Australia & India & Vietnam: Australia's Foster's may soon sell India, Vietnam breweries

Australia's Foster's Group Ltd. is expected to soon offload breweries in India and Vietnam, and license out Asian rights to its flagship beer, as part of its international brewing revamp, Reuters communicated July 03.

A sale of the assets and Foster's lager licensing rights could bring in around AU$150 million (US$111 million), some analysts said, as the company allows larger international brewers with greater economies of scale to drive supply of the brand in Asia. The company has sold its Foster's beer brand in Europe to Scottish & Newcastle Plc. and its loss-making China brewery to Japan's Suntory Ltd., leaving the remaining Asian breweries next to be sold.

"It is highly likely as long as they can find a buyer. CommSec analyst Pierre Grobler said. "Our view is that it makes sense for Foster's to take more of an intellectual property approach where they manage the brand and someone else distributes and manufactures it."

Foster's has invested more than AU$100 million in the Vietnam and India breweries since the late 1990s.

Potential bidders for the Asian assets include Singapore-based Asia Pacific Breweries Ltd., 42.5 percent owned by Dutch brewer Heineken and 38 percent by Singapore conglomerate Fraser & Neave.

SABMiller Plc., which has plans to expand in India and Vietnam, is also a likely contender, while Scottish & Newcastle, which has a stake of around 40 percent in India's United Breweries Ltd., is regarded as less likely.

A Foster's spokesman declined to comment on the future of the Asian breweries, but said India was profitable and Vietnam at break-even and moving towards a small profit.

"These businesses are performing well and are improving all the time," he said. "These are national brewers with Foster's lager representing an important part of their business, and with distribution networks throughout Vietnam and India."

The exited China brewery mainly made local-branded beer for Shanghai, with Foster's beer only a small part of total output.

Foster's entered India in 1997 when it took a 51 percent stake in a venture to build a brewery in Aurangabad.

Production started in 1998 and the company later moved to full-ownership of the 350,000 hectolitre capacity brewery, whose main beer brands are Foster's and Amberro.

In 1997 it paid AU$78 million for breweries in Vietnam's port city of Danang and in Tien Giang province, outside Ho Chi Minh City. The company, which makes local brand Biere Larue, has expanded its capacity in Vietnam to 1.5 million hectolitres.

Analysts said its profitable breweries in Fiji and Samoa were of less interest to other brewers and may not be sold.

The overhaul is part of Foster's moves to improve returns from its small international beer division, dwarfed by its domestic beer unit and international wine business.

Foster's overseas brewing division made earnings before interest, tax and amortisation (EBITA) of AU$44.4 million in the year to June 30 last year, compared to AU$577 million of earnings from its domestic Australian beer division.

F.W. Holst & Co. analyst David Spry said Foster's could afford to be patient in selling the remaining Asian breweries.

"They are in markets that are growth markets and they are on the up," he said. "They are not draining cashflow or anything like that to any large extent, so there is no rush."

Foster's shares were up 0.7 percent to AU$5.51 on Monday in a flat broader market.

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