Brewmaster Chuck Hahn has developed a beer to drink with steak, one to go with spicy curries and another to complement chocolate mousse.
His employer, Lion Nathan Ltd, Australia's No. 2 brewer, wants the 55-year-old Colorado-born chemical engineer and his staff of nine to design even tastier beers.
The three beers in the "James Squire" lineup -- Original Amber Ale, India Pale Ale and Porter -- are helping Lion Nathan boost profits at a time when beer consumption in Australia has dropped to its lowest in half a century.
Premium beer sales have risen to 9 percent from 3 percent of Australia's A$8.5 billion (US$4.7 billion) beer market in the last five years.
"People are drinking more up market," Hahn said in an interview during a tour of the plant. "They are not consuming more beer, just better beer."
The Sydney-based company, 46 percent-owned by Japan's Kirin Brewery Co, last week reported net income rose 12 percent to A$100 million. While it doesn't break out premium beer results, it has said earnings from them have help profit rise an average of 10 percent a year in the past four years.
So far, investors like the strategy. Lion Nathan stock returned 27 percent the past 12 months while the S&P/ASX 200 Index rose 2 percent.
Rival brewer Foster's Group Ltd, which has expanded in wine to try to benefit from a global surge in demand, handed investors a 9 percent loss in that time. Foster's is Australia's largest brewer.
For all beverages, "people are drinking less but better," said John Burgess, a beverage analyst at BNP Paribas in Sydney.
"As you get older, particularly with beer, you tend to drink less but drink more quality."
Premium beer prices are typically 50 percent higher than standard brands, relying on up-market packaging, superior ingredients and smaller production runs to tempt consumers. A six-pack of Foster's Carlton Cold sells for about A$10 while its premium brand Cascade retails for about A$15.
Slump in consumption
Despite Australia's reputation as the home of barbeques washed down with crates of beer, the country's per capita annual consumption has fallen 31 percent to 89 liters last year from its peak of 135 liters in the mid 1970s.
Total consumption declined about 1.5 percent to 1.7 billion liters last year, its lowest since the 1950s, according to the Australian Bureau of Statistics.
More than 70 new local and foreign beers have been added to liquor store shelves since 1996.
"The market still has room for growth but it isn't infinite," said David Park, a spokesman at Foster's Carlton United Breweries.
Park forecast premium beer sales in Australia to grow to reflect their 10 percent-to-12 percent share of markets in Europe, North America and New Zealand. Lion Nathan's Hahn is forecasting an increase to 10 percent within two years.
Growth in premium beer sales is increasingly important for Lion Nathan as Foster's expands into wine.
Earnings from Foster's wine unit account for almost one-third of its net income and are rising at more than three times the pace of beer.
Sales of wine at Foster's exceeded beer for the first time in the six months ended Dec. 31.
In contrast, Lion Nathan's wine business is forecast to have pretax earnings of A$8 million in fiscal 2003. Lion Nathan has 42 percent of Australia's beer market compared with Foster's 55 percent.
RSS