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Lion’s WCB Share at Risk

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Published on : Mar 09, 2015

The Japanese-owned food and beverage group Lion are prepared to sell their brands of everyday cheese now. The situation was not the same two years ago. Lion’s well-known brands Mil Lel and Coon, Cracker Barrel are the running brands in the dairy industry. These brands would have witnessed a complete exit of the Australian market as the company approached a near certainty. The times and strategies have changed. 

Last week on the 2nd of this month, Lion sold the everyday cheese business. Due to Lion’s parent company’s commitment to the Australian market, the Japanese leader is not sloping down anytime in the near future. Over the years, Kirin Holdings – Lion’s parent company has been severely tested of the margin pressure and heavy dismal returns and write-downs. 

Former marketing executive with Mars and Arnott’s Biscuits, Lion’s Dairy and Peter West Drinks boss is building good returns on his mandate to lift returns and simplify the business with the stop the flow of red ink. 

The revenue generated by the everyday cheese business is around $160 million. The revenue is high volume and low margin with broader category growing at nearly 1.5 percent to 2 percent every year. Lion’s leading dairy products Farmers’ Union Greek Yoghurt and Dare Iced Coffee are increasingly growing at 15 percent annualized rates in contrast to the above growth. 

Moreover, growth of the everyday cheese has been at bay with tough retailers such as Woolworths and Coles on one side, as well as Warrnambool Cheese and Butter (WCB) as suppliers on the other end. 

Saputo took over WCB in a tough takeover last year. It was during this battle of mergers and acquisition when Lion called on the house bank Greenhill and Co to capture a 10.22 percent stake in WCB in the right to protect the cheese business.

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