Beer market a no-brainer for Coke boss

Coca-Cola Amatil boss Terry Davis says it was a "no-brainer" for his company to get back into the Australian beer market given there is a billion-dollar profit pool currently dominated by just two major players.

Coca-Cola Amatil (CCA) was restricted from selling beer in Australia for two years after SAB Miller bought Fosters, and along with it the Coke maker's share of a joint venture beer business, in 2011.

Mr Davis said the structure of Australia's market was ripe for a third player to challenge the foreign-owned duopoly of Lion, which owns Tooheys, and Fosters, which owns Carlton United.

"The beer market in Australia is a billion-dollar profit pool," Mr Davis told an American Chamber of Commerce lunch in Sydney.

"There are only six markets in the world that have more than a billion-dollar profit, so it's an untapped market.

"And it's a duopoly - like many things in Australia.

"We are a land of duopolies and those two duopolists make 30 to 35 per cent margins.

"Of course the retailers selling those products don't make anywhere near that."

Mr Davis said CCA's extensive distribution network, which includes pubs and bottle shops, and its technology platform provided an opportunity for the company as a third force in the market, making and selling international beers.

So we saw the opportunity of a third player given our pervasive distribution setup, given our technology platform to be able to make and sell international beers.

"That's been a market that's grown at double-digit rates for the last seven or eight years so it's a no-brainer," he said.

CCA has the rights to distribute beers from North American brewer Molson Coors and US craft beer Samuel Adams, among others.

"We'll have a bit of fun over the next three or four years," Mr Davis said.

CCA's beer ban ends on December 17, 2013.

Mr Davis also said he had recently taken a group of investors through Indonesia, which is an important market for CCA.

Australia's relationship with Indonesia is at a tense point politically at present following media revelations of spying by Australian intelligence agencies on Indonesian government officials.

Mr Davis did not comment on the political situation but highlighted the opportunities that exist in the Indonesian market.

"We were lucky enough to have some of the government ministers present to us," he said.

The ministers had spoken about the "demographic bonus" of Indonesia, where about half of the population - 125 million people - are under 29 years of age and 60 million of those people were not yet old enough to be earning, spending and consuming.

"That demographic bonus is going to continue on for another 20 years because Indonesia is not slowing down in its growth rates," Mr Davis said.

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.69110.000.00%
    AUDUSD=X
    0.45560.000.00%
    AUDGBP=X
    0.62000.000.00%
    AUDEUR=X