Foster’s looks at portfolio cull

According to a Just-Drinks report (subscription of membership required) 'Foster’s is mulling reducing its product offering by up to 20%. The Australian company hopes the move will rejuvenate the business and ward off the risk of a takeover bid, the Australian Financial Review said today (11 October). The paper cited Foster’s managing director for Australia, Asia and Pacific, Jamie Odell in the report.

“I would be disappointed if we didn’t get it down by at least 10%,” Odell told the paper, adding that a move towards 20% would be even better. “I do hold to the view of fewer, bigger, better.”'

There you have it folks, its official. Early in July, when I spoke with Matt Schmidt, Corporate Affairs Manager of Foster’s Wine Estates I specifically asked if the product line would be culled. Matt's response was, "As far as future rationalisation is concerned, whilst Foster’s is continually reviewing its assets and its options, it is not anticipated that any further announcements regarding disposal of assets will be made within the next 12 months. In terms of brand rationalisation, “the company has a stated priority of growing sales and the individual brands are constantly being reviewed.” 

Matt also stated the reason for selling Seppeltsfield was, "It does not fit in with our business model; we are about building consumer relevant brands and continuing to promote our wines globally, and it is not inline with our global business direction.”

Culling of the brands was expected, only a naive person think Fosters would keep the entire inheritance of Southcorp brands. As to which ones will go, you can bet your sweet bippy it will be the smaller brands. According to Foster's web site, there are 42 Australian brands alone. In the USA they have 13 brand; there is also a smattering of wineries in New Zealand, Italy and France.

The Australian brands are listed in the table below. If they 20 percent, my guess is that it will come from the brands that I have highlighted in aqua.

 

Andrew Garrett	Annies Lane	Bailey's of Glenrowan	Black Opal
Blue Point	Cartwheel	Coldstream Hills	Devils Lair
Edwards and Chaffey	Greg Norman Estate	Half Mile Creek	Ingoldby
Jamison's Run	Kaiser Stuhl	Killawarra	Leo Buring
Lindemans	Maglieri	Matthew Lang	Metala
Mildara	Minchinbury	Mount Ida	Penfolds
Pepper Jack	Queen Adelaide	Robertson’s Well	Rosemount Estate
Rouge Homme	Saltram	Seaview	Seppelt
Shadowood	St Hubert's	T’Gallant	The Little Penguin
Rothbury Estate	Tollana	Wolf Blass	Wynns Coonawarra
Yarra Ridge	Yellow Glen

If they dispose of the full 20 percent, and in time I have no doubt that they will, in theory, eight Australian brands will go, but as Foster's are a global company, it is quite possible that significantly more than 20 percent of the Australian brands will go and the US brands may be left intact. So in practice, Australia could lose up to a dozen brands.

But this is not the true picture! Look at the words carefully! It does not talk about a reduction in "brands;" Jamie Odell talks about a reduction in "offerings." This means that many of these "brands" may survive but 20% of the entire portfolio of labels may go. When you consider that large, core brands like Wolf Blass and Penfolds have a large number of labels, possibly up to thirty or more each, and small brands like Devils Lair and Tollana, only have about four each, a huge number of labels will go. Brands may survive but many labels within the brands will not. For example, old favourites like the Lindemans Coonawarra Trio are sure to be given the flick, whilst the Australian Lindemans (premium) brand is decimated and bastardised with new labels from South Africa and South America.

To quote (and paraphrase) Matt Schmidt, "If it does not fit in with our business model and it is not inline with our global business direction, it will go. We are about building consumer relevant brands and continuing to promote our wines globally."

So many of those small brands that wine lovers find "interesting" will go as Foster's reduce to a core of large volume wine lables.

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