Exclusive interview LN's Gordon Cairns: Will LN join the world's top brewers in an 'One World' alliance?

Lion Nathan CEO Gordon Cairns believes that despite a rash of consolidation between European brewers there will be no global beer giant and companies will instead have regional strengths.

Speaking exclusively to just-drinks.com Cairns, whose company is 45% owned by Kirin, likened the beer industry to airlines where regional carriers ally themselves to form global networks.

He said he expected a few powerful companies to emerge in each region with co-operation ties linking them geographically.

"I think it'll be like the airlines, where in different parts of the world, different companies will have strengths," Cairns said. "I expect we will have pooling arrangements. If Interbrew or Heineken are the power houses in Europe and Anheuser-Busch in the US and Kirin-Lion in Asia, what you will get is cross trading between them so if we wanted to sell in Europe, rather than set up our own operation, we would talk to one of them and say you handle our brands there and we'll handle yours in Asia."

In the airline industry, companies such as British Airways, American Airlines, Cathay Pacific and Qantas have pooled their regional bias to form the One World global alliance.

Cairns added: "I think if you believe in my model which is of geographic spheres of influence there will be no world dominant brewer and the evidence of that is that no European brewer has made a success of Asia."

For Lion Nathan, this means strengthening its hold on the Australasian market where it competes with Fosters. Its brands include Castlemaine XXXX in Australia and Steinlager in New Zealand.

Cairns said that he thought it would be likely, under this development model, that Kirin will look to strengthen its position in Asia rather than push into European or American markets.

Lion Nathan is also close to a deal with a Chinese brewer to allow it to increase the scale of its operations in China.

Cairns confirmed just-drinks.com reports from last week that suggested that Lion Nathan would have to use a domestic brewer to penetrate the Chinese market as its current strategy was not working.

"We need to increase our scale and our coverage out of the Yangste river delta and we are not going to be able to do that on our own," Cairns said. "The model for success in China I think is to do it with a domestic brewer. Western players trying to go on their own does not work."

But he would not reveal who he would do a deal with or in what form it would take. Cairns did, however, say it was definitely not Qingdao-based Tsingtao breweries, which said earlier this week that it was in talks to take over two foreign-owned breweries.

For Lion Nathan there will be no major moves domestically that stray from its core brewing activities. Cairns has no intention of adding wine or soft drinks to the stable.

Lion is currently trying to sell its Pepsi operation and although it took a 20% stake in Montana Wines two months ago it will not increase this stake further. The move was defensive and aimed at keeping international brewers out of the lucrative New Zealand market.

With his mind free from such worries Cairns will likely spend much of the next six months, gin and tonic in hand, working on those international relationships.

Whether the G+T gets swapped for champagne celebrations will depend on whether Interbrew and Heineken agree with his model of how the industry will develop.

www.lion-nathan.com

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