Beverage Industry

Foster's Group realigns U.S. wine business, posts small profit

February 16, 2010

Foster’s Group, Melbourne, Australia, posted a net profit of $315 million in U.S. dollars for the year ended Dec. 31, 2009. In a constant currency exchange rate, the company posts a 0.5 percent profit, as reported in its mid-year report. Overall, the company reported a 2.2 percent decline in volume to 80.1 million 9-liter cases.

Its North American wine business saw overall 0.2 percent decline in volume. Foster’s Group also reported declines in on-premise channel, channel shift to grocery at discounted prices and a return to growth in Canada. In the region, the company saw modest growth in its North American wine portfolio, which was driven by innovation and its value wines, said Stephen Brauer, managing director of Americas, in a statement.

In addition, the company led aggressive promotional activity across all North American channels, it said. Consumer trends observed by the company include trading down across all price brackets, continued channel shift from on- to off-premise and the Millennial generation embracing the wine category at an early stage, which is driving growth at high price points, Foster’s Group said.

To keep in line with the trends, Foster’s announced it will focus on its core brands, such as Beringer, Chateau St. Jean and Wolf Blass, as well as its core markets, which include Canada, the New York metro area, Massachusetts and Florida. The Florida market presented 10.5 percent growth for the company, according to its report. Foster’s Group also saw a 5 percent increase in the sales of its California-sourced wines this year.

In the North American market, the company plans to reshape and emphasize the premium nature of St. Clement, Penfolds, Stags Leap and Etude wine brands in 2010. Additionally, the company plans to accelerate innovation pipeline in high-growth segments, including emerging brands such as Cellar No. 8 and Colores Del Sol, an Argentinian wine.

Internationally, Foster’s reported its continental Europe volume increased 25.7 percent, while volume in the United Kingdom and Ireland decreased 7.5 percent, said Angus McKey, chief financial officer, in a statement. In its native Australia, the company’s beer, cider, spirits and ready-to-drink brands continued to perform. However, its wine business suffered a 0.9 percent decline in net sales revenue in Australia and New Zealand. The company also continues to increase its focus in Asia, and reported good volume growth in China, Hong Kong, Taiwan, Singapore and Malaysia, despite an overall 11.4 percent decline in volume in the region.