Australia Beer Market May Shrink as Consumer Tastes Change, Foster's Says

Foster’s Group Ltd., Australia’s biggest brewer, said it has stabilized its share of domestic beer sales at about 50 percent in a market that may decline as much as 5 percent in the second half of 2010.

Shifting consumer tastes to pre-mixed spirit drinks and cheaper liquors are eroding beer sales, John Pollaers, head of the Carlton & United Breweries unit, said in Sydney today. New Foster’s products such as Fat Yak have helped limit the decline as traditional brands such as Victoria Bitter, the nation’s top brew, continue to lose customers, he said.

Victoria Bitter, which generates about A$845 million ($830 million) of annual sales through retail outlets, is losing favor with younger drinkers seeking sweeter and cheaper alternatives. Next month Foster’s will start selling three new labels, including Fusion Black, a sweeter beer, as it seeks to stem the customer switch.

“Our portfolio is not adequately positioned,” Pollaers said. “We have moved in the last few months to accelerate our development.”

Foster’s lost 1 percentage point of Australian beer market share in the 12 months ended June. About half of that was because of the decline in traditional beers, Pollaers said. Those account for 41 percent of beer sold in the nation, down from 56 percent five years ago, according to Foster’s.

While Foster’s has 65 percent of the traditional beer market and 49 percent of low-alcohol beers, both segments are declining as drinkers switch to brews such as the low- carbohydrate Hahn Super Dry made by second-ranked Lion Nathan Ltd., a unit of Tokyo-based Kirin Holdings Co.

Rum, Cola

Foster’s, based in Melbourne, is also losing out to pre- mixed drinks such as the Bundaberg rum and cola made by Diageo Plc, the world’s biggest liquor maker.

Foster’s rose 0.7 percent to A$6.10 at the 4:10 p.m. close of trading in Sydney. The stock has gained 11 percent this year compared with a 5.1 percent decline by the benchmark S&P/ASX 200 index.

The company is making more changes to win back customers after Chief Executive Officer Ian Johnston unwound an earlier integration strategy for its sales force, creating separate teams for beer and wine. Sales territories have been redrawn and representatives are spending more time with retailers, restaurants and pub owners, Pollaers said.

Foster’s is holding a two-day investor briefing as it proceeds with plans to split its beer and wine assets into separate companies next year.

To contact the reporter on this story: Robert Fenner in Sydney at rfenner@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4bloomberg.net

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