Lion Nathan drinks to Gen-Y

Lion Nathan CEO Robert Murray is optimistic for the longer term because, somewhat belatedly, he is reducing his cost levels and believes the long-term future of his non-wine liquor retailing looks good.

The winners in the next round of the beer wars will be determined by who succeeds in capturing the current Y generation, including those who are aged between 18 and 30 - the sons and daughters of baby boomers. They are part of a generation that rivals the baby boomers in size and in buying clout. Many leading companies are seeking to recruit Y generation people to advise them on this market, realising that generation Y is different from their predecessors.

The fastest growing liquor market for the generation Y group is spirits and premium beers. In spirits, Foster's has stolen a march on Lion Nathan, but Murray hopes the higher spirits promotion expenditure in the next three years and the targeting of promotion to higher-premium beers will help him win market share.

Lion Nathan now realises that when Foster's upgraded its Yatala brewery in Queensland, it took its production costs below Lion Nathan's. Murray is now focussing on restoring the balance.

But there are developments in the generation Y liquor market that are good news for both Lion Nathan and Foster's. For example, young males continue to consume much more liquor prior to marriage. And because they are marrying later, their high consumption periods are becoming longer.

At the same time, both the entire beer and RTD markets are moving towards premium products, which gives brewers the opportunity to launch a series of up-market beers. Lion Nathan is strong in this area with brands like Tooheys Extra Dry and Boags.

In past generations, sons and daughters consumed similar brands to their parents. That is no longer the case and their brand loyalty is changing. It gives the number two producer a chance.