SABMiller finds full-strength returns elusive in Foster’s declining market

  • Reading time:2 min(s) read

BEER volumes for SABMiller’s Australian arm, the brewer Foster’s, have tanked, falling 13 per cent for the first half as the global beer company suffers from the loss of key brands in its local portfolio, termination of third-party distribution contracts and a tougher line it is taking with retailers over pricing.
The beer declines at Foster’s outpaced the drop in consumption experienced by the broader brewing market.
Reporting its results overnight for the six months to September, SABMiller confirmed a trading update announced earlier in the year that its Foster’s business had lost significant volumes for the half.
SABMiller, which paid $12.3 billion last year for the acquisition of Foster’s, said lager volumes had declined by 8 per cent on a pro forma basis during the half, excluding the impact of the termination of some licensed brands and the loss of two trading days.
”Including these impacts, lager volumes declined by 13 per cent,” the company said.
Since the takeover by SABMiller in 2011, Foster’s has lost a string of licences as global owners of popular beer brands switch their contracts to other players who are not in direct competition with them in other international markets.
The termination of deals with Corona, Australia’s biggest selling imported premium beer, and others such as Stella Artois have also enabled its arch rival in the region, Lion, to usurp its position as Australia’s No.1 brewer.
SABMiller, the world’s second-biggest brewer, said its share of the Australian market might not lift for another two years.
Reporting to shareholders, SABMiller said Foster’s had made improvements to the business. ”Good progress continues to be made on plans to strengthen the brand portfolio and commercial trading relationships, to accelerate the realisation of synergies and to improve operational performance.”
The acquisition of Foster’s and higher profits in China and India did result in higher group earnings, however, with reported EBITA in the Asia-Pacific region increasing by 265 per cent, or 10 per cent on a constant currency basis.
SABMiller said group pre-tax profit rose to $US2.76 billion in the first half as sales rose 11 per cent to $17.5 billion.