Finding a new Foster home
So there’s an interesting piece on Bloomberg quoting the Sunday Times saying that Fosters Group, the Aussie wine and beer company, might sell its beer operations (branded Carlton & United Breweries, confusingly enough) to SABMiller.
This makes sense. Since I was working as a drinks industry reporter getting on for ten years ago, I’ve been saying Fosters should flog off the beer business. They’re a combination of a global premium wine company, a low-margin domestic beer business, and one mysteriously popular global beer brand – which, oddly enough, has almost entirely disappeared from their home turf. Being a global wine distributor, while providing a global beer company with a global brand, and an opportunity to distribute their other brands into Australia, was always going to be a better call.
I’d always taken a British take on ‘appropriate buyers for CUB’, on the basis that Heineken (formerly Scottish & Newcastle) owned the EU rights. Obviously, that would’ve been a good fit. But I’d forgotten the fact that the USA is the world’s largest beer market, that Foster’s is a popular import brand in the USA (“throw another shrimp on the barbie”, etc), and that Miller owned the US rights to the brand.
Meanwhile, SABMiller – which, like Kraft Foods, is part-owned and heavily cash-backed by Altria (= Phillip Morris) in a desperate attempt to stop all their shareholders’ money going to compensate lung cancer victims – has fallen way behind Anheuser-Busch Inbev in the “being a serious global brewer” stakes.
A leading position in a mature but profitable beer market (yes, oddly enough, selling beer to Australians is popular. See: selling crack in Baltimore; selling expensive houses in Mayfair) is nice from a cash-generation point of view. And for some utterly mystifying reason Foster’s is a much-loved beer brand everywhere except Australia, and as brand promotion becomes global it’s becoming important to have the rights to your most important assets, rather than having them owned by some comedy convict jokers [*].
So if the news is true, then it’s a good call on SABMiller’s part, as well as a bloody relief to Fosters Group (who’ll presumably have to rename themselves to ‘Australian Wine Company’ or a made-up name like Geadeo or something). And some kind of deal with Heineken to sort out the global rights would probably also be sensible.
And no, none of my alcoholic drinks market wisdom would have made the slightest difference to share-tippery at any point ever. If you want to make money on markets by thinking you know more than people about fundamentals, horse-racing is still a better bet. Stock analysts are still voodoo-merchants; my skills are only worthwhile if you actually want advice on what to do if you’re trying to market grog.
[*] dear the Australian Department of Immigration and Citizenship: I don’t believe that all Australian businessmen are comedy convict jokers. As the owner of an official certificate of being an Australian Businessman, I take Australian business very seriously. And mentioning Alan Bond and John Elliott at this point would be deeply unfair, and the fact that Mr Elliott used to own CUB isn’t even slightly relevant.