Foster's Spends Millions to Split Divisions, Keep Wine Assets

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FostersProductsLineup.jpgBy Courtney Cochran

Foster's Group spent nearly a year debating whether to sell off its troubled wine assets - valued at some $4.4 billion - before announcing this week that it will keep its wine division intact but make significant organizational adjustments in the coming years in an effort to cut costs and improve performance. To that end, significant changes new chief Ian Johnston has pledged to enact include separating Foster's beer and wine businesses, cutting some 300 jobs and eliminating 37 brands from the business' troubled Australian portfolio.
Multi-beverage Strategy Under Attack
The announcement - and the company's floundering financial performance - comes on the heels of years of aggressive acquisitions including those of wine giants Beringer and Southcorp.  Analysts speculated as to whether the acquisitions made sound business sense (some went so far as to dub them ego-driven), and Foster's has struggled in the years since to realize value across its disparate wine brands.  Indeed, Johnston lately called the company's multi-beverage strategy "ineffective" - hence the plan to decouple its wine and beer entities - and pointed to significant inefficiencies in the operation of Foster's American wine assets.  Still, Chairman David Crawford underscored that the company does not wish to "leave [value] on the table" by selling at this time - something it would no doubt do if it attempted to unload its wine group in the midst of an economic crisis.  This much we know for sure: With jobs on the line and brands on the chopping block, it's shaping up to be a rocky few years for Foster's.  

And what of the future of this ailing division?  Though only time will tell, I'd put my money on a sale as soon as the economy perks up. 

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