Coca-Cola Amatil (CCA) is one step closer to re-entering the Australian premium beer market, after announcing plans to lend JV the Australian Beer Company AUS $46m, as it leverages its sales and distribution muscle.
On Wednesday, CCA announced an H1 2012 turnover of AUS $2.078bn (+7.4% year over year),while net profit rose 60.9% to AUS $247.2m (US $256.9m), despite poor consumer spending and a wet summer in Australia.
MD Terry Davis said: “CCA has delivered a strong result with improved momentum in the Australian business despite a difficult trading environment, and another excellent result from Indonesia and Papua New Guinea.”
Australian Beer Company (ABC) is part of the Casella group, and Coke bottler and food and beverage distributor CCA said the loan was a preparatory step towards its re-entering the Australian premium beer market.
After SAB Miller’s takeover of Foster’s in December 2011, CCA sold its 50% stake in lucrative JV Pacific Beverages to partner SAB.
The deal stopped CCA selling, distributing or manufacturing beer in Australia until December 2013.
Attractive growth opportunity
But Davis said at the time of the stake sale (for AUS $305m) that CCA hoped to re-enter the Australian beer business by 2014, and this week he described premium beer as an “attractive growth opportunity”.
He noted a beer EBIT pool of around AUS $1.4bn across the Pacific region (with major players SAB Miller/Carlton United Breweries and Kirin representing AUS $800m and AUS $500m respectively).
ABC will use the loan to help it acquire and expand a brewery in Griffith, New South Wales, into a 500,000 hectolitre annual capacity brewery.
CCA also proposes to acquire a Foster’s owned brewery and distillery in Fiji and has signed multi-year distribution agreements with Grupo Modelo, Carlsberg and Molson Coors for Fiji, Papua New Guinea and the Pacific Islands.
When the beer restrictions expire in December, CCA said the loan would convert into a JV equity interest in ABC, which would then be responsible for manufacturing premium beer and developing brands.
CCA itself will be responsible for sales, distribution and development/management of customer relationships.
Group MD Terry Davis said on Wednesday that the Casella agreement strengthened CCA’s credibility with international brewers who brewed domestically, and gave CCA “access a world class, low-cost brewery that will enable us to re-enter the premium beer market in Australia in December 2013”.
Davis added that CCA would also have sufficient initial manufacturing capacity to cater to for approximately 15% of the premium beer market in Australia.
Independent distribution option
CCA said its sales and distribution expertise, combined with the draught and packaged brewing capability of the Australian Beer Company, would give multinational brewers an independent route to market in Australia
Beer firms would also be able to partner with CCA as the leading non-alcoholic beverages and spirits partner for the licensed trade, Davis added.
“Large-scale independent distribution options for international premium beer brands are limited in Australia. CCA is in a strong position to capitalise,” he said.
John Casella, Casella Wines MD, said the agreement would allow Casella to expand within the beer category.
“A partnership with CCA, when it occurs, will give us tremendous scope to grow our brewing operations and we look forward to the exciting opportunities that lie ahead,” he said.