Financial results from the three brewers that control 90 per cent of New Zealand's beer market show continued erosion in demand and margins for mainstream beers, even as the retail value of sales rises.
Lion, which has 46 per cent of the New Zealand market and is owned by Japan's Kirin Holdings, said last month it "continued to experience aggressive competition" in its first half. Results from local unit Lion - Beer, Spirits & Wine (NZ) for the 2013 year showed sales fell almost 7 per cent to $611 million while profit dropped 22 per cent to $55 million.
DB Breweries, with 33 per cent of the market, changed its balance sheet in its latest year to be in line with owner Heineken and presented results for a 15-month period. That showed sales jumped 45 per cent to $677 million and profit rose 49 per cent to $38.8 million.
But on a month-for-month basis, sales actually slipped 3 per cent while profit was up 18 per cent and industry insiders say that doesn't account for the 15-month period including two peak Christmas quarters, in which brewers typically get a third of their gross margin. On a like-for-like basis, DB's results were probably flat or negative.
Independent Liquor (NZ), which now has about 11 per cent of the beer market, narrowed its loss by almost two-thirds last year to $41.6 million, mainly reflecting smaller impairments than in 2012.
The Asahi Group-owned RTD, liquor and beer company posted a 13 per cent drop in sales to $357 million in 2013 and rivals say its results are indicative of building market share in beer, although it may also reflect pressure in the RTD market it dominates. Asahi is locked in a court battle over the $1.5 billion it paid for Independent.
The total volume of beer available for sale in New Zealand has been sliding for three decades, according to government figures, reflecting changing consumer tastes toward wine, cider and the ready-to-drink 'alco-pops' favoured by young drinkers.
In 2013, the total was 288.8 million litres, down from more than 400 million litres in 1987, the year of the stock market crash. Yet according to Nielsen & Aztec Scan data, the total retail value of off-licence beer sales has risen in four of the past five years, reaching $717.9 million in the year through July 31.
The brewers say this reflects a fattening of margins by dominant retailers, such as the two main supermarket operators Foodstuffs and Woolworths, who can use their sheer purchasing power to wrangle discounts.
"You're seeing a concentration of power of the retailer," said one brewing executive who declined to be named. "Not volumes but overall value of sales. You will see that's still in growth for beer but if you look at the big three you're not seeing that in the top line."
Industry analysts, though, say it is difficult to tell if retailers alone are widening their margins without also seeing the volume of retail beer sales.
Craft beer, the growth segment of the market along with premium brands, accounts for only about 8 per cent or 9 per cent of the market, according to beer scan data.
To be sure, not all of the weaker results are directly related to beer. Lion's New Zealand sales decline reflected the company's decision to terminate a number of unprofitable wine distribution arrangements, while the weaker profit included an insurance payout in the previous year for quake damage to its Canterbury Brewery site.