FOSTER’S PULLING THROUGH THE GLUT

Foster’s Group reported today that sales for the 2nd quarter fell 62% to A$291.1 million. They reassured investors, however, that it’s not as bad as it looks because on a like-to-like basis with 2003, sales have risen 10.5%. The Southcorp acquisition and Lensworth property sale in 2004 caused discrepancies with 2005’s 2nd quarter results. “In six short months, we’ve taken on the Southcorp integration, continued to develop our unique multi beverage business in Australia and established the world’s leading premium wine portfolio,” said Chief Trevor O’Hoy.

Sales volume grew 2% for Foster’s six global wine brands while revenue declined 0.2%. Wine volume and revenue growth was dragged down by Rosemount brand which experienced a volume decline of 20%. Beringer brand volume increased 8%, Wolf Blass grew 6.1%, and Penfolds and Lindemans went up 4.2%. Without Rosemount, global wine volume and revenue increased 5.3% and 1.9%. There are concerns that the California wine surplus will hurt Foster’s market share as well as the Australian glut. Trevor said, “It’s definitely not a life-threatening event but it is going to make the market more challenging.”