Five years ago when I started this podcast I never thought I’d see small craft brewers making products like hard seltzers, low carb and non-alcoholic beers, or “cervezas” that to me look very much like the macro lagers they originally railed against.
But these are interesting and challenging times in the drinks industry. All producers are currently grappling with a plethora of economic headwinds and the need to cater for increasingly health conscious consumers.
Chris Moschos, who is innovation director at Lion, is better placed than most to speak about these trends.
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Prior to joining Lion – Australia’s second biggest brewer – in February 2022, Chris worked for almost 14 years at spirits company Diageo Australia.
In this interview, Chris and I speak about a couple of Lion’s big bets in 2023. James Squire Stride, the first low carb beer released by the pioneering craft beer brand in its 25-year history.
And Kirin Hyoketsu, a premix vodka lemon sour that’s been phenomenally successful in Japan, where it’s been available since 2001.
This is a special episode of the Drinks Adventures podcast, produced in partnership with Lion.
And given Chris’s job title, I started this interview by asking what the word ‘innovation’ means to him.
Lion innovation director Chris Moschos: Full transcript
CHRIS MOSCHOS: For me, innovation basically means the process of bringing ideas to life. I think it’s Edison that said it, you know, “innovation or ideation or creativity is one per cent inspiration and 99 per cent perspiration”. So it’s that process of taking an idea and then breathing life into it. And then all that’s required to go through the collaboration, getting a whole business behind it, the nurturing of that idea, because there are many stages at which that idea can be crushed.
But, you know, from where it starts off to where an idea finishes quite often is very different. So that’s what innovation is, that whole process.
JAMES ATKINSON: You’re definitely one of many ex-Diageo people working in the Lion business. In fact, the, the CEO and MD of Lion are both formerly of Diageo. Does that kind of speak to some of the prevailing trends in the market?
I guess beer probably hasn’t really been growing like it was in the past.
CHRIS MOSCHOS: Yeah, I guess from my perspective, I mean, I wasn’t aware that they were coming over when I had also made the decision, but it was a happy coincidence.
JAMES ATKINSON: Oh, so it wasn’t all orchestrated, like it may look to people from the outside?
CHRIS MOSCHOS: I guess it may look that way, but they are definitely a pay grade or three above me. So I guess from my perspective, the attractiveness for me as a passionate innovator. I have spent a lot of time in drinks and in particular spirits and RTD and never quite had the opportunity to work in beer so the happy kind of medium and the fit with Lion is, not only is it a great place to work and the culture was something that attracted me, but the challenge of beer as an innovator, and the fact that it is losing penetration. It has been for many years, that shouldn’t be news to anybody.
But that innovation challenge around, how do you turn around a category and lead from the front? Which is, through my experience at Diageo, something I did and was a big part of the journey on, for RTDs.
JAMES ATKINSON: Yeah, and I guess that decline of beer has kind of been shown again in the last week with the apparent consumption of alcohol figures that got released.
Why do you think that beer has been through such a tough time over recent decades? I mean, it’s really been in decline since the 70s, hasn’t it overall?
CHRIS MOSCHOS: That’s right. That’s right. So penetration does continue to decline. It may be a bit more pronounced more recently. I guess like in any category, there are strengths and challenges, and I guess for beer sitting on the other side for many years, the strength of beer has always been it’s a one-bottle solution made up of multiple natural ingredients, which through a natural process of fermentation, make up this single bottle drink. And for many years when I was struggling on the other side of the fence looking at RTD and its struggles, you know, beer stood out as something that consumers talked about as being a wholly natural product. I think emotionally as well, consumers talk about the ‘beer moment’, men and women wanting to be part of this moment where you’re socialising and you all feel like you’re, you’re in the same group and you’re all part of the same tribe, I guess we’d say in marketing because you’re drinking this one product.
So beer still has those allures, I guess, and especially from an emotional perspective that desire to be part of the tribe. When you look at it, maybe we had a problem as a culture in terms of drinking and maybe the per capita consumption of beer was a bit too high. So there’s potentially a right-sizing of the amount of beer consumers want to drink these days, when you talk about how they look at their lives.
And what I’m talking about here is this prevailing trend around holistic living, you know, mindful living. Some people call it ‘better for you’ choices. So I think there’s a right-sizing in beer in terms of the per capita consumption. I also think though that be just like any other category of drinks; soft drinks or RTDs, beer has its achilles heels. The main enemy for beer is bloating and carbs. From an emotional perspective as well, it’s quite non-inclusive, very male-focused as well in the way it comes across in the advertising and the packaging. I still think they’re the problems for beer.
For RTD, the problems still are – aside from the amount of calories and sugar in products – that from an emotional perspective, there’s this immaturity to it as well. It still needs to grow up a bit.
JAMES ATKINSON: I think I read that you were at Diageo for 14 years. How much has the market changed in the time that you’ve been in the drinks industry?
CHRIS MOSCHOS: I think it’s changed dramatically. I would call the beginning of my time at Diageo as pretty tough from a kind of headwinds perspective. Literally a month after I started, the famously coined Alcopop Tax, came into play. And you automatically saw, I think it was a 30 per cent reduction in volume pretty much within the three-month period.
That was a really tough start to a journey of rebuilding the category. And when you’re faced with a challenge like that, you have no choice but to really have a look under the hood of all the assumptions and slowly challenge some of those assumptions and pick away at them in order to find where you’re going to drive growth.
And so to me, it was over a 10-year period of really picking away at those assumptions, formats, liquid types and ingredients that go into those products. And it was definitely a journey. And that I think played a real big part of the work we did at Diageo, but then you look now at culture and what’s driving growth, products like -196 are cultural phenomenons that are well understood from overseas that are making their way into the market. I mean, the growth that products like that have had overnight – well never literally overnight – but the perception that they are within a very short period of time is huge.
So culture within RTDs drives a lot of that growth and that exponential growth. Look at on our side, you know, White Claw has been a phenomenon for Lion and the whole seltzer category was a real big cultural movement in the US. And then as soon as it landed, there was a lot of hype for it. And then once White Claw landed that, that growth was kind of instantaneous as well.
So I think the sweet spot of growth and what we’re seeing is definitely the combination of your functional attributes of products, but there’s gotta be some emotional, some cultural hook out there.
Kirin Hyoketsu vs -196
JAMES ATKINSON: Looking specifically at the products that you’ve brought to market recently, Kirin Hyoketsu, new in Australia, but it’s not actually a new product.
Tell me about the decision to introduce it here and how does it contrast with some of the other products that are in the market already?
CHRIS MOSCHOS: I guess you look at Kirin Hyoketsu and the -196 phenomenon, this idea of ‘Japan cool’ is not new. Australia’s love affair with Japan is more than a decade old and, and you look at kind of some of those other trends within the market.
The Japanese have a word for it, ‘otaku’, so small obsessions. Alright, so you look at ramen as a small obsession, right? Uh, I think there’s a bit of sarcasm in that phrase, small obsession. They’re pretty much huge obsessions, but, uh, things that people are obsessed about with Japan, the whole category of Japan cool has been growing for years.
And so I guess with us and Kirin Hyoketsu, there’s more than one way to skin a cat in terms of, you look at kind of these categories and how they’re built. It’s never all done by one brand. You knowm, RTDs you look at back in the day, Smirnoff Ice Double Blacks, and then the invention of vodka cruisers.
These categories are never built by one brand. And so when we looked at this space and the success of -196, we felt that, ‘hey, there’s another element of Japan that consumers in Australia can resonate with’. And we think that we can help grow the entire category, not necessarily bring in a new range of products that’s going to steal from -196.
And that’s really important because when you talk about the success of innovation, yes, you have to have a consumer lens on it 100%. But we work through our customers, you know, the independents of this world, the Endeavours and the Coles. And so we need to find a way. to grow categories as well. So that’s, you know, that’s where I think we’re hitting the sweet spot here with products like Kirin Hyoketsu.
There’s something in it for the consumer that they’re not getting from another product. It’s a way to grow the category and the pool for the customers and to drive footfall into stores. And obviously there’s a benefit to Lion in terms of recruiting outside of beer.
JAMES ATKINSON: How does the flavour profile contrast with what’s already available in -196? Is there a clear differentiator?
CHRIS MOSCHOS: The Kirin R&D department have really worked hard over a number of years in order for Hyoketsu in Japan to be the number one RTD in that space. And it all comes down to the technology and perfecting that technology of freeze drying the whole lemon experience.
And so I guess it’s very similar to -196. But depending on where you sit, I’m not going to kind of say it’s better or not. But in terms of kind of the flavour delivery, I think we’ve taken maybe a step forward in terms of delivering the whole lemon experience. And that comes from the juiciness, pithiness, oiliness of the citrus fruit. And you get that when you taste the freshness and we’ve had a lot of positive feedback so far.
JAMES ATKINSON: Is it a double-edged sword for you when you talk about growing the category with something like Hyoketsu? Are you potentially cannibalising your own beer market share by sort of bringing consumers across? Or is it more about… where do you sort of see those consumers coming from?
CHRIS MOSCHOS: Yeah, it’s a good question. I don’t think, you know, we don’t look at playing in RTDs as necessarily being at the expense of our beer portfolio and what we’re doing in beer. Therein lies the challenge of how do we recruit through RTD and through categories of products that are relevant for consumers today.
And then as well, how do we face into the challenge of beer and really work hard. And that’s what we need to do because there is an element within the beer category of potentially some neglect over the last decade or so around, has the category gone far enough to address those pain points and looked at things a bit differently and challenged the status quo enough? So it’s an ‘and’ versus an ‘all’ situation for us. So I guess the more successful we are in one area, the more successful we want to be in the other so that they’re both really successful. And the name of the game is recruitment, right? We’re, we’re a beer business essentially, we’ve got infrastructure that’s been built to produce beer and we employ thousands of people as well, so we want to win in both.
JAMES ATKINSON: And what about classic beer? You know, I kind of continually hear anecdotally how Swan is having a bit of a resurgence in WA. Is there any truth to that? And if so, what do you think is kind of driving this sort of return to the classics in select… you know, Resch’s would be another good example for, for CUB, I guess.You know, this year you’ve invested quite a bit in the Toohey’s trademark as well. What relevance do these brands still kind of have, and if they’re having a moment, what do you think is underpinning those sorts of trends?
CHRIS MOSCHOS: I’d throw in Guinness as well, which is one of the products we distribute and manufacture as well.
JAMES ATKINSON: The number one draft selling beer in the UK now, I think, Guinness, as of this year.
CHRIS MOSCHOS: Correct. Absolutely. So look with Guinness in the UK, it’s a different story. I guess from a local perspective, sometimes it’s what marketeers do. Sometimes it’s what marketeers don’t do. I think in the case of our brands here Tooheys; actually for Lion deciding to invest in the brand after years of not investing in it for a while and finding those – from a brand positioning perspective, what in the brand’s past resonates today with consumers and then reviving that. So there is a bit of that nostalgia at play. And then I’d also suggest that actually there’s that counterculture piece as well. So younger consumers finding and exploring for themselves what was cool in the past and trying it for themselves.
So I guess, you know, in the digital age we live in, we know that trends are being revived naturally by consumers. So, for example, right now, 90s is on trend, and you can see that through the sneaker, sneaker world, and, and the revival of things like the Reebok Pump, etc., etc. So, there’s that self-discovery of nostalgia and nostalgia from consumers.
And I also do credit marketing as well. So, Guinness. Locally we’ve gone through a couple of years of trying new things and shifting out of just the focus on St. Patrick’s Day and trying to drive relevancy through, I guess, the winter period. And we’ve won an Effie Award this year for that campaign, which goes to show that thinking differently and searching for that growth and driving relevancy in different occasions as well has got something to do with it.
JAMES ATKINSON: Yeah, and I did mention Swan. Was there any truth to that one?
CHRIS MOSCHOS: Yeah, Swan, and you mentioned CUB brands as well, but there’s a strength in Australia of state-based brands that really resonate with those local communities. And so, you know, they’ve held their own when you talk about brand power within those states for years.
And so, they’ve always had that love. You’ve also got a sales force at Lion who has a passion for them too. So whenever they’re in conversations around our more national brands as well, that they’re still pushing that loyalty. There’s that affinity within our own business, within those brands.
The sales teams have kept chipping away at those as well. Boags in Tasmania is another example.
JAMES ATKINSON: In growth at the moment or?
CHRIS MOSCHOS: Yeah, yeah.
JAMES ATKINSON: Okay, interesting. Do you think economic factors are also kind of at play here as well? I mean, you know, a lot of people have got a bit less cash to spend at the moment and craft beer can come with a price premium or sometimes it’s higher in alcohol and these sorts of factors kind of benefit some of these stalwart brands, don’t they, that are reasonably priced on top of everything else.
CHRIS MOSCHOS: They do, 100%, and price is one part of the equation, but I’d say that if you look at cost-of-living pressures, as well as people drinking less overall, with the amount of disposable income people have to allocate towards alcohol, what we’re seeing is that they’re overall just looking for the best experience, right? And that could come from, if you’re in WA and you’re talking Swan and whether that actually serves that purpose or whether it’s a more value-conscious kind of play within our RTDs that’s good for a party occasion or if it’s a craft beer, you know, buying one or two cans of a craft beer versus a case of craft beer.
I think value, and from marketeers and us innovators, delivering the best value possible, which is a combination of price, but also what we’re offering from a product experience perspective, is super important these days.
James Squire Stride
JAMES ATKINSON: Talking about the mindful consumption trend that you’ve touched on earlier, and you know, there’s certainly some high profile beers that are zero carb and the like that have achieved quite stratospheric growth in recent years.
But I mean, like low carb isn’t really new in beer, is it? I mean, I think back to, you know, Pure Blonde and products like that have been around for a very long time. So how is what you’re doing, for example, with James Squire Stride, how is that kind of different to the other products that are on the market in this space?
CHRIS MOSCHOS: Yeah, I think one thing to say is that like low carb beers account for about 17 percent of pack beer volumes. So, beers that you’d buy in your Dan Murphy’s, your Cellarbrations, you know, off-trade retail. And the brands that are driving growth within that segment are brands that are investing behind it. So, brands that aren’t investing are flat to slight decline. The brands that are investing are growing. For us, with Hahn, as I mentioned already, it’d been a brand that hadn’t been invested in for years. And then we found, from a brand equity perspective, lots of strength in the brand in terms of being known for good, great quality and taste, but little recognition for being low carb and the whole trademark is basically built on that proposition. So part of that refresh was elevating the prominence of that low carb message and coming to consumers with transparency, so we call out the number of carbs and calories on the front of the pack. And then you had that Hahn Ultra Low Carb innovation.
And so we’ve been enjoying double-digit growth this year, because of the combination of all that activity, and consumers want more of that. When you look at what we did with James Squire Stride, a lot of the low carb products are concentrated in the contemporary beer market, easy drinking beer, and so you’ve got those drinkers who want more taste but the low carb benefit and there’s no one really looking at it within craft or a step up, premium, where James Squire plays.
And then from a, a segment perspective, pale ale is the biggest segment within craft beer and James Squire is a main brand within pale ale. And so we saw through those loyal pale ale drinkers, the idea of a low carb product that was more sessionable within the pale ale space was really appealing.
And so that’s how James Squire Stride was born in terms of offering a true low carb product with more flavour from a well-known and trusted master brand.
JAMES ATKINSON: And you mentioned the success you’ve had with Hahn. Were there any other recent case studies that you can point to that have been big wins for your team this year?
CHRIS MOSCHOS: I think so far, Hyoketsu is definitely a standout.
JAMES ATKINSON: It’s not too early to see the sales results from that?
CHRIS MOSCHOS: We’re pleased with the sales results year-to-date. So I’d say that that as well as the James Squire Stride, the trajectory of both of those is, is strong. Hahn Ultra Low Carb has done very well this year as well, in terms of adding that string to the bow of how you relaunch and restage a brand like Hahn. Yeah, so I think they’re definitely the key ones.
JAMES ATKINSON: And are you looking at other innovations, you know, within the craft family, for example? So you’ve obviously got an incredible portfolio now with the likes of Stone & Wood and that family of brands, obviously Little Creatures and there’s been a bit of a reorganisation into the Fermentum craft beer division, and do you kind of see that as being ripe for some of these innovations as well?
CHRIS MOSCHOS: Yeah, 100 per cent. We’ve got the full integration of Stone & Wood, you know, Four Pillars Gin within Lion as well.
I think we are definitely opening up our gaze and our sphere of focus and looking at where the opportunities are, where we understand there’s a consumer pain point or opportunity, how you mash that up with understanding of the portfolio and where the opportunities and gaps are. And then when you take a brand lens and look at, well, what brands can we deploy against that?
We’re more spoiled for choice and that’s great for a team like mine. We own the process of taking ideas through to fruition. And so what we’re spoiled with now is a greater richness of those ideas and what we can play with and what we test with consumers and then understand kind of how we bring those to market.
So there’s a lot more opportunity basically, is what I’m saying now than there was when I started at Lion in February last year.
JAMES ATKINSON: Just with the sheer breadth of the portfolio and the number of different brands that sort of occupy different segments?
CHRIS MOSCHOS: Yeah.
JAMES ATKINSON: Well, Chris, thanks so much for taking the time to have a chat with us. It’s been really interesting seeing how you guys go about this area of the business.
CHRIS MOSCHOS: Great to chat.
