Australia: Coca-Cola Amatil plans beer expansion

Australian drinks company Coca-Cola Amatil Ltd. said on Wednesday it expected profit growth to improve this year and outlined plans to reduce its reliance on soft drinks and expand in beer, boosting its shares, according to Reuters, April 18.

Announcing results of a strategic review, Coca-Cola Amatil said it will expand its non-cola soft drinks and speed its entry into the highly profitable Australian beer market.

The company said it will fast track its joint venture with world No. 2 brewer SABMiller Plc. They face tough competition in the Australian beer market, which is dominated by Fosters Group Ltd. and Lion Nathan Ltd.

"Foster's and Lion Nathan aren't going to give up market share without a fight, but they need to realise the dynamics have changed and the market is no longer a duopoly," said Shaw Stockbroking analyst Scott Marshall.

Coca-Cola Amatil entered the joint venture with SABMiller last year to distribute premium beer brands Peroni, Miller Genuine Draft and Pilsner Urquell.

It will consider building a brewery in Australia under the joint venture, manufacture some imported brands locally, and develop new domestic brands. The capital outlay will be A$100-A$125 million for its 50 percent share of the venture.

"The Australian beer market is one of the most profitable in the world, generating earnings in excess of A$1 billion and we are aiming to become the clear No. 3 player in the Australian beer market by the end of 2012," Davis said.

The group also said it would continue to focus on recovering an estimated 5-6 percent increase in cost of goods sold.

Coca-Cola Amatil's shares have surged as much as 18 percent since it announced the review in February.