Lion expects its beer sales to account for less than 60 per cent of total sales in 2019 financial year. Photo / File
Lion expects its beer sales to account for less than 60 per cent of total sales in 2019 financial year. Photo / File
Lion NZ, the local unit of Japanese brewer Kirin Holdings, posted a big fall in net profit last year due to costs associated with a multi-million-dollar IT transformation project.
The brewing company's net profit after tax of $28 million for the year to December 31 was down from $75.6m inthe 15 months to December 2017 following a balance date change. Lion posted a $39m net profit after tax in 2016 financial year.
The Auckland-based brewer and winemaker said its earnings were affected by an IT transformation project designed to modernise its operations.
The two-year project centralised 500 applications running across the business into one cloud-based platform and involved 550 people from Lion's global team.
The company said the project would pay off in the long term and is expected to positively affect net profit over the next two fiscal years.
During the year Lion made sales revenue of $593m, up from $585m recorded in the 2017 financial year.
New Zealand's largest alcoholic beverage company sells beer, cider, wine, spirits and ready-to-drink (RTDs) products and owns beer brands including Lion Red, Lion Brown, Steinlager and Speight's, along with the rights to international brands such as Corona, Budweiser, Stella Artois and Guinness.
It also sells Lindauer, Daniel Le Brun and Wither Hills wines. Its spirits include Gordons and Bombay Sapphire gin, Johnnie Walker whiskey, Wild Turkey bourbon, Coruba and Bacardi rum, Smirnoff and 42 Below vodka. Outside of liquor, it has the Vitasoy plant-based milk range and Yoplait yoghurt brand and various soda brands.
Lion NZ managing director Rory Glass said the IT transformation would set Lion up for the future. He said the company knew its financials would take a hit as a result of the project.
"Like all companies undergoing such a major transformation, we accepted it would create some short term pain and while it impacted net profit, I'm incredibly proud that we've still managed to maintain topline sales growth and underlying profit," Glass said.
"Over time this will revolutionise our business and when fully optimised, we'll be able to provide a real time customer delivery experience and seamlessly update to new technology as it emerges."
The transformation impacted every part of the business, from supply chain and its customer portal through to invoicing and employee systems, Glass said.
"It wasn't a simple process. It would be one of the largest if not the largest system implementations in Australasia in terms of the breadth of what we changed. We want to transform our customer experience which we couldn't do off old systems so we have been very ambitious in this space."
The last time Lion updated its systems was in the 1980s, Glass said.
The company would now look to deploy technology such as predictive analytics, facial recognition and artificial intelligence within the business, he said.
Lion has been diversifying its portfolio over the past few years. In the 2018 financial year it acquired iced tea company Teza and teamed up with sparkling water start-up Vista, adding those to it non-alcoholic drinks portfolio including GoodBuzz Kombucha, Mac's Soda and Hopt.
The company wants to grow its non-alcoholic drinks sales to be at least 10 per cent of total revenue by 2025.
In the year, Lion opened The Fermentist in Christchurch, the country's first sustainable craft brewery, and acquired craft beer brand Harrington's. It also opened the $20m Little Creatures dining precinct at Hobsonville Point in Auckland, which it said had exceeded its sales targets by 70 per cent, and acquired Wellington coffee brand Havana.
It also launched subscription software platform YOWO, the first business out of its Lion Ventures division, which connects remote workers with venues to work from.
Lion said its core alcohol business remained strong, driven by its craft beer brands. Panhead experienced 22 per cent growth year on year, Emerson's 10 per cent and Little Creatures 37 per cent.
Speight's Summit Ultra grew 360 per cent from $1.5m to $6.9m in the 12 months to December 31.
Glass said Lion's sales growth in the current financial year was already above 3 per cent and was on track to be "one of its highest sales results in the last 20 years".
He said beer sales would account for less than 60 per cent of total sales in the current financial year.
