Foster’s delays wine review, bullish about beer brands

Posted by Daniel Palmer on 29th October 2008

Foster’s Group, Australia’s largest brewer, has announced that first-quarter results were in-line with expectations and advised that their wine review – originally slated for completion before the end of the year – is unlikely to be released until February.

“As previously advised, we expected to complete the wine review by the end of this calendar year,” Foster’s Chairman David Crawford told shareholders at the company’s AGM. “However, we have taken the decision to extend our work plan into early next year and now expect an announcement of the review outcomes no later than the release of our first half trading results in mid-February.”

Foster’s wrote down the value of their wine assets by $730 million in June upon admitting that they paid too much for wine assets and failed to execute their acquisition of Southcorp in the most efficient manner. Since then a “broad strategic review” of their wine business has been initiated, with speculation strong that a takeover bid may be launched for the Australian giant. Foster’s have reportedly hired an advisor to protect them from any takeover predators and continue to stress that talks of a sale or demerger of their wine and beer businesses are premature.

Their beer business in Australia was performing well, according to CEO Ian Johnston, with the economic downturn not considered a major threat to their business at this stage. “We are witnessing some extraordinary changes and challenges in financial markets and, like any company, some have a direct impact on our business. But we are not distracted by noise out in the marketplace, all businesses are dealing with many of the same issues,” he said. “In times like this, it is all the more important that we are focussed on making changes to get the basics right – focusing on volume growth, gaining value share, reducing business costs and building our organizational capabilities.”

“For the quarter to September this year, I’m pleased to say performance has been in line with our expectations,” Mr Johnston continued. “Here in Australia our beer business is performing well. Improving volume and value trends have continued through September and we have a strong innovation program which offers consumers more choice in the premium sectors, and delivers a positive price outcome.”

The company reported that the international premium and low carb segments were booming in Australia and their leaders in the categories, Corona and Pure Blonde, were performing well. Australia’s leading beer, VB, also created cause for optimism, as it has returned to revenue growth in 2008 after lacklustre performances in recent years.

Mr Johnston added that the company remained cautious, yet positive, with regard to expectations in their overseas wine markets due to “economic headwinds”. They had benefited, however, from the recent fall of the Australian dollar – which has been welcome news for many in the wine industry in Australia.

Looking forward, Foster’s were confident about the future, with innovations anticipated to continue to drive growth. Recent innovations have included their first 100% carbon offset beer – Cascade Green, Rosemount O – a wine made especially to be poured over ice, a number of new low carb options and Carlton Fusion – the first flavoured beer under a major Australian brand.