ASAHI BEVERAGES WILL TARGET GROWTH IN AUSTRALIA

Asahi Australia CEO Robert Iervasi. Picture: Aaron Francis

• ELI GREENBLAT
• JUNE 16, 2021

Image:  Asahi Australia CEO Robert Iervasi. Picture: Aaron Francis

Japanese beverage giant Asahi has given the blessing for its Australian arm to push the accelerator on growth, whether by acquisition or further investment in its manufacturing capabilities, with local chief executive Robert Iervasi ­enthusiastically taking up the challenge to extend his drinks portfolio across the sector.

Mr Iervasi said Asahi in Australia, which recently bought leading coffee business Allpress Espresso, has also not delayed major projects or investments because of the uncertainty around Covid-19, and will keep its capital expenditure for 2021 steady at about $100m.

“The position we are in at the moment as we emerge out of the Covid pandemic, which is really encouraging, is that we are on track to deliver strong sales and profit growth across Oceania in 2020. And there has been no pausing from a material investment perspective,” said Mr Iervasi, chief executive for Asahi Beverages Oceania region.

“We make up one of three regions for Asahi globally – there is Japan, Europe and Oceania – and we are considered one of the growth engines for the global organisation which is really pleasing from our perspective because that enables and encourages investment in the local market which we are really pleased about.”

Asahi has been investing in the region since it acquired the Schweppes soft drinks business in 2009 for $1.2bn, followed by one of the biggest corporate deals in recent years with the 2019 agreement to buy Carlton United Breweries for $16bn. Along the way there have also been more bite-sized deals such as in the craft beer market where it has been actively buying brands including Cricketers Arms, Mountain Goat and 4 Pines, and outside of alcohol this year’s acquisition of Allpress. Through partnerships and joint ventures it also manufactures and distributes under licence Pepsi, Mountain Dew, Sunkist, Gatorade, Lipton Iced Tea and Kombucha.

In Australia and New Zealand, Mr Iervasi now oversees 17 manufacturing sites, across alcoholic beverages, non-alcoholic drinks and coffee and is keen to transform into the “multi-beverage provider of choice” for its customers, able to sell them whatever drink they want.

“We are focused on sustainable growth, both for our customers and consumers, long-term investment in Australia,” he said.

“We have a very ambitious agenda. Where we see there is a link to our strategy and where it makes sense for us to continue to invest and grow we will do so.”

Mr Iervasi said he had not had direct discussions with Asahi headquarters in Japan about what beverage categories Asahi Beverages Oceania would not enter, but it came back to linking an acquisition with its strategy of multi-beverage and that supplements its current portfolio.

“We continue to explore where there are gaps in our portfolio and where we see gaps we will explore how we will fill that,” he said. “That may be via an acquisition or could be by a partnership such as we have with PepsiCo … or through product innovation and there are a number of opportunities to close any portfolio gaps that we might need to address.”

Turning to trading, Mr Iervasi said Asahi Beverages had emerged from the pandemic in a strong position and that, while its on-premise channel was yet to fully recover to pre-pandemic levels, the trajectory was positive, and its flagship alcohol business had returned to growth.

Asahi’s total alcohol sales in the first three months of the year are up mid-single digits. This was against a broader industry where the overall beer market had declined 2.1 per cent in the first quarter of 2021 against the same time last year, with pack beer declining 2.5 per cent and bulk beer flat.

“So far we are performing well in 2021 compared to 2020,” Mr Iervasi said. “People are going out to the pub again and socialising at home. However, the situation in Australia and New Zealand for that matter is that Covid-19 continues to provide some uncertainty particularly in on-premise.

“The pandemic will continue to create challenges for some time so we continue to be vigilant but what we are pleased about is that because of our portfolio of brands and scale that we have been able to deliver a really strong performance in the first quarter.”

Mr Iervasi said consumer confidence would be linked to the continued vaccine rollout in Australia, as higher rates of vaccination encourage more opening of the Australian economy – including pubs, clubs and venues where Asahi’s beverage are sold.

“When I reflect on the on-premise channel in particular, while it is yet to recover back to pre-pandemic levels we are seeing a strong positive trajectory in general,” he said. “But if I were to reflect on those inner-city venues it is well behind pre-pandemic levels. And I think that is driven by the fact of low numbers of workers in central business districts and a higher proportion of staff working from home. Also not having international tourists, which naturally impacts the CBD.”

Mr Iervasi said that during Covid-19 consumers were clinging to brands with strong brand equity or an emotional connection, with its traditional Victoria Bitter growing faster than the mainstream beer category, its Great Northern beer holding its position as the largest selling beer in Australia by value, strong growth for PepsiMax and good growth for new categories such as zero alcohol beer and Asahi’s Carlton Zero label.