Foster’s profit driven by beer division

Posted by Daniel Palmer on 17th February 2009

Foster’s, Australia’s largest brewer, today reported a 4.5% increase in net profit to $411.1 million, as their beer portfolio compensated for its struggling wine division. Net sales revenue increased 2.2%, but declined 0.9% on a constant currency basis.

“Despite global wine challenges, our Group first half performance has been strong,” CEO Ian Johnston advised. “We are building a more accountable, adaptable and aggressive culture, we continue to take the tough decisions and we are beginning to drive improving sales growth trends and win back lost share.”

“In the face of very unique global trading conditions, our balance sheet is strong, our medium term funding secure and we continue to generate outstanding operating cash flows.”

Beer, Cider and Spirits in Australia, Asia and Pacific (AAP) continued to perform strongly, with beer net sales revenue in Australia up 6.2%.

“We’ve seen a strong comeback in Australian beer with underlying volume up over 3% for the half and we finished the year with around a 52% value share of the Australian beer market,” Mr Johnston stated.

Pure Blonde continues to lead beer category growth with net sales revenue up 32.2%. Carlton Draught sales grew 10.5% and in December was Australia’s second largest regular beer brand behind VB by value.

“Foster’s further increased its market leadership position in the premium domestic and international beer categories with above category volume and revenue growth,” a company statement claimed. “Foster’s continues to innovate strongly in beer and in the first half launched Pure Blonde Naked Ale, the first beer launched as a low carb alternative in the mid-strength category, Carlton Natural Blonde and craft beers Fat Yak and Sebastian.”

Wine top line performance included share gains in key market segments in the Americas and the UK and strong bottled wine sales growth in Australia. However, volume was impacted by the previously announced decision to exit cask in Australia, the anticipated decline in Beringer White Zinfandel following the January 2008 price increase and a one time disruption in the Nordics.

While negatively impacting volume, the exit from cask in Australia and the Beringer White Zinfandel price increase have positively contributed to earnings, the company reported.

“Deteriorating global trading conditions are a challenge in wine, with a switch away from the higher contribution on-premise trade and consumers trading down on price,” Mr Johnston noted. “Our ability to win share gains in key market segments in the Americas and the UK and our improved performance in Australian bottled wine gives me real confidence in the future.”

Foster’s, which last week announced the outsourcing of maintenance work and today reported they would undertake a restructure of their wine business, believes they are now beginning to turn sales trends in their favour.

“We’ve focussed on getting the basics right, simplifying the business to focus on what really matters – profitably making and selling drinks. We have begun to turn around sales growth trends and we’ve taken back 1 percentage point of share in the Australian beer market in the last quarter,” Mr Johnston said.