Fosters cancels vineyard and winery sales

Foster’s has scrapped plans to sell four Australian vineyards and a winery after reconsidering their importance to the group’s future strategy.

The company, which has already completed the sales of 20 of the 36 vineyards it identified as being surplus to requirements during a strategic review earlier this year, has confirmed that the Bailey’s winery at Rutherglen, Victoria, has been taken off the market.

As well as the vineyard attached to the Bailey’s site, the 150 hectare Guthries vineyard and the 246ha Shulz vineyard, both at Wrattonbully on South Australia’s Limestone Coast, and the 59ha vineyard at Meridian Home on the New South Wales central coast, have all also been taken off the market.

The news suggests that Foster’s might be preparing for something of a turnaround in its wine business after previously announcing it is planning on splitting its wine business from its highly profitable beer operations.

The vineyards were saved after the company identified improvements in grape quality at the sites, as well as being deemed necessary for developing new products for release from next year as part of the group’s strategic brand planning.

The decision to hold on to the sites means Foster’s has around 1000ha of vineyards across nine Australian locations and one US vineyard remaining up for sale, on top of the Denman winery in New South Wales, which will close if Foster’s cannot sell it before the end of next year.

Meanwhile Constellation Brands confirmed this week that it is planning to axe 50 jobs at its packaging plant in Reynalla, South Australia, blaming the cuts on UK customers for increasingly buying wine in bulk and having it bottled locally to save on shipping costs.

Less than two years ago, in August 2008, Constellation made 350 staff redundant and put three Australian wineries and 23 vineyards up for sale in an effort to counter falling export sales, but it struggled to find buyers and was even forced to rip up vineyards at some sites.

Constellation last week announced a slight drop in net sales for the first quarter of the current fiscal year – US$787.5 million down from $791.6m in Q1 2009.

However, operating income for the period was up from $84.7m in 2009 to $96.3m this year and gross profit rose from $268.7m to $270m.

Rob Sands, president and CEO of Constellation Brands, said: “I am pleased with our first quarter results that are in line with our expectations. We are beginning to see benefits from our focus on profitable organic growth. Our US distributor initiative gained traction in the first quarter as we experienced improved results at retail.

"We also increased brand investments and promotional activities and launched several new products, all of which drove an improvement in depletion trends.

“Examples of new products introduced during the quarter include Blufeld German Riesling, Black Box Malbec, Woodbridge by Robert Mondavi brut sparkling wine and the Arbor Mist White Pear Pinot Grigio."

Alan Lodge, 07.07.2010