Coopers fears excise costs will prove unpalatable
Coopers managing director Tim Cooper, the head of the nation's biggest Australian-owned brewer, has warned beer was price sensitive, and the days when consumers would drink beer no matter what the price were over.
"Our worry is now that beer is an elastic commodity and consumers can shift to other products like cask wine," Dr Cooper said on Friday.
"We can't just forever be increasing the price of beer and expecting people to keep on buying it in the same volumes."
Beer sales in Australia are stubbornly stuck at their lowest levels since World War II. Sales volumes have been falling for three years.
Adding to the pressure on beer sales are competitive threats from other beverages such as cider.
For the time being the slump in beer does not seem to be hurting Coopers, however. The South Australian brewer brushed aside the troubles in the sector to post record turnover, profits and sales volumes.
Coopers, which has a 4.5 per cent share of the Australian market, said in the year to June 30 its turnover rose by 16.1 per cent to $216 million.
Profit increased by 13.4 per cent to $30.8 million and beer sales were up 8.3 per cent to 69.7 million litres - a rise from 64.3 million litres last year.
Dr Cooper said three-quarters of that volume was driven by strong contributions from its new international brands Carlsberg, Sapporo and Kronenbourg, while sales revenue in the brewing products division, which includes Coopers DIY home-brew kits, was up 7 per cent.
Strong sales for its home-brew division was driven by the acquisition of Mr Beer in the United States, which increased revenue by 12 per cent.
Mr Beer contributed $2 million to Coopers' bottom line.
Coopers said it had absorbed the August 1 beer excise increase for its packaged beers, which would have added roughly 12¢ a case to the price. It was the first time Coopers had absorbed the tax in more than six years.
Dr Cooper said the decision had helped support volume in the first few months of 2013-14, and the extra sales should potentially help to cover some of the lost margin. "This is certainly helping volumes but of course it's at the expense of price. My view is if we can grow volume then we are spreading the overheads over a bigger volume and that helps us with the bottom line."
He said the "'jury was out" on the benefits of absorbing the excise, and that it might be repeated one more time in February.
It was easier to absorb the tax in a low inflation environment but the brewer still faced cost pressures especially in packaging and malt prices, he said.
Frequently Asked Questions about this Article…
The twice-annual excise tax increase on beer can make it more expensive for consumers, potentially leading them to seek cheaper alternatives like cask wine.
The twice-annual increase in the excise tax on beer can make it more expensive for Australian drinkers, potentially leading them to seek cheaper alternatives like cask wine.
Coopers is worried that beer is a price-sensitive commodity, and continuous price increases due to excise taxes may drive consumers to switch to other beverages.
Coopers is concerned because beer is a price-sensitive commodity, and continuous price increases could drive consumers to switch to other beverages, affecting sales volumes.
Beer sales in Australia have been declining, reaching their lowest levels since World War II, partly due to the increasing excise tax and competition from other beverages.
Coopers absorbed the August 1 beer excise increase for its packaged beers, which was the first time in over six years, to support sales volumes despite the potential impact on profit margins.
Coopers has achieved record turnover, profits, and sales volumes by absorbing the excise tax increase and expanding its international brand offerings, such as Carlsberg, Sapporo, and Kronenbourg.
Coopers has maintained strong sales through contributions from international brands like Carlsberg, Sapporo, and Kronenbourg, as well as growth in its home-brew division, including the acquisition of Mr Beer in the U.S.
International brands like Carlsberg, Sapporo, and Kronenbourg contributed significantly to Coopers' sales volume, accounting for three-quarters of the increase.
Beer sales in Australia are at their lowest levels since World War II, with volumes falling for three consecutive years, partly due to competition from other beverages like cider.
Coopers' home-brew division saw strong sales growth, driven by the acquisition of Mr Beer in the United States, which increased revenue by 12% and contributed $2 million to the company's bottom line.
Coopers has posted record turnover, profits, and sales volumes, with a 16.1% increase in turnover to $216 million and a 13.4% rise in profit to $30.8 million.
Coopers absorbed the excise tax increase for its packaged beers, which helped maintain sales volume and potentially offset some lost margins.
International brands such as Carlsberg, Sapporo, and Kronenbourg significantly contributed to Coopers' sales growth, driving three-quarters of the volume increase.
Coopers may consider absorbing the excise tax again in February, but the decision will depend on the benefits observed from the current strategy and ongoing cost pressures.
While absorbing the excise tax is easier in a low inflation environment, Coopers still faces cost pressures, particularly in packaging and malt prices, which could impact future pricing strategies.
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