Based on a report by Macquarie Research's Andy Kovacs, Australian imports, particularly Foster's Group, has underperformed in the tough U.S. market so far in the second half of 2008.
U.S. WINE MARKET. Andy remarked that the U.S. wine market is holding up under pressure but there is some disparity within, namely between states. In January to April, market wine volumes and price both grew at approximately 3%. However, the following inconsistencies remain: California is particularly soft; consumers are switching to wine clubs; low to mid-range wines are squeezed; and imports, particularly Australian, are declining.
CHALLENGES FOR FOSTER'S. Foster's, according to the note, is falling in the underperforming category. Gomberg Fredrikson data suggests that Foster's wholesaler shipment volume is down -36% for the third quarter in 2008, mainly due to a first quarter buy-up of blush wine.
Nielsen also indicates declining consumer demand, with Foster's volume and value down -5% and -1%, respectively, for January through April, compared to the total market's volume and sales growth of 2% and 6%.
Andy notes that the Australian wine segment is losing appeal in the U.S., with trade feedback suggesting the category has matured. Australian export data supports this view, with third quarter volumes to the US down -30%. Macquarie's research also suggests that another cause for concern is that many of Foster's brands "are showing poor 'health.'" Nielsen data shows that two-thirds of Foster's top 10 brands are declining (volume and value) to April 2008.
Wine & Spirits Daily