Melbourne: Foster’s Group, Australia’s largest brewer, gave a subdued outlook for its core beer market on Thursday, with sales volumes in decline, but said it was on track to spin off its wine business early next year.
Foster’s soft beer outlook, linked to a weakening in Australian consumer sentiment, will be of interest to global rival SABMiller which, according to sources, has appointed advisers to look at buying the beer assets.
Takeover interest in the maker of Foster’s Lager, Pure Blonde and Victoria Bitter has been heightened by the group’s plan to separately list its troubled wine business. The demerger plan has left both the beer and wine businesses as targets.
Foster’s, due to spin off the wine business in the first half of 2011, recently rejected a bid for the wine assets worth up to $2.7 billion from private equity firm Cerberus.
“We’re on track to complete the work...by early 2011,” Foster’s chief executive Ian Johnston told an investor briefing on Thursday, referring to the demerger plan.
Foster’s said that second-half profit rose 8% as higher prices for beer and cost-cutting helped to offset a 3% decline in volume as consumer spending slowed.
It forecast beer sales volumes to fall 4% to 5% in the first half of fiscal 2011 and only a small improvement in the second half.
“We are still likely to see some decline in the second half of fiscal 2011,” said Stephen Matthews, finance director at Carlton & United Breweries.
“In the short term we do expect subdued volumes and more moderate price...trends,” Matthews said. “We are cautious about consumer confidence,” he said, adding an unseasonably cold and wet August and September had likely helped reduce sales.
The Australian beer market is a virtual duopoly with some of the highest profit margins in the brewing world. Foster’s controls half the market, with most of the rest held by Japan’s Kirin-owned Lion Nathan.
Shares in Foster’s touched a one-week high of A$6.16 on Thursday, still below a peak of A$6.44 last month.
Foster’s will continue its investor briefing on Friday, focusing on the wine business, which is also reported to be in the sights of Kohlberg Kravis Roberts & Co and TPG, though KKR is busy with this week’s $1.7 billion bid for Australian fund manager Perpetual.
Foster’s managing director of Carlton & United Breweries John Pollaers, said the beer unit still offered growth after losing market share due to poor positioning and execution.
“In this fiscal year we have stabilised our market share, and in some categories we’ve started to grow our market share again. It’s the first time in some five-plus years,” Pollaers said.
Carlton & United Breweries brands are mostly slow-growing mainstream beers and the company wants to boost its share of the higher-margin premium market. The beer division generates 85% of group earnings.