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Wine bears ‘full brunt’ of recession: Foster’s

The wine market has been hardest hit by the economic downturn and will continue to be troubled in 2010, Foster’s has warned.

The Australian brewer which owns brands including Penfolds, Wolf Blass and Wynns reported net profits increased 4% thanks to strong beer sales, but global wine volumes fell more than 5%.

Foster’s chief executive officer Ian Johnston, said, ‘the wine category is bearing the full brunt of a lack of consumer confidence brought on by global economic conditions.’

‘Trading conditions in key wine markets will remain challenging in 2010 due to the ongoing impact from recessionary economic conditions,’ the company added.

Foster’s partly attributed the decline in sales to its exit of the bag-in-box wine category.

On-premise sales have tumbled as people cut back on dining out while sales of luxury, icon and some premium wines have been hit as customers trade down. Entry level, low margin wines have seen strong growth.

Foster’s announced earlier in the year it would sell 36 vineyards and scrap 37 brands. It announced it had made ‘good progress’ with divestment of its Californian and Australian vineyards and had ‘deletion plans’ for 17 brands with six brands likely to be sold.

The company’s restructure has seen writedowns of A$397.6m in the last 12 months, compared with A$602.9m of writedowns in the previous year.

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Written by Rebecca Gibb

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