SABMiller Sends VB Beer the Way of New Coke With Change

SABMiller Plc. (SAB), the world’s second- largest brewer, will send its Victoria Bitter beer the way of New Coke, discarding a recipe change that saw VB overtaken as Australia’s top seller by Kirin Holdings Co. (2503)’s XXXX Gold.

Carlton & United Breweries, the Australian beer business SABMiller acquired with its takeover of Foster’s Group Ltd. last year, will revert to a formula abandoned in 2007 and raise the alcohol content from 4.6 percent to 4.9 percent from October this year, the London-based company said in a statement on its website. The beermaker today placed full-page advertisements in the Herald Sun, Australia’s top selling daily newspaper, saying “we got it wrong.”

The reversal echoes the experience of Coca-Cola Co. (KO)’s New Coke, said John Roberts, a professor of marketing at Australian National University and London Business School. New Coke attracted so many protests when it replaced Coca-Cola’s classic formula in 1985 that the original product was reintroduced three months later.

“You can do almost anything you want with the taste, but in beverages you don’t mess with the brand image,” Roberts said by phone. “People are doing more than drinking beer, they’re drinking the whole story.”

Photographer: Carla Gottgens/Bloomberg

A bartender pours a glass of Victoria Bitter at a pub in Melbourne. Close

A bartender pours a glass of Victoria Bitter at a pub in Melbourne.

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Photographer: Carla Gottgens/Bloomberg

A bartender pours a glass of Victoria Bitter at a pub in Melbourne.

Excise Tax

Kirin’s shares rose 2.2 percent to close at 988 yen in Tokyo today, the biggest gain since Aug. 7, while the broader Nikkei 225 index fell 1.1 percent. SABMiller fell 0.3 percent at 9:11 a.m in London as the FTSE 100 index slid 0.5 percent.

Recipe changes to century-old VB, as it’s known to locals, dropped its strength in 2007 and again in 2009 to save on an excise tax levied on alcohol content, Carlton & United spokeswoman Jennifer Howard said by phone from Melbourne. The company also introduced new packaging and new variants of the brew to arrest a slipping market share.

XXXX Gold, brewed by Kirin’s Lion unit, in April ended VB’s more than 20 years as Australia’s top selling beer. XXXX Gold had a 12.4 percent market share in the 12 months through June compared to 12.1 percent for VB, according to Nielsen Holdings NV (NLSN) data quoted by Lion.

Foster’s has also fallen behind Lion as the country’s largest brewer since SABMiller completed its A$10.5 billion ($10.7 billion) takeover of the Melbourne-based company in December.

No Tinkering

The decision to up VB’s alcohol content will cost SABMiller more than A$10 million a year in excise tax, a necessary cost to restore the beer’s original flavor, Howard said.

“The Vic Bitter drinkers have spoken and told us that we should not have tinkered with their beer,” Andy Gibson, CUB’s chief marketing officer, said in a statement. “We have listened.”

Carlton & United first brewed a beer with the VB branding in 1907, according to the company’s website. Its breweries in Victoria and Queensland states produce more than 20 million cases per year, Howard said.

VB is considered a “blue singlet” beer, said Roberts, in reference to the colored tank-tops stereotypically worn by working-class Australian men. That puts a premium on perceived authenticity, he said.

Macho Beer

“There’s a whole host of associations that go together with it being a full-bodied, manly, macho beer,” he said. “Reducing the alcohol content, making it look lighter, reducing calories, all send a signal that it’s not a real man’s beer.”

The decisions to drop VB’s alcohol content had damaged the image of the beer with consumers, Matt Kirkegaard, founder of beer enthusiasts’ website Australian Brews News, said by phone.

“Drinkers were always told VB was this important brand and this just showed them the company itself didn’t really care about it,” he said. “They were signaling that the bean counters were in charge.”

In any case, beer drinkers who previously would have favored VB are increasingly buying imported brands such as Heineken NV (HEIA)’s eponymous brew and Anheuser-Busch InBev NV (ABI)’s Beck’s and Stella Artois, he said. The prices of imported beer are now more competitive, he said, thanks to a 19 percent strengthening of the Australian dollar against the U.S. dollar over the past three years.

“People don’t see themselves in that classic old mold,” he said. “They see themselves as being a little bit more upmarket.”

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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