Price war dents Courage: Drop in profits to pounds 45m offset by improvement at Foster's
Tuesday 15 February 1994
Courage, which is owned by Foster's Brewing of Australia, saw operating profits drop from pounds 54m to pounds 45m in the seasonably favourable six months to 31 December.
That result contrasted with Foster's overall performance, showing an increase in profits from Adollars 157m ( pounds 70.5m) to Adollars 178m. Group profits before tax, including an exceptional credit of Adollars 49m from disposals, rose from Adollars 175m to Adollars 227m.
Nick Bryan, managing director of Courage, said the company lifted its market share in the UK from 19 to 19.2 per cent amid heavy discounting of up to pounds 80 on a 36-gallon barrel of beer.
Courage was not responsible for the beer price war, he said. 'Bass are the main protagonists, and we have had little option but to follow them. We are net winners in terms of volume, but in terms of profit margins I don't think anyone is a winner.'
Courage has had to fight harder than most to maintain its market position, particularly in holding on to beer supply contracts for the 1,900 pubs it had to free from its tie in November 1992 to comply with the controversial Beer Orders.
It sells 300,000 barrels a year to those pubs, against the 1.3 million pushed through the 4,350 pubs in the Inntrepreneur network.
Despite the problems, Courage said it had no plans to close any of its six breweries. 'We need all the capacity. We can produce 7 million barrels a year, and are selling 7.2 million after buying in Holsten, Guinness and Carlsberg,' Mr Bryan said.
Ted Kunkel, chief executive of Foster's, added: 'The company was very conscious of the complex issues facing Courage and the UK industry in general.
''Operationally, Courage is implementing the programmes that will improve its competitive position. That includes investment in our key brands and efficiencies in all parts of the business.'
Marketing expenditure was raised by pounds 9m in the first half, and more money was invested to increase the strength of Foster's lager and to utilise the draught-flow system in cans of John Smith's bitter.
Brewing results in Canada were also lower. The fall in Molson Breweries' contribution from Adollars 70m to Adollars 50m largely reflected a reduction in Foster's shareholding from 50 per cent to 40 per cent.
Mr Kunkel added: 'The Molson market share was trending up at the end of the period, but the environment has become increasingly competitive with US brewers having increased access, and we are seeing the development of a popular-sized segment in Canada for the first time.'
Carlton & United Breweries in Australia did better, improving profits from Adollars 102m to Adollars 129m. Its share of the Australian market in December was above 54 per cent.
Overall, Foster's has reduced its gearing over the six months from 106 to 89 per cent - equating to a Adollars 290m reduction in debt. The interim dividend is held at 2.75c.
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