Fosters: restructure, breakup and sell-off to help shareholder value – but is this enough?
Facts first: the Australian beer and wine giant has today announced to retain its wine business. Since evaluating its options with the departure of its former CEO Trevor Hoy last year, the business community was speculating whether or not the wine business could be history in Fosters liquor empire.
Instead of sealing its fate, the Fosters Group today announced major changes to their wine business itself:
- 36 ‘non-core’ vineyards will be sold,
- 37 Fosters owned ‘tail’ brands will be sold or discontinued,
- 3 wineries in Australia and California will either be closed, reconfigured or consolidated, and
- the Group expects to book total asset writedowns and restructuring charges between $330 million and $415 million in the second half of this 2008/09 financial year.
So let us look behind the scenes and explain why they are doing it:
Firstly the decision to keep the wine business was heavily influenced by external factors: “The current difficult conditions in debt and equity markets mean this is not the appropriate time to sell or de-merge Foster’s Wine business,” Fosters Chairman Crawford said today in his address to the media. Point taken, it doesn’t help presenting your wine business to potential buyers in an economic climate like ours today. So the Fosters management didn’t have a real chance and now has to make the best out of it.
Secondly: Foster’s management seems to understand the signs of the times, let me give you some examples:
I am a former (tiny) shareholder in Fosters and I still receive their newsletters in print to my post office box, although I told them in several of their frequent sales calls that they should better take me of their list. But hey: this is fun – as it gives me exposure to some of the best trained telephone sales people the wine industry has on offer.
But then I open the mail and I am confused: so many brands, so much Shiraz and Cabernet, but so little variety: I have in the past simply questioned Fosters capacity to market what today’s wine drinkers really like, its management still living in an Australian wine climate of 10 years ago. The reshaping of its brands will change this.
Another major lesson learned is the fact that wine and beer just don’t sell well together: the multi beverage model Fosters was pursuing never worked and now is officially called dead. Its Australian wine and its beer, cider and spirits divisions will be structurally separated. I still smile at the idea of having a Fosters/Southcorp sales rep try to convince the average retailer in Wagga to buy one of their 47 wine brands, while the consumer was mainly connecting the Fosters brand with beer.
So there is good news and bad news in today’s announcement for the 7,000 other Australian winemakers: the bad news is that Fosters management has woken up and will stick to its portfolio – they have the deep pockets to finance this change and profits from its beer and spirit business will help turn around their wine story. The only good news in this is that it will take some time for the giant to make it happen.
Valuable time I will take and open another bottle from one of the many fine smaller Boutique wineries here in Australia.
____________________________________________________________________
Die Fosters Gruppe hat heute einschneidende Veraenderungen fuer ihre Struktur beschlossen. Nachdem in den letzten Monaten so ziemlich jede strategische Variante fuer oder gegen den Verbleib der Weinsparte im Konzern diskutiert wurde, hat heute Chairman Crawford verkuendet, dass die Weinsparte an Bord bleibt. Basta!
Allerdings werden innerhalb der Weinsparte massive Veraenderungen vollzogen:
- 36 Weinberge werden verkauft
- 37 Marken im Rahmen der Fosters/Southcorp Weine werden abgegeben
- 3 Wineries in Australien und Kalifornien werden geschlossen oder konsolidiert
Das Ganze fuehrt zu Umstrukturierungskosten in Hoehe von 330-415 Million AUD.
Wir werden diese Vorgaenge in den naechsten Tagen weiter analysieren und Sie auf dem Laufenden halten.
Ihr Michael Brecht
Related posts:
- Fired: volunteer firefighters sacked by Australian Beer and Wine Giant
- ‘Binge Drinking’ and how the Australian government wants to get rid of it!
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