Fosters counts cost of poor wine market

Brewing giant Foster’s today said that higher annual profits from sales of beer overseas had been eroded by a sharp drop in US wine trade.

The Australian group said international beer sales pushed ahead by 8.5% in the year to June 30.

This outstripped the performance of the global beer market which is estimated to have grown by around 2% in 2003.

Foster’s reported 10.7% growth in earnings at its international beer business, which includes the lager brewed in the UK by Scottish & Newcastle.

But the company said its results had suffered from a wine market that has become saturated in North America, where earnings shrank 45.8% over the past year. The company’s wine brands include Beringer and Wolf Blass.

Lower demand led to fewer shipments, making packaging materials obsolete and forcing the company to write down its stock of excess wine by AUS $229.7m (€134m).

Fosters reported annual profits of AUS $799.3m (€466m), up 73% on a year ago and reflecting gains from the sale of its pub business.

First produced in Australia in 1888, Fosters is the UK’s second-best selling lager, accounting for one in four pints of standard draft lager sold.

It has annual sales in the UK of AUS $3.91bn (€2.3bn) and is sold in more than 155 countries.

Fosters is also in the process of building relationships with supermarket chains to drive higher sales of wine in the UK where it currently has a 1% market share.

Chief executive Trevor O’Hoy said the performance of its wine business, which had begun to outstrip the group’s traditional strength in beer, had been unacceptable.

But he added: “At an operational level there are grounds for confidence in strong performances in the coming years across all parts of the business.”

The priority will now be given to restoring the financial performance of the wine business to ensure total group earnings growth of more than 10% from 2006, Mr O’Hoy added.