Rosemount, one of Australia’s best known global wine brands, suffered a 20 per cent collapse in sales in the second half of last year, reflecting the tough conditions facing the local sector, once among the fastest growing in the world.
Foster’s the Australian drinks group which owns the wine brand, said competition remained intense in the UK and Australian wine markets, as it revealed the weak performance at Rosemount, the premium winemaker that it acquired with last year’s A$3.2bn takeover of Southcorp, its former local rival.
Trevor O’Hoy, Foster’s chief executive, said wine producers had “no pricing power” because of excess supply and the emergence of more powerful retailers. But, he said Foster’s would be able to offset the lower sales’ prices by exploiting its critical mass and broad product offering to make significant savings in its distribution and supply chains.
“We believe the best is yet to come for this company,” he said, adding that Rosemount was the only significant wine brand in the group’s portfolio to experience falling sales.
“The real value from the work we’ve done to date won’t flow through this half or indeed in the full year but over the next two or three years.”
An unexpectedly strong half in the domestic beer business – which lifted sales for the first time in a decade – helped the group to a 11 per cent increase in normalised net profits, before exceptional items, for the six months to December. The local beer division, which many had seen as a cash generative but mature, low growth business, reported an18 per cent increase in earnings before interest and tax.
Foster’s said the business had benefited from new advertising campaigns and a shift by consumers to more upmarket labels.
The results were at the top end of expectations but the shares fell, partly because the market had hoped for synergies from the integration of Southcorp to flow through more quickly. Analysts also said they were concerned by margin erosion in wine.
Foster’s said Rosemount was suffering from a lack of trade support after a difficult few years but that consumers were still positive towards its wines.
Mr O’Hoy said Foster’s remained on track for an increase in earnings per share for the full year of between 12 and 14 per cent.
The shares fell 12 cents to A$5.48 on Tuesday.