Brewer faces battle to turn around Australian acquisition

Brewer SABMiller is set for a tough battle to turn around its Australian Foster’s acquisition as its beer volumes sink and it loses key import contracts.

Investors are unconvinced that SABMiller, which has built up its business around fast-growing emerging markets, made the right move in buying the leading player in mature market Australia when its beer volumes, profit and market share were all going south. SABMiller’s shares have underperformed its main rival Anheuser Busch InBev.

SABMiller spent $11.8bn (€9.5bn) last year on Foster’s and set out ambitious targets to reverse its decline in a market where beer has lost out to wine and volumes have been flat for nearly 20 years.

“We bought into the SABMiller emerging market story and Foster’s dilutes that. The size of the task in Australia makes us cautious as we do not hold its optimism for a quick turnaround,” said one top 10 SABMiller shareholder.

Last week, it was reported Foster’s volumes of beers dipped 4% in its year to the end of March. This compared to the SABMiller group which saw an overall 3% annual volume rise for its beers such as Peroni, Castle and Grolsh, with Africa growing volumes as fast as 13% and Latin America by some 8%.

The Australian beer market is a virtual duopoly between Foster’s and Kirin-owned Lion Nathan, with both big brewers now having a market share of around 45% each.

— Reuters