Foster's to split wine and beer operations

Foster’s has confirmed it is to separate its wine and beer divisions.

The demerger is scheduled to complete this May and will cost the business around $151 million to organise. It will create two listed companies: Treasury Wine Estates and Foster’s.

Foster’s chief executive Ian Johnston said: “The demerger recognises the different business characteristics of, and industry dynamics now faced by, each business.

“Following the demerger, Foster’s and Treasury Wine Estates, 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.

“The demerger will create a leading international wine company with a portfolio of luxury, premium and commercial wines, while Foster’s will continue as Australia’s leading brewer.”

Foster’s is expected to attract interest from rival brewers following the merger, with SABMiller touted as a likely suitor. Treasury Wine Estates will be the second largest wine company in the world after Constellation (soon to be renamed Accolade), with a brand line-up including Wolf Blass, Penfolds and Lindemans.

The wine division performed solidly in the last six months of 2010, according to Foster’s latest results, unveiled today.

“Improved route to market capabilities, better product and channel mix and cost reduction initiatives drove improving performance for Treasury Wine Estates,” the company said.

“Wine earnings pre interest and tax increased by 25.2% on a constant currency basis, the second consecutive half of 20% plus growth.”

It added: “Excluding the impact of exchange rates, profitability in the UK and Ireland is ahead of the prior year and performance remains solid in the Nordics and Continental Europe.”