rapidly.

Craft beer and wine are seen as premium products and don't suffer from the same sort of health concerns that ordinary beer does.

It is considered perfectly okay to go on about an artisan craft beer with pine and citrus notes and a light mouth feel.

Soon you'll be surrounded by other bearded and tattooed beer enthusiasts wanting to share their own fascinating observations.

Sinking seven schooners of VB down at the pub, however, is no longer acceptable in many circles.

It's hard for brewers to fight the craft beer trend.

By its nature, craft beer is made in small local batches and once it starts rolling off the production line in a big brewery much of its appeal disappears.

And like wine, it is sipped and savoured, not chugged, so people drink less of it.

The brewers are fighting back, however.

Lion is launching a A$10 million "myth-busting" campaign in the coming summer to persuade consumers that beer isn't full of preservatives and sugar.

But it will be hard to overcome perceptions (and the reality) that if people drink too much beer they'll get fat. And it's just one of the problems the brewers will have to overcome.

Miners bounce back

Investors are wondering if the worst is over for commodity prices.

Japanese steel makers have agreed to more than double the price they pay for Australian coking coal over the next three months, the Australian Financial Review revealed last week.

The better prices could boost economic growth, inflate the Government's coffers and kick start wage growth again.

They are also good news for investors, of course.

Rising coal prices this year have flowed through to coal mining stocks and investors are already benefiting from the rally.

Whitehaven shares have risen seven-fold to A$2.87 this year and shares in BHP Billiton are up by more than a third to A$22.54.

Coal mines in Queensland and NSW that had been shuttered have been reopening to take advantage of the better prices.

The December quarter coking coal price will be US$200 a tonne, up from just US$80 in March.

The big question is how long the better prices can last.

The coal price has risen because of limited supply, in part caused by a state-driven reduction in coal production in China.

In April, Chinese authorities announced they would reduce the number of statutory working days for its coal miners to 276 a year from 330 as it tried to tackle the ongoing supply gut.

With coking prices now doubled the ploy has clearly worked.

But China has already twice relaxed its 276 day rule and there's no reason to believe that they won't do so again if prices remain high.

The good news (at least if you're a coal miner or investor) is that on the demand side the Chinese are starting to consume more coal.

Chinese coal imports are up 15 per cent in the first nine months of the year, thanks to a slowdown in local mining and an increase in steel production.

The increase has helped allay fears that China might eventually stop importing coal altogether.

The mining boom won't ever come back but those who called time on the industry might have been premature.

- NZ Herald

Get the news delivered straight to your inbox

Receive the day’s news, sport and entertainment in our daily email newsletter

SIGN UP NOW

Have your say

1200 characters left

By and large our readers' comments are respectful and courteous. We're sure you'll fit in well.
View commenting guidelines.

© Copyright 2016, NZME. Publishing Limited

Assembled by: (static) on production apcf05 at 09 Dec 2016 10:25:17 Processing Time: 1298ms