'Underperforming' Foster’s to split wine and beer, 37 brands cut

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  • Tuesday 17 February 2009

Foster’s is to retain its ailing wine business but is to split its Australian wine and beer businesses, the drinks giant announced today.

The company said its planned changes will cost AUS$60m a year but, it says will result in savings of over AUS$100m a year from 2010.

The move was announced today when the company released the results of a review of its wine assets which was started last June.

One of the key conclusions of the review was that the wine giant had 'underperformed' but that there were 'substantial operational improvement opportunities'.

Other changes announced by the group include the closure of its Denman plant (the original Rosemount winery in the Hunter Valley), a reconfiguration of the St Helena facility in Napa California and, on California’s central coast, the consolidation of the Taz and Meridian wineries.

The company announced the sale of 36 ‘non-core’ Australian and Californian vineyards covering 5,000ha (hectares) of planted vines worth AUS$243m. It will also sell or close 37 low-end brands which currently generate AUS$60m in sales and which are worth approximately AUS$53m.

Fosters also announced write-downs of AUS$3-400m.

Scott Weiss who has led the company’s American wine business since Foster’s took over Southcorp in 2005, is one of the casualties of the review.

New managing directors are to be appointed in Australia and the Americas but Europe Middle East and Africa chief, Peter Jackson, is to remain in the job.

‘The performance of our wine business has been unsatisfactory,’ said Fosters Chairman, David Crawford. ‘In large part this has been the product of poor execution in the Americas and pursuing a multi-beverage model in Australia.’

A Foster’s statement said that the review had concluded that the business was ‘reasonably well positioned but has failed to operate effectively in an industry where execution is particularly critical to success’.

In the company’s half-yearly results, also announced today, an overall 3.2% increase in net profit to AUS$411m was reported.

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