Foster’s may import wine because of drought

Australia’s drought has reached such critical levels that the Foster’s Group has issued a warning it may have to import wines to blend with its lower-end wines in order to meet demand.

October was not a good media month for Foster’s. First, Foster’s hit the news when its Queensland brewery workers went on strike to fight for a union agreement. Second, Foster’s had to announce that the weak dollar would seriously bite into its profits and lastly, the board warned that drought conditions might force Foster’s to import wine.

As if these were not enough, Foster’s executives at the AGM on 31 October 2007 had to reject suggestions that Foster’s could split its operations into separate wine and other beverage businesses. Foster’s bought the Southcorp wine company in 2005 for about AUD 3.5 billion, picking up its Penfolds and Rosemount wine brands, to add to Wolf Blass which it had bought earlier.

Foster’s Chief Executive Trevor O’Hoy, a professional optimist, said that he is hopeful of better times ahead for the company. "The worst is behind us." he reportedly said.

Mr O’Hoy also raised the prospect of Foster’s using overseas suppliers for its lower-end wine products if the drought is prolonged.

"It may be South Africa or South America. We will do that, but clearly at the lower end."

In view of Foster’s flagging share price, which puts his job seriously at risk, Mr O’Hoy decided to take the bull by the horns. He said he was aware of suggestions that his own job might not be secure but that he would stay for as long as the board wanted him.