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Grape over grain drives Foster's sales gain

By Neil Merrett , 21-Feb-2007

Australian brewer Foster's has posted encouraging results in its first half report as improving performance amongst its global brands drove strong sales growth throughout its operations.

The company achieved an 11 per cent growth in sales, to €276m over the 6 month period ending 31 December 2006, spurred by improving fortunes in Europe and the Americas, through growth in its wine ranges offsetting overall decline in its Asia Pacific markets.


The results revealed the need amongst the Asia's beverage producers to embrace European and American markets, as well as the importance of expanding its core brands.


Foster's has bought global wine group Southcorp, allowing it to expand beyond its established beer brands like Fosters lager.


And through the resulting acquisition of popular brands including Beringer, Lindemans, Penfolds and Wolf Blass, the company has increased its global operating income in the sector to €177m from €155m previously.


But success for its wine brands in the European and American markets could not hide disappointment in Asia Pacific.


Sales volume Foster's its entire beer and wine portfolio were down over the same period last year, despite Australia's domestic beer market seeing encouraging growth of its Pure Blonde and Carlton Draught brands.


And, the group added, the value of savings in Asia Pacific costs were undermined by a temporary increase in cost for wine packaging and export logistics.


Chief executive Trevor O'Hoy stressed the growing importance to the group of expanding its ranges in both wine and beers.


"We are committed to Australian multi-beverage and we have most aspects of the model right, however, we are continuing to evolve the sales structure to leverage specialist wine skills and improve customer service levels," he said.


With the grape crop expected to be smaller but of higher quality in Australia, and continued investment in its brands, O'Hoy is confident that the company will continue to see growth over the second half of the current financial year.


"Sustained brand investment, improving route-to-market models and operating efficiencies will drive accelerating earnings growth in the second half, and for the full year."

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