New Zealand's alcoholic drinks industry is undergoing a 180-degree turn as millennials and health conscious Kiwis are increasingly swapping a full-strength drink for a low or no-alcohol alternative.
About six months ago Lion kicked off what the brewing company, owned by Japanese beverage giant Kirin, is calling the Growth Hub, a global division set up to forge new growth opportunities for the global business as it moves away from its roots of only selling alcoholic drinks, and to ensure its alcoholic portfolios continue to perform as it navigates an increasingly sober future.
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Rory Glass, managing director of Lion NZ, has been appointed chief growth officer for both the New Zealand and Australian markets. The role will see him travel more than he is used to as the company develops global strategies to ensure future business growth as the consumption of alcoholic drinks continues to decline.
This includes developing no or low alcoholic drinks options under its core brands. Lion currently has no low alcohol beers.
Ahead of the launch of Growth Hub, Glass and key members from Lion's leadership team visited "high-growth companies" overseas over a three-year period, including Alibaba and Huawei in China, and Tesla and Amazon Web Services in the United States.
"It was really insightful. What we noticed about all of those companies was that they focused a lot on small empowered, agile teams, where there wasn't a lot of hierarchy and those teams could make decisions and propel the business forward and make decisions at an incredibly fast rate," says Glass.
He says Lion found those companies had a "consumer obsession" and how to get ahead of consumer trends, supported with digital and advanced analytics.
Glass says Lion is not looking to replicate those organisational structures but implement parts that would fit into Lion's rapidly business. He says Growth Hub was not "just about protecting what we have, but creating what we want to become".
What it wants to become is not decided, or at least not yet publically-known.
Global figures show one in three millennials are choosing not to drink alcohol, and those that do are opting for lower-strengths. Conscious consumption is also now growing trend.
Lion says it is evolving to tap into those areas of opportunity. Over the past 20 years it has transitioned from a having a portfolio of 90 per cent beer to 60 per cent today.
A team of 20 people work across Growth Hub in New Zealand and Australia and focus on three areas: customer and consumer experience, insights and innovation and digital and advanced analytics. The company employed an executive from Airbnb to head the experience section as it explores new opportunities for growth.
Ordering via voice recognition, paying by facial recognition are some areas its analytics team are looking at.
"[Growth Hub] is about looking at new growth opportunities, areas that we are not currently involved in," says Glass, who next year will celebrate 20 years with the company.
"Beverages and drinks per se are moving on at a rapid rate, particularly in that functional drinks area, which is something we're having a look at. A good example of that is Kirin, in Japan, has launched a non-alcohol beer which targets belly fat."
Health-bent products were an area of focus for the company, along with no and low alcohol products, says Glass. "We're already seeing the trends in New Zealand with people looking for better-for-you alternatives, that's one of the big trends impacting the business at the moment."
Evolution of the industry
"The big things that are impacting the business, or present opportunities for the business, are things like millennial impact, and we're seeing that come through in terms of numbers.
"We know that younger people are definitely drinking less ... and we know they are particularly interested in sustainability."
There's also the rise and popularity of small brands. Glass says these are easily able to get a foothole in the market now as they can use digital means to establish the brand, which had been a big change to the market.
"Size and scale you'd once consider a real strength can also be a disadvantage as it can limit your ability to move really quickly, which is why we look at something like the Growth Hub and think can we actually, when we see opportunities, get in behind it quickly."
This is why Lion had acquired or formed partnerships with a number of small brands in recent years and had helped to accelerate Lion's growth, Glass says. He estimates the New Zealand division will turn a record profit in the current financial year. Lion is currently growing at a rate of 6 per cent on topline.
Lion wants to grow its non-alcoholic sales to be 10 per cent of revenue by 2025. Currently, it is just over 5 per cent. Coffee brand Havana, which Lion acquired in December 2018, had been a "star of the company" this year and was ahead of its annual forecasts.
There are nine coffee occasions to every one beer occasion nowadays, says Glass.
"The reality is we have to get future growth out of the core business because that is still the majority of our sales. Beer is sitting at about 60 per cent of our portfolio now, so we are managing to grow into other areas."
In the past five years Lion has increased its share in craft from about 20 per cent to 35 per cent, though its expects the growth of craft to continue to slow in coming years, one of the reasons it is renewing its areas of focus. "We'll continue to grow that non-alcoholic portfolio which is really important and continue to lean into those better-for-you opportunities and then explore how we can operate differently."
Lion also operates its ventures business that creates new ventures and revenue streams. Lion Ventures this year launched its subscription platform YOWO that connects remote workers with venues to work from. It will next year launch a wellness cafe.
