Foster’s split scheduled for May

18 February, 2011

The long-expected demerger of the wine and beer businesses of Australia’s Foster’s Group will be completed by the end of May.?Following the demerger, the Treasury Wine Estates division will become a separate listed entity from the beer business, which will be called Foster’s, on the Australian stock exchange. The move will incur one-off costs of A$151 million and annual operating and corporate costs estimated at A$21.6 million.?The boards of Treasury and the beer division are reviewing the standalone cost base of each business, and expect the savings made from the demerger to offset the additional operating costs within two years.?Foster’s Group chief executive Ian Johnston said the company had saved A$100 million through a strategic review of its wine business, which led to the departure of three senior executives in its European business last October.

“While this has been completed, the task of optimising the cost bases of the businesses will continue,” Johnston said.?Treasury will seek more savings in winemaking and vineyard operations, closer control of marketing budgets and a reduction in “global administrative and selling costs”.?A spokeswoman for UK-based Treasury Wine Estates EMEA said it was not expecting any effect on jobs from the demerger. “It’s not really going to have any impact as we’ve already been through the review and have the new structures in place,”she said.?The new beer business will aim for efficiency savings in the supply chain and new IT systems but speculation persists that it will be sold after the demerger, with SAB Miller tipped as favourite to acquire it.?Johnston added: “The demerger recognises the different characteristics of, and industry dynamics now faced by, each business.?“Foster’s and Treasury, supported by separate boards and management teams, will be able to focus solely on their own business and strategic objectives, providing greater flexibility to respond to challenges and pursue opportunities.

“We expect this will lead to improved

performance by the businesses over time.”?Peter Jackson will remain Treasury’s managing director for EMEA. Treasury will be the second-biggest wine producer in the world and the second-largest supplier of Australian wine to the UK market, with brands including Penfolds, Wolf Blass and Lindeman’s and total wine sales just short of 5 million cases.

Foster’s is to set up a new company, which will operate out of Treasury’s offices in Twickenham with “a handful” of staff,

to handle its premium beer portfolio in the UK.

Its beers will include Crown and VB, which have previously been handled by Treasury, but not Foster’s, as Heineken owns the European rights to the brand.

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