Sri Lanka’s largest brewery, Lion Brewery (Ceylon) PLC (Lion) is consolidating and changing its beer distribution channels in the United States (US) to create a platform for better growth, which has yielded a short-term decline in export revenue.
“We have made several changes to our operating model in the US. We have changed the distribution model, moving from sole importer with multi-state distribution, to multiple importers – i.e. one person state – with single state distribution,” Lion CEO Suresh Shah said. He said that as a result, the number of states in which Lion’s brands are distributed has been reduced from 20 to five, and a greater focus and wholesaler support in the handful of states will prove fruitful in the future. “We believe this model will deliver better opportunities for brand building and consolidation and roll out across the wider market,” Shah added.
Due to the changes in strategy, export volumes for Lion in 2015/16 declined 5 percent year-on-year to Rs.349 million. Lion’s main export markets are the US, Canada, Australia, the UK, Japan and the Maldives. Shah noted that despite tough conditions in the Western markets, Lion continued to export one container a day during the 2015/16 financial year, reaching two containers a day in exports this March. Despite the past worries that competitors would reduce prices in the Maldives to dilute Lion’s market share, Shah noted that the group had emerged the strongest in the archipelago. “Our largest overseas market, the Maldives recorded a 21 percent growth during the year under review. In the Maldives we are now the overall market leader with an extremely strong position in the draught beer segment,” he said. Meanwhile, Shah added that Lion has entered into a brewing contract with the Scottish brand Hudgen, which contributed 38 percent to the export volumes in 2015/16, and is set to expand further in 2016/17. He further said that the domestic market was likely to be challenging in the year ahead with the government’s marketing restrictions, high taxation, flood damage to production facilities and the increased costs of inputs.