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Foster’s Group 2006 company profile edition 1
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© 2006 All content copyright Aroq Ltd. All rights reserved.
Foster’s Group 2006 company profile edition 1
August 2006 Published by Aroq Limited Seneca House
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© 2006 All content copyright Aroq Ltd. All rights reserved.
Table of contents
Single-user licence edition..................................................................................................................ii
Copyright statement ....................................................................................................................... ii
Incredible ROI for your budget – single and multi-user licences .................................................... ii
just-drinks.com membership ......................................................................................................... iii
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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© 2006 All content copyright Aroq Ltd. All rights reserved.
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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© 2006 All content copyright Aroq Ltd. All rights reserved.
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
© 2006 All content copyright Aroq Ltd. All rights reserved.
Page 1
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
© 2006 All content copyright Aroq Ltd. All rights reserved.
Page 2
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.
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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$1,407.5 million, as a result of wine trade growth in the Americas, Asia and
Continental Europe.
Note: 1) * Sales for overall company refer to net sales revenues 2) ** Sales for industry segments refer to operating revenues excluding
net interest revenue 3) ***EBIT as a percentage of net sales revenue 4) The financials for the first half of FY 2005/06 are based on Group
Statutory Reporting Basis.
© 2006 All content copyright Aroq Ltd. All rights reserved.
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Table 2: Foster’s key consolidated performance, FY2000/01-FY2004/05
(Figures given are in millions of AU$, 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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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.
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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
© 2006 All content copyright Aroq Ltd. All rights reserved.
Page 13
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.
© 2006 All content copyright Aroq Ltd. All rights reserved.
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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%
© 2006 All content copyright Aroq Ltd. All rights reserved.
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.
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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.
© 2006 All content copyright Aroq Ltd. All rights reserved.
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.
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© 2006 All content copyright Aroq Ltd. All rights reserved.
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.
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© 2006 All content copyright Aroq Ltd. All rights reserved.
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.