Melbourne Beer War

Lion Nathan’s push into Victoria

In 1999 Lion Nathan, a New Zealand based group of breweries decided to make a concerted effort to gain market share in Victoria through their Tooheys brand.

Lion Nathan are Australia’s second largest brewer, behind only Foster's Group who amongst others owns Carlton & United Breweries which produces popular beers such as Carlton Draught, Victoria Bitter and Fosters Lager. Since the Tooheys brand was established in 1869, Tooheys has traditionally been a NSW brewery, while CUB have produced Victorian beers. Over the last 20 years Fosters have managed to push CUB beers to becoming popular and even the leading brand in other areas of the country. Where XXXX (a L-N beer) used to be the drink of choice in Queensland, you’re now just as likely to find a VB on tap up North. This has been a contributor to Fosters becoming the largest brewing company in Australia.

Lion Nathan have responded to this not only by bolstering their position in the northern states, but also by making an unprecedented push into Victoria. In 1998, Lion Nathan had a paltry 12% share of the Victorian beer market, compared to Fosters’ 80%. Its campaign has had several fronts, and has cost the company upwards of $120m. Its success is debatable, as in the last 5 years L-N beers have only increased to account for 15% of beer sold at the start of 2003.

The first part of the push into Victoria was to select a brand to push in the market. A draught beer similar to the most popular Victorian brand, Victoria Bitter, was deemed to be the best choice and in 1998 Tooheys renamed Tooheys Draught to Tooheys New. The taste was also altered slightly to more closely resemble VB. Tooheys New then became the flagship beer for the company. Until 1998 Tooheys Red was the lead beer of the Tooheys brand, and whilst still available it is now being market as a budget beer rather than an ‘everyman’ drink like VB and Tooheys New.

Having created a brand to push, the first stage of marketing began in Victoria for Lion Nathan. During 1998 and 1999 L-N representatives started a new campaign which included persuading publicans in regional areas and racetracks to switch to L-N beers. They were offered cash incentives and promotional support from the brewery to drop the popular Fosters line of products. Initially they caught Fosters with their guard down and managed to persuade 32 of the 52 country racing tracks to convert. Pubs that had felt neglected by Fosters were often happy to accept the Tooheys offer.

"About a week after we signed with Tooheys for double the money, the rep' from CUB came to see us. He hadn't been here for two years. I said: Mate, you've got to be kidding..." -Wangaratta Turf Club secretary manager, Peter MacAllister

In the last three years Fosters have started to catch up with this and now offer to match deals offered by Tooheys to pubs. Given that accepting the Fosters deal not only makes customers happy by keeping the popular brands but means that Fosters will pay pubs to effectively do nothing, Tooheys success in this area since 2000 has been limited.

One of the major coups for Tooheys has been securing the tap rights for the Victoria Racing Club and naming rights to the Melbourne Cup from 1999 – 2009. The deal is estimed to be worth $68m. This has been followed up by intensive advertising campaign around the time of the Cup, as well as the year round “Give that man a New” ads. In 2001 Tooheys New also sponsored the Centenary of Federation celebrations in Victoria.

One of the core parts of the campaign has been the purchase of 62 ‘prime’ hotels around Melbourne in 1999. These were mostly pubs that were very successful serving CUB product and had no intention of switching to Tooheys. Often publicans even had no intention of selling the venue until L-N, backed by the financial muscle of 45% stakeholder Japanese brewery Kirin, made them offers too good to refuse. The purchase of these venues cost the company in the area of $50 – 60m.

The philosophy behind these acquisitions is that it shows L-N are serious about establishing the Tooheys New brand in the long term in Victoria. It also ‘forces’ beer drinkers who have traditionally been very loyal to the CUB stable of brands to at least try and generally switch long term to New.

Another part of the strategy has been to intensively target the under 25 market.

"The 25-year-old age group is notoriously difficult to reach so we like to be where they are" -Lion Nathan corporate affairs director Gabriel McDowell (Brewer backs uni beer club, The Daily Telegraph, May 8 2002)

A part of this has been achieved through the purchasing of prime youth venues around universities such as Naughtons, the Clyde and the Prince Alfred around the University of Melbourne. Venues such as these run regular specials offering severely discounted beer designed to attract students as regulars and get them to appreciate the taste of New. One of the most controversial part of the youth campaign has been the launch of the Beer Monsters club. Students could pay $10 to become a ‘Citizen of the Keg’ and were then able to apply for free beer to be given out at parties. This type of marketing relies on attracting influential members of large social groups, such as Student Unions, residential colleges, and large clubs and societies. The plan was quite controversial and came under the scrutiny of Liquor Licensing Victoria. As of the end of the 2002 academic year the Beer Monsters club has not been in operation and it seems unlikely L-N will risk running it again in 2003.

A list of pubs now believed to be a part of the Lion Nathan stable:

• Albert Park Hotel - Albert Park
• Builders Arms - Fitzroy
• Bridie O'Reileys - Melbourne, Brunswick, South Yarra
• Chasers Nightclub - South Yarra
• Clyde - Carlton
• Corner Hotel - Richmond
• Darby McGill's - Bendigo
• Depot - Richmond
• Eclipse - Bendigo
• Elephant & Wheelbarrow - St Kilda, Melbourne, Port Melbourne
• Evelyn Hotel - Fitzroy
• Frostbites - South Yarra
• Geelong Hotel - Geelong
• Golden Gate Hotel - South Melbourne
• Governor Hotham - Hawthorn
• Grace Darling - Collingwood
• Hog's Breath - Ballarat
• London Hotel - PortMelbourne
• Metropolitan - Melbourne city
• Middle Park Hotel - Middle Park
• Naughtons - Carlton
• Perserverance Hotel - Fitzroy
• Prince Alfred - Carlton
• Provincial - Fitzroy
• Rattle & Hum - Ballarat
• Re-Bar - Geelong
• Red Eagle - Albert Park
• Rob Roy - Fitzroy
• Skinny Dog - Kew
• Sundowner - Bendigo
• Star Bar - South Melbourne
• Studio 54 - Bendigo
• 21 Arms - Ballarat