Oversupply, weak consumer spending and unfavourable currency rates mean that Foster’s Group wine business is still performing below expectations, the Australian firm has warned.
Foster’s expects to take a hit of between AUS$80m (US$71m) and $90m on its half-year wine earnings due to currency, the group said in a trading update today (18 December).
Overall wine sales and earnings in the six months to the end of December will be below expectation, Foster’s warned.
The weak performance comes in spite of the group’s efforts to restructure its wine arm, which have included installing a new management team in the Americas and a plan to sell off more than 30 non-core vineyards and brands.
“The new management team in Americas is implementing the new strategy, however prevailing recessionary conditions remain challenging and are resulting in lower volume and net sales revenue,” said Foster’s.
It added that oversupply has hit sales in Australia and New Zealand. Tough conditions on the domestic wine market have overshadowed an in-line performance for the firm’s separate beer business, Carlton & United Breweries.
However, in Europe, challenging conditions in the UK and Ireland have been offset by growth in the Nordic markets and continental Europe.
Australia’s wine industry is facing significant upheaval in the near to medium term.