DB lifts share

Press, 27 August 1983, Page 21

DB lifts share

PA Auckland Dominion Breweries, Ltd, holds 44.3 per cent of the beer market after a sharp increase in its share between March and July.

The latest rise comes after an increase in market share for the March 31 year from 42.6 per cent to 43.3 per cent—a period plagued by the price freeze, sales tax increases, and a bad summer.

The managing director, Mr Jim Fletcher, told shareholders yesterday that the 1 per cent increase in market share over four months was a welcome trend for DB’s new management team. He said 1982-83 had been challenging. The 7.2 per cent return on shareholders’ funds was inadequate, although the asset revaluation reserve had increased by $5.2M as a result of property revaluations.

“This increase, while not reflected in the profit and loss statement, had the same effect as retained profits in increasing the amount of shareholders’ equity in the company. “However, our profitability in relation to funds used was inadequate. Our return on shareholders’ funds is only two-thirds of the aver-

age of all the listed public companies in the food and beverage manufacturing group. “Our initial aim is to reach the average and ultimately we aim to earn a higher return than other food and beverage companies. However, we will not achieve this improvement overnight.” Mr Fletcher said the DB management was quietly confident the company would be successful.

“We aim to achieve this through increasing marketing and generally challenging all traditional methods of operation with a view to reducing costs and improving productivity.” He said DB would introduce a smaller, 340 ml can to expand sales for DB Draught and obtain a “significant share” of the canned beer market.

DB had been particularly successful with Foster’s Lager, which had increased its share of Australian canned beer sales in New Zealand from 17 per cent to 40 per cent in the last six months.

The DB chairman, Mr Graham Callam, said of 198283: “For the first six months trading profits were relatively

buoyant, but the second half of the year, normally a highrevenue period, produced a decline in profitability due in the main to unfavourable summer weather but also a result of competitive trading, par-

ticularly in the wine ana spirit sector."

Mr Callam said DB had been hit heavily by increased duty and sales tax.

“The increase in the rate of beer duty announced in the Budget will add $4.5M to the DB beer duty payments in the current financial year, and $6.5M for the full 12 months trading period—assuming no decline in sales as a result of higher prices. “Excise duty increases on spirits will add a further SIM to DB’s duty payments in a full year and the increases announced in sale tax in both wines and spirits will further increase prices to the consumer.”

Mr Callam said lower inflation as a result of the wageprice freeze was welcome, but the difficulty would be keeping inflation down after the freeze ended.

“Projections indicate a slow recovery for New Zealand and this depends on sustaining high prices for our primary commodities, while at the same time keeping domestic demand at a manageable level.” The company’s future growth plans must be based on increasing market penetration rather than from natural growth in consumption, he said.