DB takes measures as changes brew

JOHN SELKIRK/Dominion Post

DRAMATIC CHANGES: Managing director Brian Blake says DB's Hospitality Initiative is a response to dramatic changes in the industry.

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DB Breweries has moved into the liquor consultancy business to help its customers cope with the unprecedented changes sweeping over the industry.

DB managing director Brian Blake said the industry was being buffeted by change on several fronts.

A flood of cheap wine meant wine consumption had increased at the expense of beer and spirits-based drinks.

At the same time, the tough economic conditions meant the trend for beer drinkers to trade up to premium brands had slowed, and many had gone back to cheaper brews.

And many consumers were saving money by having a drink at home rather than going out at night.

Blake estimated overall beer consumption declined 4-5% in the year to September, compared with the previous year.

"It's been a huge category shift and I've never seen that sort of momentum before in the market," Blake said.

So it was no surprise that the hospitality sector had been plagued by a rash of receiverships over the past year.

Blake said the hardest-hit segment had been traditional pubs.

On top of that, the current review of the Sale of Liquor Act could result in "quite sweeping changes" to the legislation which sets the industry rules.

"So you have consumer changes, legislative changes and economic changes all hitting your business at once, so it's very hard to predict where it will go," Blake said.

"We've attacked our cost base quite aggressively, but in many ways that's short term. It's to give us some breathing space to do other things."

The company had also had to bring new products to market more quickly and squeeze as much as possible out of its brands.

This resulted in Monteith's move into cider and extending the Tui brand by offering an upmarket Blond version, which was launched last week with the biggest marketing push since the company started making Heineken in this country in 1994.

However, one of the biggest changes involved the company's move into the consultancy business.

Blake said many publicans who had fallen over during the recession didn't have a good understanding of the fundamentals of their business.

"They didn't know what their profit margin was on their beer, wine and food, and they didn't understand their operating costs.

"A lot of them hadn't managed their businesses well and hadn't reinvested in their premises.

"For a while pubs had big-screen TVs and that was a point of difference for them. Now you can have an HD [high definition] TV at home that's as good and you can buy cheap booze from the supermarket and order in cheap pizzas and get your mates around.

"So if you are going to go out and spend more on food and drink, [pubs] must have something else to attract you."To help its on-premise customers navigate these waters, DB had set up a new division, DB Hospitality.

The company had sent a small team of executives overseas where they evaluated 500 different hospitality venues, looking for concepts which they believed would work well in this country.

The Hospitality team then worked with its publican clients to develop concepts which DB believed would work for each particular business.

This was backed up by financial management systems, market information and marketing support to help each business stay on track.

"Our aim is to help them get more through the door," Blake said.

"I think there are a lot of businesses sitting there saying, `we'll wait for the economy to improve and things will go back to where they were'.

"We've taken the view that things will never go back to where they were. Business has fundamentally changed. They have to adapt to a new world."

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