Figures hint at industry recovery

Reports this week have suggested that the world is finally fighting its way out of recession and figures released by major drinks companies over the past few days have hinted at a level of optimism that has been desperately lacking so far in 2009.

Foster’s Group, Heineken, Australian Vintage and Adnams have all brought us reasons to be cheerful as we limp towards the end of summer and look over the horizon towards a brighter future.

Foster’s Group – the biggest brewer in Australia – enjoyed a 4% rise in full-year profits thanks to a strong performance by its beer division, where sales rose by 2.7%. The separation of the company’s wine and beer divisions has allowed the brewer scope to focus its energies into profitable markets and consumers seem to be remaining faithful to familiar brands.

Heineken did even better, blowing analysts’ estimates out of the water by posting a 20% rise in first-half profits, having cut costs by £44 million under its Total Cost Management programme. Price rises and a cut in marketing spend allowed the company to maintain a strong performance through what was expected to be a tough period.

The brewer said it expects net profit before exceptionals to rise by at least a high single-digit percentage for 2009.

UK-based brewer and pub retailer Adnams reported “much improved” trading in the first six months of the year.

Turnover at the Suffolk-based company rose 6.8% and Adnams also saw turnover at its Cellar & Kitchen chain rise by 2.4%.

Executive chairman Jonathan Adnams said: “We reacted quickly to the economic downturn and having done so believe we are well-placed for improved performance in 2009.”

It’s not only the beer industry which is showing encouraging signs of recovery. Australian Vintage today reported that full-year sales were up 9% with a net profit after tax of AUS$4.3m.

With the Australian wine industry undergoing something of a revolution as winemakers struggle to adapt to an over-supply of grapes, the company implemented a strategic review of its operations which has allowed it to outperform many of its rivals.

“Today’s results clearly demonstrate that Australian Vintage is outperforming the industry with improved sales, strong cash flow and reduced debt,” said chief executive Dane Hudson.

“In February this year we announced that we would take a $127m impairment charge following a strategic review. This followed other major changes we made to the company when it became apparent three years ago that the traditional wine company model was not sustainable.

“The bottom line is that the Australian wine industry is facing a new stark reality, the old golden age has well and truly gone. Our company however is now in shape for the next chapter of the industry.

“We’ve rebased the business, restructured the assets, dramatically improved cash flow, created a flexible supply and operations platform and you can see the results starting to come through.

“AVG’s export branded sales were up 8% with growth in every market except New Zealand.

Our total Australian packaged sales increased by 6% in a competitive market driven by a 24% improvement in sales with the major retailers.

“Worldwide sales of the McGuigan brand were strong with case sales growth of 15% and net sales growth of 8%.”

Interest now turns to Diageo – the world’s biggest drinks company – which announces its full year results tomorrow.

Industry insiders are not expecting miraculous profits, but Diageo’s results are expected to show that the contraction in the market has bottomed out and sales are on the rise once again.

Should that indeed be the case, industry chiefs around the globe can afford a celebratory sip of their own.

Alan Lodge, 26.08.2009