SABMiller clearing the way for a Foster’s bid?
Spreading rumours is a wonderful thing. Especially if rumours contradict each other. Take Foster’s.
At the end of January 2011, several people I spoke to in Australia still were sceptical if Foster’s split into beer and wine will ever materialise, while a few days later it was plastered all over the world that Foster’s board might give approval for the demerger on 15 February. “Might”, “could”, “would” – nothing’s for certain. Not even that SABMiller is really getting ready to pounce on Foster’s. That was the third rumour within a single week.
SABMiller, which has a small presence in the Australian beer market through its Pacific Beverages joint venture with Coca-Cola Amatil (CCA), is understood to have spent the past few months working with lawyers to untangle itself from certain legal and commercial issues relating to its joint venture with CCA which have precluded it from making an independent bid for Foster’s. Australian media believe that these obstacles have now been overcome, giving SABMiller the chance to bid for Foster’s.
It is strongly rumoured that Foster’s will use the announcement of its half-year results on 15 February to tell the world that its board has finally given its approval to the demerger. If the board finally waves the green flag, it will be high time. Haven’t we been waiting for this for over a year now?
Foster’s may also take the opportunity to release the full set of numbers for the wine and beer businesses as separate entities and to outline the timing for the necessary scheme of arrangement booklet and extraordinary general meeting.
In the meantime, industry gossip is focusing in on SABMiller. Pundits say the world’s number two brewer could use the Foster’s beer unit CUB as a platform for growth in Asia. Already, SABMiller owns the Foster’s brand in India and its U.S. brewing rights, whereas Heineken owns the brand in Europe (that’s the bit Australian Foster’s watchers prefer to ignore!)
Australian rumour mongers hope that if SABMiller buys CUB, it will undoubtedly spend money on the long-suffering Foster’s beer brand in Australia and either consolidate or leverage it, at last.
A question-mark is hanging over Pacific Beverages, the joint venture SABMiller formed with Coca-Cola Amatil when it entered the Australian market in 2006 to market, sell and distribute brands including Peroni, Pilsner Urquell, Miller and later Grolsch, as well as the portfolio of global premium spirits distributor Maxxium.
From the lofty heights of a global brewer, beer sales of its local joint venture have been neither here nor there, actually, even after the purchase of Bluetongue Brewery and the construction of an AUD 120 million brewery in New South Wales.
According to Australian media sources, the joint venture has captured between 8 and 9 percent of the premium beer category but has less than 2 percent of the total packaged beer market (ACNielsen figures).
From a commercial perspective, if SABMiller launches a successful bid for Foster’s, that will give Coca-Cola Amatil a chance to make some tough decisions: will they get out of the joint venture or will they try to get the best out of an increased Australian production and distribution system, with the gem being access to the Corona Extra distribution rights?
Corona Extra is Australia’s number one import beer and it’s assumed that Foster’s generates more than AUD 65 million in EBITDA a year from the Corona Extra contract.
In its current form, the Pacific Beverages business will find it increasingly tough to meet the target of management and board to become the number three player in the Australian beer market by the end of 2012. Foster’s is number one with 50.3 percent, followed by Lion Nathan/Kirin with 39 percent, Coopers with 4 percent and Pacific Beverages with 1.8 percent (ACNielsen packaged beer shares by value).
