Fosters not doing as well under SAB Miller


BREWING major Foster's has had a bumpy start to life under new parent SABMiller, losing contracts that accounted for almost 10 per cent of sales by volume while its flagship VB brand continued to decline.
In annual accounts lodged with the London Stock Exchange last night, SABMiller revealed the loss of contracts to brew or distribute imported brands such as Corona, Asahi, Stella Artois, Carlsberg and Kronenbourg had cut 91.5 million litres from its annual sales by volume, which in 2010-11 were 971 million litres.

The owners of the brands -- SAB's international rivals -- were able to terminate their contracts with Foster's under change-of-control provisions triggered by the $12.3 billion takeover, completed in December.

The loss of such volumes has toppled Foster's from its position as Australia's largest brewer -- a position now held by Japanese-owned competitor Lion, maker of the Toohey's and XXXX brands and the new local distributor of market-leading import Corona.

SABMiller said losing the contracts "was a known risk at the time of the acquisition".

However, the bad news extended to Fosters' domestic beer brands, whose sales declined by 4 per cent in volume on an annualised basis -- a result SABMiller blamed on "continued subdued consumer sentiment".

"The traditional regular mainstream segment, which includes Victoria Bitter, declined at a higher rate than the market," but Carlton Draught consolidated share, the company said.

Sales of premium beers including Crown Lager were stronger, while craft brands such as Matilda Bay Fat Yak Ale grew rapidly.

Revenue per litre increased by 3 per cent for the first three months of the year on a pro forma basis, as SABMiller wound back heavy discounts to retailers.

Earnings before interest, tax and amortisation were down because of lower sales volumes and what SABMiller described as "increased commercial investment in the market", which could suggest retailers were offered rebates to shore up its market position.

SABMiller had pulled out $US6 million in costs from Foster's so far, which it expected to translate into annualised savings of $US40m, with cost savings expected to contribute $180m to pre-tax earnings by the end of the 2015-16 financial year.

SABMiller reported net profit of $US4.2bn for the 12 months to the end of March, up 75 per cent from the previous fiscal year, or 13 per cent to $US3.4bn excluding one-off items.