Foster’s lacked innovation: CCA boss

Foster’s decision to sell to a foreign buyer was the result of a lack of innovation, according to Coca-Cola Amatil’s (CCA) chief executive.

But that doesn’t mean the company won’t eventually cash in on Foster’s decision to sell, Terry Davis said.

Davis made the comments at the American Chamber of Commerce in Australia luncheon attendees yesterday, saying the takeover of Foster’s by London-based SABMiller will mean 90 per cent of the beer consumed in Australia will be foreign-owned.

Combined with the global financial crisis (GFC), proposed carbon tax and other factors, he said, Australians are losing confidence in our economic stability and being easily swayed by sales and promotions from retailers.

He also claimed the Australian government does not fully gage the impact of the high Australian dollar on the economy.

Davis said when he recently travelled overseas he experienced something he had not before: people discussing “sovereign risk” in Australia.

He is adamant CCA will not follow in Foster’s footsteps and sell to foreign buyers, because the company remains committed to innovation.

He pointed to the growth in products like cider and the decline of beer year on year as proof that innovation is rewarded in the sector.

Foster’s agreed to the takeover by SABMiller last month, after a lengthy process where it said the London-based company was offering less than it was worth.

The sale will leave Coopers as the largest beer manufacturer in Australia.

While CCA is critical of Foster’s decision to send its ownership offshore, it has not ruled out its own possible benefits from the sale.

It said there is a high chance it would acquire the spirits, ready-to-drink (RTD) spirits and non-alcoholic brands of Foster’s, but Davis warned it would be a while off.

"First of all, it (the sale of Foster’s to SABMiller) has to be approved by Foster’s shareholders," he told reporters after the luncheon.

"And then the second component of that is we get access to due diligence.

"We’ll make the decision after that, but assuming that that due diligence is fine and there’s no reason why it wouldn’t be, we’d have a fairly high expectation that we would (buy the assets)."

Davis said CCA is already present and successful in the mixed-drink business, with Jim Beam and Cola, and he also pointed out its strong distribution platform that could generate improvement in the Foster’s non-beer assets.

"We’ve got the most effective sales force in the country,” he said.

“We call on every licensed premise in Australia," he said.

"We think that we have very strong customer relationships, so we hope to leverage all of those."

He said there had been suggestions that the Foster’s assets of interest to CCA could be worth around $200 million but a figure would not be known until it could see Foster’s accounts as part of the due diligence process.

SABMiller and CCA will end their joint venture in Pacific Beverages, which makes Bluetongue beers, with SABMiller buying out CCA on its half.

Under a non-compete provision, CCA will be restrained from selling, distributing or manufacturing beer in Australia for two years.

"But what we do know is that international brewers will be looking for alternative forms of distribution, and we think that we offer that alternative form of distribution" Davis said.

He did point out that the non-compete clause did not prevent CCA from doing anything in New Zealand and said the distribution of brands would be the first step in re-entering the beer market, but the eventual aim would be to make the product locally.

 

 

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