India key to SABMiller's global bid for Foster's beer unit

As the buzz about UK-based SABMiller making an estimated $12-billion bid for Australia’s leading premium branded drinks company Foster’s beer business continues, India, say analysts, holds the key to the bid.

To begin with, SABMiller controls both the brand and brewery of Foster’s beer in the country since it owns the Indian unit here. Such is not the case in SABMiller’s other markets, which could be prompting it to bid for the beer business in the hope of controlling the Foster’s brand in more markets than one.

Foster’s is the third-largest mild beer brand in the country after Kingfisher and Royal Challenge. It has a segment share of 13 per cent compared to Royal Challenge’s 15 per cent and Kingfisher’s 66 per cent shares, say industry experts. With a greater handle on the brand and business globally, company sources reckon the Indian subsidiary can devote more time to it without having to worry who the owners are internationally.

Foster’s beer is produced out of SABMiller’s 11 units in India. This is in stark contrast to the scenario over four years ago, that is, prior to its acquisition in 2006, when Foster’s was brewed out of a single unit in Aurangabad, Maharashtra. Its availability, too, was limited to Maharashtra then, says a company spokesperson. Following the acquisition, however, Foster’s was rolled out across markets, he says. “It is now available nationally,” he adds.

But even as the buzz about SABMiller making the bid for the Foster’s beer business gets louder, the UK-headquartered company continues to deny any such move. Nigel Fairbrass, head of media relations at SABMiller Plc, says, “This is all in the realm of media speculation. We have not issued any such statement expressing our intent to do so.”

SABMiller, however, is reportedly considering the option of making a bid for the business following Foster’s announcement recently that it was splitting its loss-making wine unit from the cash-rich beer business — a strategy that had cost it dearly since it was first implemented over a decade ago. Foster’s recently wrote down its wine unit by over $1 billion to deal with mounting losses on account of weak demand in the US and Europe — markets where it exports its wine products.

The demerger, said Foster’s chief executive Ian Johnston on May 27, would pave the way for the two companies to be listed on the Australian Stock Exchange.

Though Johnston, incidentally, had played down speculation of a possible bid for the cash-rich beer business of Foster’s, he had at the same time hinted that he was open to any such offer in the future.