Carlton blamed for beer war

By Joe Helm

Lion Breweries has accused Australian arch-rival Carlton & United Breweries (CUB) of trying to undermine its New Zealand business by starting the price war now sweeping the wholesale-packaged beer market.

The managing director of Lion Breweries, Kevin Stratful, said packaged beer had never been cheaper.

Happy beer drinkers could thank CUB for the low prices.

CUB was trying to build market share in New Zealand by dumping Australian beer, notably Resch's pilsner on the local market.

"They're selling it here for less than they charge in Australia," said Mr Stratful.

"We are not happy about that, but there's nothing we can do about it as there are no anti-dumping provisions in the CER [trade] agreement [with Australia]. If there were anti-dumping provisions, we would invoke them."

Mr Stratful said the big players in the New Zealand beer market, Lion and DB, had been forced to react to CUB's cut-price tactics.

Lion had reacted by discounting its Tasman Bitter and Rheineck brands and DB had dropped the price of Double Brown and then DB Bitter.

The chief executive of DB Group, Brian Blake, said this week that the discounting was the fiercest he had ever seen.

Mr Blake did not lay blame for the price war.

"Everybody's discounting," he said.

DB's margins had been squeezed by the price war and the
company faced a big challenge to match last year's profit before interest and tax.

Mr Stratful said the discounting had spread to other brands because CUB had begun discounting its Stripe brand.

"They've taken a middle of the range brand which they've spent a lot of money on promoting, and turned it into a discount brand," he said.

"They have created a budget segment of the beer market."

Liquor industry analysts said there had always been a budget segment of the beer market.

Until recently it had been the territory of Independent Liquor which made the discount Ranfurly Draught and New Zealand Lager brands.

The present price war was unlikely to be hurting Independent Liquor too much as the company had moved more into producing ready-to-drink spirits products such as its enormously successful KGB brand.

The owner of Onehunga Spring Brewery, Carl Wackrow, said micro breweries like his were not being hurt by the discounting from the large brewers.

January sales of his bottled products were 30 per cent above January last year.

"Price is not a driving factor in our market," he said.

"I think there is a growing market differentiation between good beer and cheap beer.

There is growing demand for micro-brewed and boutique beers which are perceived as being fresher and healthier products."

Mr Stratful said the present level of discounted beer would not last much longer.

"Beer prices will come up in the next few months," he said.

"Carlton can't keep pouring money into the New Zealand market and getting nowhere."

Paul Kennedy, the vice president of marketing for Carlton & United, said it was strange that Lion, the holder of 40 per cent of the New Zealand beer market was blaming CUB, the holder of about 5 per cent of the market, for the price war.

Mr Kennedy said CUB's beers were not as widely available in New Zealand as Lion's were, so it was difficult to see how they could be leading the price war.

He said CUB's Stripe brand had followed Lion Red down in price.

Mr Kennedy said Mr Stratful was wrong to say CUB was selling Resch's cheaper here than in Australia.

To do that Resch's would have to be selling here at less than $6.95 a dozen he said. It was selling at around the $10 mark.