Kirin looks to sell Lion Dairy

By Dairy News

JAPANESE BEVERAGE giant Kirin Holdings said it has started a strategic review of its Lion-Dairy and Drinks unit, looking at a possible sale among its options.

Lion-Dairy and Drinks owns the Masters and Yoplait brands, among other dairy and beverage brands, distributed in Australia.

"It is appropriate at this point in time to consider the best pathway forward to maximise its sustainable growth potential for the future," Kirin said in a statement.

It also said options included retaining the unit and investing in it and that no decision has been made yet.

Kirin has been reviewing its business portfolio, which spans alcohol, beverages, food and drugs at home and overseas.

Last year, it sold its money-losing Brazilian beer business — bought for $US3.9 billion in 2011 — to Heineken for $US1.09 billion.

"Lion Dairy & Drinks has restructured itself and improved its profitability since 2015 through the ‘Turnaround Project’ launched in 2014, and the ‘Kirin Group 2016–2018 Medium-Term Business Plan’," Kirin said.

"Having improved its business performance … it is appropriate now to consider the best pathway forward to maximise sustainable growth potential for the future."

All options are being kept open, Kirin said, including an all-out sale. No decision had been made.

Lion is a significant player in fresh milk markets in Queensland, NSW and Western Australia. Collecting about 10 per cent of the national milk, it owns prominent brands Pura and Dairy Farmers fresh milk, Yoplait and Dairy Farmers yoghurt and the specialty cheese brand Tasmanian Heritage.

Dairy analyst Steve Spencer, of FreshAgenda, believes a break-up of the business is likely.

“It has effectively been for sale for several years,” Mr Spencer said.

“A breakup is probably more realistic, as flavoured milk and specialty cheese would be of interest to a few players, but the fresh white milk business is not especially attractive to others.”

Lion Dairy is not expected to end up owned by either Saputo and Fonterra.

“Neither is likely to make more major investments in this country until existing assets improve and demonstrate profitability,” Mr Spencer said.

Kirin first entered Australia’s dairy sector in 2007 when it bought the local manufacturer National Foods for A$2.8bn; Fonterra, which owned a 19 per cent stake in National Foods in 2007, lost the bidding war to Kirin.

A year later Kirin moved to buy another Australian dairy business, Dairy Farmers, for A$910 m.

In 2009, Kirin snapped up the Australian beverage business Lion Nathan and merged these new assets with National Foods. Two years later, Kirin renamed the overall Australian arm Lion.

In 2015 the Canadian dairy giant Saputo bought Lion’s ‘everyday’ cheese business for A$137.5m, taking control of the Coon, Cracker Barrel, Mil Lel and Fred Walker brands. Lion retained the ‘specialty’ cheese brands South Cape and King Island Dairy.