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Lion Nathan rethinks bricks and porter strategy Leon Gettler The Age, 29 January 2004, p. 3 Lion Nathan has put its pubs operation under review, four years after embarking on an aggressive plan in which it spent $65 million on hotel assets to ratchet up its low share of the Victorian beer market. The brewer said yesterday that it was reviewing its ownership of 41pubs in Melbourne and Geelong after receiving expressions of interest. This is expected to involve various sale and leaseback options. Contracts for long – term supply arrangements are expected to be part of any deal. Lion Nathan is revisiting the pubs business after its rival, Foster’s, spun off its own hotels and gaming business, Australian Leisure and Hospitality. Lion Nathan’s pub-buying spree was at odds with its strategy of not owning or operating hotels, but the brewer wanted to make an exception in Victoria, the backyard of Foster’s. In June 2000, it had a 13% share of the Victorian beer market but by November 2003, Lion Nathan’s share had crept up to only 13.2%. Lion Nathan had shrewdly targeted the 18 to 25-year-old segment in Victoria, but the strategy has been criticized because of the difficulties of coming in as an outsider and using an exclusive retail network to drive market share from such a low base. In that time, Lion Nathan had also written down the value of its Victorian hotels. Yesterday, the group said the change did not indicate a reduction in its plans for Victoria but rather a switch in focus by increasing its investment across brands including Tooheys, Becks, Hahn, James Squire and XXXX. Analysts said yesterday that the news was in line with Lion Nathan overhauling its Victorian strategy, something which had been under way for 12 – 18 months. Lion Nathan is believed to have raised $20 million from the sale and leaseback of about a third of its Victorian portfolio about 12 months ago. In a statement to the market, Lion Nathan said it was not looking to sell individual venues and was committed to retaining ownership and control of the portfolio ‘if that will deliver the best outcome for Lion Nathan and maximize shareholder value’. Hotels in the brewer’s portfolio include Pugg Mahone’s and The Imperial in the central business district, the Albert Park Hotel, Limerick Arms and Golden Gate in South Melbourne and the Builders Arms in Fitzroy. Lion Nathan Australia Managing Director, Andrew Reeves; said yesterday; ‘Hotel ownership and management was only one part of our Victorian growth strategy, the objectives of which have been largely achieved. We have never viewed hotel ownership as a core business and, given the recent focus on investment in the sector, we considered that now was an opportune time to review the future of these venues in our Victorian growth strategy’. Questions (a)