Beer cheer boosts Foster’s

Half-year figures from Foster’s Group showed that a strong performance by its beer division helped to offset weak wine sales.

Sales at Carlton & United Breweries, Foster’s Australian beer division, rose 6.6% to A$486 million for the six months to the end of December 2009.

Overall the company reported net sales for the period fell by 4.4% to $2.3 billion compared to $2.4bn in the same period in 2008, while net profits fell 13.5% to $335.7m

Despite reporting more stable demand in the Americas and progress on its restructuring plan, Foster’s wine division continues to hamper the company.

The current strength of the Australian dollar makes the group’s wine figures appear worse than they actually are.

Wine sales to the Americas region, where consumers have increasingly been buying cheaper wines in the wake of recession, fell 62% over the six months, though with a constant exchange rate this would equate to a 45% drop.

Exchange rate losses were also wholly attributable to a 76% sales drop in Foster’s European, Middle Eastern and African (EMEA) division.

The group also announced it has sold more than half of its planned sale of 36 vineyards as part of a review of the wine division.

The group said the cost-saving programme had delivered around US$35m in savings in the first half and hopes for a total of US$70-80m in the full year.

A Foster’s statement said: “Today’s result demonstrates the ongoing strength of Carlton & United Breweries and the exchange rate impacts and recessionary economic conditions in global wine.”

Stephen Brauer, managing director of Foster’s Americas, said that consumer confidence is still lagging in the United States. "Confidence on Main Street trails the sentiment on Wall Street with high unemployment, high credit and a depressed housing market are the primary concerns with consumers," he said.

Brauer also noted that the US wine category "posted modest volume growth in the half driven by value wines, new to market brands and aggressive promotional activity."

Global grape oversupply, particularly from Australia, has also dramatically driven down prices.

Group chief executive Ian Johnston said: "This downturn is made worse by global oversupply of wine prompting clearance level discounting. Of course retailers have welcomed this situation and brand owners are being faced with difficult short term decisions. Most small players are forced to take any price to clear tanks ahead of next vintage."

Alan Lodge, 17.02.2010