Lion's Peter West looks to milk opportunity through simplification

Tim Binsted
May 23, 2014
The Age
Lion’s new dairy and drinks boss, Peter West, intends slashing the number of products Lion puts on retail shelves as he looks to turn around the struggling business and drive sales in higher margin segments, such as specialty cheese.
A former marketing executive with Mars and Arnott’s Biscuits, Mr West has a challenge as he fights fierce competition and pricing pressure from the Coles-Woolworths supermarket duopoly.
”We are concentrating on categories with strong growth and strong share,” he said. ”Our key opportunity is around how we simplify. We make about 1000 items, and around 200 items generate 80 per cent of our sales.”
Since 2010, Lion, a wholly-owned subsidiary of Kirin, the Japanese drinks group, has invested about $550 million to drive efficiency in its beleaguered dairy and drinks division. Lion has taken billions of dollars of write-downs in dairy and booked a $338.8 million impairment in the 2013 financial year.
”Any time you run a business there is a different set of challenges,” Mr West said.
In his first six weeks in the job Mr West said he cut Lion’s product portfolio by 20 per cent and he may cut another 20 per cent. Lion has 40 brands, but the top 10 make up one third of sales.
”It is much easier to grow things that are already growing than turn around poor performers. It certainly is a return to growth in brands and categories that matter.”
That means Lion will focus less on everyday cheese under the Coon and Cracker Barrel brands and work harder on specialty cheeses brands King Island and Mersey Valley.
In juice, Mr West is taking 10 per cent of the sugar out of products as part of a healthy and nutritional push. He said Australians are shunning soft drink for iced coffee in convenience stores and he will reposition Lion’s portfolio around health and wellness. Lion has a 35 per cent share of the specialty cheese category, which is worth $1 billion in grocery stores and is growing at 6 per cent a year.
Last year, in the heat of the fierce $500 million takeover battle for Victorian group Warrnambool Cheese & Butter (WCB), Lion seized a 10 per cent stake in WCB in a bid to protect its supply contracts.
WCB supplies the majority of Lion’s 12,000 tonnes of everyday cheese. Canadian giant Saputo won the takeover battle but has so far been unable to convince Lion to sell its stake and fully acquire the company. Mr West said change of control provisions would trigger contract changes and Lion was happy with the status quo. ”The original intention of buying our stake [to protect contracts] remains. We are happy with our shareholding.”
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