foster’s group 2006 company profile edition 1 · foster’s group limited business activity...

Foster’s Group 2006 company profile edition 1

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Foster’s Group 2006 company profile edition 1

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Table of contents

Single-user licence edition..................................................................................................................ii

Copyright statement ....................................................................................................................... ii

Incredible ROI for your budget – single and multi-user licences .................................................... ii

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Table of contents.................................................................................................................................iv

List of figures........................................................................................................................................v

List of tables ........................................................................................................................................vi

Chapter 1 Company Dossier ...............................................................................................................1

Company Name .............................................................................................................................1

Business Activity ............................................................................................................................1

Stock Symbol .................................................................................................................................1

Key Executives...............................................................................................................................1

Summary Financials.......................................................................................................................2

Key Competitors.............................................................................................................................2

Key Customers...............................................................................................................................2

Outlook ...........................................................................................................................................2

Chapter 2 Worldwide Locations..........................................................................................................3

Chapter 3 Financial Analysis...............................................................................................................4

Chapter 4 Competitor Analysis ...........................................................................................................7

Chapter 5 Key Events...........................................................................................................................9

Chapter 6 SWOT Analysis .................................................................................................................11

Strengths ......................................................................................................................................11

Weaknesses.................................................................................................................................11

Opportunities ................................................................................................................................12

Threats .........................................................................................................................................13

Chapter 7 Customers .........................................................................................................................14

Chapter 8 Products & Product Development...................................................................................16

Chapter 9 Prospects...........................................................................................................................18

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List of figures

Figure 1: *Sales of Foster’s across geographic segments, FY 2003/04-FY 2004/05 (% of net sales)..................................................................................................................................14

Figure 2: *Sales of Foster’s across industry segments, FY 2003/04-FY 2004/05 (% of net sales)......................................................................................................................................17

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List of tables

Table 1: Foster’s divisions and their locations, FY 2004/05 ...........................................................3

Table 2: Foster’s key consolidated performance, FY2000/01-FY2004/05 .....................................6

Table 3: Major products of Foster’s across product categories, FY 2004/05...............................16


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Chapter 1 Company Dossier

Company Name

Foster’s Group Limited

Business Activity

Foster’s Group Limited is a leading multi-beverage company in Australia and a

major premium wine producer in the world. Foster’s markets beverages such as

beer, wine, spirits and cider under the brands Foster’s, Wolf Blass, Victoria Bitter,

Crown and Carlton Draught. The company also markets ready-to-drink

beverages such as ginger beer and fruit juices under brands such as Cascade.

The company operates through three core industry segments namely Australian

Beer, International Beer and Wine. Foster’s Group encompasses its group

companies namely Foster’s Australia, Foster’s Wine Estates and Foster’s

Brewing International. The company recorded a 1.6% year-on-year growth in

sales to AU$3,972.3 million in FY 2004/05. Foster’s has devised an organic

growth strategy, which aims at reviving its North American wine business, better

leveraging the value of the Foster’s brand and enhancing focus on its core

businesses by divesting non-core businesses.

Note: AU$ refers to Australian dollar

Stock Symbol

Foster’s Group’s shares are traded on the Australian Stock Exchange under the

ticker symbol FGL.

Key Executives

Frank J. Swan, Chairman

Trevor L. O’Hoy, President and Chief Executive Officer

Martin Hudson, Chief Legal Counsel and Senior Vice President (SVP),

Commercial Affairs

Pete Scott, Chief Financial Officer

Ben Lawrence, SVP, Human Resources Richard Scully, Managing Director,

Foster's Brewing International

Jamie Odell, Managing Director (MD), Foster's Wine Estates

John Murphy, MD, Foster's Australia


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Summary Financials

In millions of AU$ FY 2002/03 FY 2003/04 FY 2004/05Net sales revenue 4,637.8 3,908.1 3,972.3 Net profit 462.9 799.3 936.1 Working Capital 730.5 452.2 1,470.8 Capital expenditure 309.8 290.6 239.9

Fiscal years ended June 30 Source: Foster’s Group

Key Competitors

The prime competitors of Foster’s are beverage manufacturers Pernod Ricard

SA (Paris, France), Constellation Brands Inc (New York, US) and Anheuser-

Busch Inc (Missouri, US).

Key Customers

Foster’s markets its beer, wine, spirits and cider products to retailers and

wholesalers in Australia, the Asia Pacific, Europe and the Americas. Foster’s

Australia serves 38,000 customers through its specialist sales network and

Foster’s Wine Clubs function as consumer-direct business channels for the

company’s wine products.

Outlook

Foster’s, aims to sustain its revenue growth through investments in product

innovation, customer service, brands, acquisitions and by continuing its efficiency

improvement initiatives. In the period from FY 2005/06 to FY 2007/08, the

company plans to enhance its Australian multi-beverage business and achieve

continued earnings growth as a result of efficiency projects implemented in 2006.

Through the Southcorp acquisition (FY 2004/05), the company plans to expand

in Australia and strengthen its category leadership. In addition, the acquisition is

also expected to enhance Foster’s scale of operations in the wine and multi-

beverage segments. Foster’s anticipates cost synergies to the tune of AU$40-50

million in FY 2005/06 and AU$130-145 million by FY 2007/08, from the

integration of Southcorp. Foster’s also expects growth through partnerships in

new geographic markets such as Finland, Spain, Germany, France, Italy,

Scandinavia, Russia and the US.


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Chapter 2 Worldwide Locations

Foster’s Group, headquartered at Victoria, Australia, has brewing/wine

operations in 10 countries and had 10,300 employees* as of June 30, 2005.

Note: * Full-time equivalent employees

The following table summarises the company’s divisions and their locations.

Table 1: Foster’s divisions and their locations, FY 2004/05

Divisions Locations Foster's Australia Australia Foster's Wine Estates Vineyards in Australia, California, Italy, France, New

Zealand Foster's Group Wine Clubs & Wine Services

-

Global Wine Clubs Cellarmaster in Australia; BVI in France, the Netherlands, and Belgium; Cardmember Wines in New Zealand; Pallhuber and Cellarmaster in Austria, Germany and Switzerland; Wine Buzz KK in Japan; Nexday Delivery Services in the Netherlands and Australia and Windsor Vineyards and IWA in the US

Global Wine Services Five bottling plants-three in Australia (McLaren Vale, Barossa Valley and Hunter Valley regions) and two in France (Languedoc and Macon regions).

Foster's Brewing International

Partnerships with local brewers in Europe, the UK, the US and Asia. Owns breweries in Vietnam, China, India, Samoa and Fiji

Source: Foster’s Group


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Chapter 3 Financial Analysis

Foster’s recorded a 1.6% growth in sales* to AU$3,972.3 million in the fiscal year

ended June 30, 2005 (FY 2004/05). The growth was driven by a 6.1% year-on-

year increase in its net beer sales (before adding royalties) to AU$2,098.5 million

and higher net wine sales (by 16.1% to AU$1,857.3 million), as compared to FY

2003/04. However, total operating revenues declined by 6.7% year-on-year to

AU$5,444.1 million, owing to a 23.5% year-on-year decrease in its other

operating revenues (comprising mainly gain on sale of controlled entities, sale of

assets and investments and other income) and a 24.6% decline in interest

revenues.

The company witnessed sales growth in all its industry and geographic segments

despite a 10.3% year-on-year decline in royalties in FY 2004/05. In FY 2004/05,

cost of sales was down 1.5% year-on-year to AU$1,990.8 million and cost of

sales margin reduced to 50.1% from 51.7% in FY 2003/04, as a result of cost

synergies achieved during the fiscal. As a result of sales growth, gross profit

improved 5.0% year-on-year to AU$1,981.5 million in FY 2004/05 and gross

margin was 49.9%, as compared to 48.3% in the previous fiscal. Selling, general

and administrative (SG&A) expenses decreased by 5.3% year-on-year to

AU$1,455.9 million in FY 20004/05 and SG&A expense margin was down at

36.7%, as compared to 39.3% in the previous fiscal. The decline in SG&A

expenses was due to a 36.4% year-on-year decrease in selling expenses to

AU$289 million in FY 2004/05, achieved as a result of operating a lowest-cost

supply chain. However, the decline was partially offset by a 10.4% year-on-year

increase in marketing expenses (to AU$379.6 million) and a 6.8% increase in

administration expenses (to AU$674.9 million). Earnings before income and tax

(EBIT) witnessed a 32.3% year-on-year growth to AU$1,257 million in FY

2004/05, with EBIT margin*** at 31.6%, as compared to 24.3% in FY 2003/2004,

as a result of the growth in sales. Consequently, net profit improved by 16.7%

year-on-year to AU$941.4 million.

The Australian Beer segment reported a 15.8% year-on-year growth in sales** to

AU$2,183 million in FY 2004/2005, driven by the strong growth of premium

imported beers such as Stella Artois and Carona and the success of marketing


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campaigns undertaken for the Victoria Bitter and Carlton Draught brands. The

International Beer segment’s sales improved by 3.3% year-on-year to AU$262.4

million in FY 2004/05, as a result of volume growth in Europe and the strong

performance of premium brands in the Asia Pacific. The Wine segment recorded

a 20.9% year-on-year growth in sales to AU$2,000.2 million in FY 2004/05,

owing to brand development initiatives, the growth in the Asia Pacific market and

volume growth in Europe. The Corporate segment reported a 42.4% year-on-

year decline in sales to AU$21.6 million.

For the six months ended December 31, 2005, the company recorded a 27.7%

year-on-year growth in sales* to AU$2,593.3 million, driven by sales growth in

the Australian Beer and Wine segments and the effect of the integration of

Southcorp. As a result, EBIT improved 28.5% year-on-year to AU$593.7 million

in the half-year and EBIT margin*** was up at 22.9% in first-half of FY 2005/06,

from 22.8% in the first half of FY 2004/2005. Net profit for the first half of FY

2005/06 declined by 62.4% year-on-year to AU$291.1 million owing to a net loss

(after tax) of AU$37.9 million and charges related to the restructuring and

integration of Southcorp, which was acquired in FY 2004/05.

The Australian Beer segment reported a 5.2% year-on-year growth in sales** to

AU$1,141.7 million in the first half of FY 2005/06, driven by the growth in beer

brands such as Corona and Crown Lager. The International Beer segment

suffered a 0.9% year-on-year decline in sales** to AU$127.6 million, despite

volume growth. The Wine segment’s sales improved by 54.7% year-on-year to

AU$1,407.5 million, as a result of wine trade growth in the Americas, Asia and

Continental Europe.

Note: 1) * Sales for overall company refer to net sales revenues 2) ** Sales for industry segments refer to operating revenues excluding

net interest revenue 3) ***EBIT as a percentage of net sales revenue 4) The financials for the first half of FY 2005/06 are based on Group

Statutory Reporting Basis.


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Table 2: Foster’s key consolidated performance, FY2000/01-FY2004/05

(Figures given are in millions of AU$, unless otherwise stated)

FY 2000/01

FY 2001/02

FY 2002/03

FY 2003/04

FY 2004/05

Net sales revenue 4,026.3 4,527.5 4,637.8 3,908.1 3,972.3 Cost of sales* NA 2,299.0 2,406.5 2,020.9 1,990.8 Net profit 465.2 560.9 462.9 799.3 936.1 Working Capital 804.9 944.3 730.5 452.2 1,470.8 Capital expenditure 322.9 285.0 309.8 290.6 239.9 Cash at the end of the year

534.5 271.4 337.6 706.8 791.9

Total assets 9,623.8 9,511.0 9,588.9 8,443.1 11,745.3 Total shareholders' equity

3,779.0 4,211.9 4,493.1 4,600.2 4,944.1

Employees 13,700 12,950 13,400 9,300 10,300 Fiscal years ended June 30

Source: Foster’s Group Note: * Restated figures are not available


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Chapter 4 Competitor Analysis

The organic growth strategy of Foster’s centres on reviving its North American

wine business, better leveraging the power of its Foster’s brand in international

markets and enhancing focus on its core businesses by divesting non-core

businesses. The company also targets top-line growth through investments in

product innovation, customer service and brands, and seeks to become a low-

cost producer by realising acquisition synergies and supply chain efficiencies.

The company primarily competes with beverage producers like Pernod Ricard

SA (headquartered at Paris, France), Constellation Brands Inc (headquartered at

New York, US) and Anheuser-Busch Inc (headquartered at Missouri, US).

Pernod Ricard SA is the world’s second largest provider of wine and spirits. The

company’s growth strategy is centred on organic expansions as well as

acquisitions. Pernod Ricard plans to continue its international development by

expanding globally, fortifying its brands and operating a decentralised

organisation. The company acquired Allied Domecq in 2005 and consequently,

attained its present position in the global beverages market, besides

strengthening its white spirits and liqueurs businesses. The company’s Pernod

Ricard Australia Pty Ltd subsidiary is the second largest wine and spirits

producer in Australia. The company launched Chivas Regal 18 YO, Wild Turkey

Russell’s Reserve and Seagram Gin and Juice – Red Fury in the US in 2005.

Constellation Brands Inc is a leading global producer of alcoholic beverages,

wine, spirits and beer products. Constellation Brands focuses on achieving

growth in its beverage alcohol products business across geographic regions

through product launches, organic growth and acquisitions. The company’s

Constellation International business is recognised as the number-one wine

producer (by volumes) in Australia. Constellation Brands acquired Vincor (a

leading wine provider in Canada) and the Cocktails by Jenn brand in 2005, and

Robert Mondavi Corporation (in the US) in 2006. The company launched the

Sparkling White Shiraz wine in 2005 and is seeking to enhance its wine business

through new product introductions and the development of innovative wine

products. Constellation Brands also launched California lifestyle varietals such as

Twin Fin and 3 blind moose and wines such as Four Emus, Monkey Bay and


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sauvignon blanc. The company also launched wine product extensions such as

Woodbridge pinot noir (from Robert Mondavi) in 2005.

Anheuser-Busch Inc is a leading brewer in the US. The company is focused on

enhancing its beer business through product and packaging innovation, and

international expansion. In the beer segment, the company launched over 30

new products in 2005. For instance, Anheuser-Busch introduced Budweiser

Select, Bud Light, B (beer), Tilt, Bacardi Silver Big Apple and Bacardi Silver

Strawberry (malt beverages), Michelob Pale Ale and the malt-based beverage,

Michelob Marzen.

E


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Chapter 5 Key Events

Foster’s Group was originally established as Carlton and United Breweries (CUB)

subsequent to the merger of Carlton Brewery and the Foster’s Brewing Company

(formed in 1876) and four other breweries in 1907. The company established

itself as a leading beverage company through the 1900s by means of

acquisitions and brand development.

Foster’s strengthened its presence in Australia and expanded its product line with

brands such as Carlton Draught, Victoria Bitter, Crown Lager and Foster’s Lager.

The company forayed into the wine business through the acquisition of Mildara

Blass in 1966.

Foster’s continued to fortify its brands and drive top-line growth through the

2000s. In 2001, CUB changed its name to Foster’s and focused on building its

premium brands and managing its capital base. Meanwhile, Beringer Wine

Estates (Foster’s wine division) was formed through the merger of Beringer Wine

Estates with Midara Blass. The merger boosted the sales of the company’s

Australian wine brands in the US, by bringing in partnerships with distributors in

the region. In the following year, Foster’s became committed to the development

of multiple products for multiple regions and differentiation, with a view to

enhancing its volume sales, profits and revenues. Foster’s also introduced

innovation across its operations, services and brands. For instance, the company

initiated developments in its Draught Beer Academy for bringing about

sustainable growth of draught beer products. In 2003, the company enhanced its

portfolio through major acquisitions in the beer and wine businesses. In the beer

category, the company acquired Bulmer Australia (the UK-based beer company,

HP Bulmer’s subsidiary), Danang (Song Han) Brewery (in Vietnam) and African

& Eastern (a distribution company in the Middle East). In the wine category,

Foster’s acquired Australia’s T’Gallant, a wine-making facility in California called

RMS, Carmenet (a Californian wine brand), Ponder Estates Wines (in New

Zealand) and Kangaroo Ridge (an Australian wine business).

The company’s key focus areas in 2004 were the expansion of its beverage

business in the Asia Pacific and the development of the Foster’s Lager brand. In


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2004, the CUB business of Foster’s strengthened its Carlton Draught, Cougar

and Carlton Midstrength brands, and launched the Half Mile Creek wine brand. In

2005, the company’s organic growth strategy aimed to revive its North American

wine business, leverage the value of its Foster’s brand better and increase focus

on its core business by divesting non-core businesses. In the year, Foster’s

divested its stake in Australian Leisure & Hospitality Group (ALH), its art

collection and its Lensworth Group property business. The company created a

single operating platform across its product categories and geographies to

enhance its efficiency and improve competitive edge. Through the Southcorp

(Australian wine producer) acquisition in 2005, the company enhanced its scale

and portfolio in the Australian wine and multi-beverage businesses. The

company also strengthened its global presence through partnerships with

SABMiller (in the US) and with Hartwall (Scottish & Newcastle’s Finnish brewing

business) in 2005. Foster’s sold the Foster’s brand in Europe, Turkey, the

Russian Federation and other Commonwealth countries to Scottish & Newcastle

in April 2006. In June 2006, Foster’s sold its Chinese beer brand and Shanghai

brewing operations to Suntory Limited. Following the transaction, the company

will retain rights of ownership and distribution of Foster’s Lager in China and aims

to strengthen the brand in China and other Asian regions.


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Chapter 6 SWOT Analysis

Strengths

Foster’s is a leading multi-beverage company in Australia and a major premium

wine producer in the world. The company owns an unparalleled portfolio of

beverages, from premium wine to specialty beverages and a stable of world-

renowned brands. Foster’s Lager is ranked among the top ten global beer

brands. Foster’s is the first consumer goods company in Australia to attain global

category leadership in the premium wine segment. Beringer is the largest

domestic wine brand in the US by value terms and SKYY is among the top most

recognised vodka brands in Australia. In the US, five of the company’s wine

brands were ranked among the top ten Australian wine brands. Three of the

company’s wine brands attained leading positions in the list of top twenty wine

brands in the UK. Likewise, in Australia, the company’s six top brands were

named among the ten leading bottled wine brands.

The company focuses extensively on implementing its multi-beverage strategy

with a view to providing customers at any given location, a wide portfolio of

brands and beverages. In this regard, the company was successful in making its

Carlton United Beverages business a powerhouse of several branded premium

beverages in the Asia-Pacific region. This achievement enhances the company’s

chance of leveraging its lowest-cost supply chain to provide superior service and

value to customers.

Foster’s has exercised commendable financial discipline even at a time when it

made its biggest-ever acquisition. Despite assuming heavy debt to finance the

Southcorp acquisition, Foster’s net debt/equity ratio declined to 85.7% in FY

2004/05 from 93.6% in FY 2000/01. The company was also featured in the

FTSE4Good (the sustainability index of the London Stock Exchange) listing,

which enhanced its access to capital markets.

Weaknesses

The company experienced a 1.3% decline in sales to AU$3,972.3 million in FY

2004/05 over FY 2000/01, as a result of a lower-than-expected performance of

the Wine Clubs & Services business. The division suffered a 19.5% decline in

earnings before income, tax and amortisation (EBITA) to AU$50 million owing to


Page 12

the effects of the Wine Equalisation Tax in Australia. Furthermore, the company’s

wine business accounted for a 49.5% share of its revenues in FY 2004/05, as

compared to a 41.4% share in FY 2001/02. The declining trend in wine revenues

coupled with the segment’s increasing contribution to overall revenues does not

augur well for the company and impairs its competitive edge.

Foster’s revenue contribution from Australia to its total revenue has been flat in

FY 2004/05, as compared to FY 2003/04. Moreover, revenue contribution from

the Asia-Pacific region declined from 7.2% of total revenues in FY 2003/04 to

6.5% in FY 2004/05. With Foster’s sourcing a higher percentage of revenues

from brewing, this trend is not in line with that of other brewers, who are

extensively focusing on emerging markets in the Asia-Pacific. Foster’s may stand

to lose some lucrative opportunities for revenue augmentation if it fails to

enhance revenue contribution from the Asia Pacific region.

Opportunities

Foster’s views the Southcorp acquisition as a major opportunity for further growth

in Australia and achieving category leadership. The company also expects to

enhance its scale of operations in the Australian wine and multi-beverage

businesses. Foster’s expects strong long-term returns from the acquisition.

The company also perceives the need to fully leverage the power of the Foster’s

brand in the international market. Foster’s currently accounts for 70% of the

company’s total brand sales. Despite selling the same quantity of beer in foreign

markets as in Australia, the company derives only 15% of its total profit from

international markets. Foster’s is therefore aiming to maximise value from the

strong recognition, reach and returns that are associated with its flagship brand

in foreign markets, to enhance brand performance in high-growth regions such

as the Americas, Africa and the Middle East, Eastern Europe and Japan.

Consumption patterns across the world are not restricted to wine or beer,

whereas the location of consumers and the occasion they are celebrating are

seen to influence wine and beer consumption. However, in the US, the drinkers

have demonstrated a shift in preference from beer to wine. About 39% of the US

drinkers claim that wine is their most-often-consumed drink, while 36% claim that

it is beer and 21%, spirits. In the UK, wine has overtaken beer as the country’s

most-preferred drink. The changing consumption patters, in light of Foster’s


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multi-beverage strategy, opens up an avenue of opportunities for Foster’s to

augment revenues.

Foster’s envisages growth opportunities through partnerships in new geographic

markets. Foster’s forayed into the Scandinavian region through a brewing

alliance with Hartwall (Scottish & Newcastle’s Finnish brewing operations). The

alliance allows the company to promote its brands in five key markets of Europe

namely Finland, Spain, Germany, France and Italy. The company also expanded

its presence in Russia through a brewing and marketing partnership with Efes. In

the US, Foster’s strengthened its position through a partnership with SABMiller.

These partnerships are expected to widen the reach of the company’s products

in foreign markets.

Threats

The North American wine industry is plagued with problems such as oversupply,

which has affected Foster’s wine business in the region. In addition, the

company’s performance is subject to the impact of fluctuations in raw material

prices, which could result in higher production costs.

Foster’s is subject to challenges related to its overseas business such as

fluctuations in economic and political conditions and the effect of social

disruption. The company’s performance is also exposed to financial risks such as

currency fluctuations, liquidity risks and capacity availability risks. In addition,

being a producer of alcohol-based beverages, the company is under the constant

purview of stringent regulations, which are different across geographic regions.


Page 14

Chapter 7 Customers

Foster’s provides beer, wine, spirits and cider products to retailers and

wholesalers in Australia, the Asia Pacific, Europe and the Americas. Foster’s

Australia serves 38,000 customers through its specialist sales network and

Foster’s Wine Clubs serve as consumer-direct business channels for the

company’s wine products.

The following figure represents the company’s sales across geographic

segments.

Figure 1: *Sales of Foster’s across geographic segments, FY 2003/04-FY

2004/05 (% of net sales)

FY 2003/04

Australia61.5%

Americas21.2%

Europe10.1%

Asia Pacific7.2%


Page 15

FY 2004/05

Australia61.6%

Americas22.3%

Europe9.6%

Asia Pacific6.5%

Geographic segments FY 2003/04 FY 2004/05 Australia 61.5 61.6 Asia Pacific 7.2 6.5 Europe 10.1 9.6 Americas 21.2 22.3

Source: Foster’s Group Note: * Sales across industry segments refer to net external operating revenue

from continued operations excluding net interest revenue.


Page 16

Chapter 8 Products & Product Development

Foster’s markets beverages such as beer, wine, spirits and cider. The company

has launched new products under the VB line such as VB Original Ale, Pure

Blonde low carbohydrate beer, Cougar Rum and Cola RTD and Half Mile Creek

table wine in 2005. The company also launched the Pure Blonde beer brand and

Cougar Rum in the first half of FY 2005/06.

The table below summarises the company’s major products across product

categories.

Table 3: Major products of Foster’s across product categories, FY 2004/05

Product category Products Beer Carlton Cold, Carlton Draught, Carlton Sterling, Cascade

Premium, Crown Lager, Foster's Lager, Victoria Bitter Wine Andrew Garrett, Annie's Lane, Black Opal, Blues Point,

Ingoldby, Jamiesons Run, Kaiser Stul, Leo Burring, Saltram, Seaview, Shadowood, Secret Stone

Spirits and Cider Cougar Bourbon, Karloff Vodka, Strongbow Cider, the Black Douglas Scotch Whisky

Source: Foster’s Group The figure below represents the company’s sales across industry segments.


Page 17

Figure 2: *Sales of Foster’s across industry segments, FY 2003/04-FY 2004/05

(% of net sales)

FY 2003/04

Australian Beer

49.6%

Corporate1.0%

Wine42.7%

International Beer6.7%

FY 2004/05

Australian Beer

49.3%

Corporate0.5%

Wine44.3%

International Beer5.9%

Industry segments FY 2003/04 FY 2004/05 Australian Beer 49.6 49.3 International Beer 6.7 5.9 Wine 42.7 44.3 Corporate 1.0 0.5

Source: Foster’s Group Note: * Sales across industry segments refer to net external operating revenue

from continued operations excluding net interest revenue.


Chapter 9 Prospects

Foster’s is committed to enhance its growth through investments in product

innovation, customer service and brands. The company also seeks to make

acquisitions and continue its focus on efficiency initiatives. For the period FY

2005/06-FY 2007/08, the company targets consistent revenue growth in its

Australian multi-beverage business and continued earnings growth as a result of

efficiency projects in 2006. Foster’s plans to focus on growing its premium

brands, achieving scale economies, conducting additional efficiency

programmes, maintaining category leadership, realising earnings growth and

sustainable cash flows. The company also expects to build a sustainable

competitive edge through its differentiation strategy and enhance its business

model. In addition, Foster’s seeks to distribute its business risks across its

geographic regions and product categories. In the US, the drinking preferences

of consumers are not restricted to wine or beer but influenced by occasion and

location factors. Foster’s, with its multi-beverage strategy, is well poised to take

advantage of this trend. The preference for wine to beer in the US and the UK

also presents considerable growth opportunities for a multi-beverage company

like Foster’s.

Foster’s key focus areas in the current fiscal (FY 2005/06) for its Australian multi-

beverage business include innovation in logistics platform, sales-force integration

and enhancement of core brands. In the global wine business, the company aims

to achieve volume growth by analysing and reorganising its brand portfolio and

realising supply chain efficiencies. Foster’s also targets growth of its Foster’s

brand in international markets through investments in brand development. In its

Wine Clubs & Services business, the company will continue to focus on

performance reviews. The company plans to move from a product-based

segmentation to a geography-based segmentation from 2007. The company

views the Southcorp acquisition as an avenue for further growth in Australia by

achieving category leadership and greater scale of operations in its Australian

wine and multi-beverage businesses. Foster’s anticipates cost synergies to the

tune of AU$40-50 million in FY 2005/06 and AU$130-145 million by FY 2007/08,

from the integration of Southcorp.


Foster’s expects growth through partnerships in new geographic markets. The

company forayed into the Scandinavian region and gained access to five key

markets in Europe namely Finland, Spain, Germany, France and Italy, through a

brewing alliance with Hartwall (a leading brewer in Finland and subsidiary of

Foster’s European partner Scottish & Newcastle). Foster’s expanded its

presence in Russia through a brewing and marketing partnership with Efes. In

the US, the company strengthened its position through a partnership with

SABMiller. Foster’s expects to identify growth opportunities with the help of the i-

Nova team that the company has formed to focus on innovation and insights.

Foster’s is building a strong culture of innovation and aims to develop beverages

to satisfy diverse consumer requirements and occasions. As part of this initiative,

the company established Half Mile Creek, a partnership between CUB (Carlton &

United Beverages) and BBWE (Beringer Blass Wine Estates), which has been

successful in increasing consumer awareness about wine.

foster’s group 2006 company profile edition 1 · foster’s group limited business activity...

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