SABMiller is going to need time to turn around the recently-acquired Foster's Group brewing unit in Australia, according to an analyst.

In its full-year trading update earlier today (19 April), the brewer said that sales volumes for Foster's in the three months to the end of March fell by 4% on the corresponding period a year earlier. The decrease, which was greater than Australia's overall beer market, came in the same quarter that Foster's lost the rights to both the Japanese beer brand Asahi and Mexico's Corona in the country.

Speaking to just-drinks today, Gideon Adler from Investec in London said that SABMiller will need to focus on premiumisation to reverse Foster's fortunes in the country, although “it's going to take time to turn it around”.

“They (SABMiller) had a bad start in losing Corona,” said Adler. "That's about US$60m-worth of profit (per year), and that's fairly material.

“They could turn it around if they can regenerate their mainstream brands and lift the pricing, as well as bringing their expertise to the market and focus on their higher growth segments. But, if they're losng a premium brand like Corona, it's going to dilute the offering they've got in their portfolio and it's going to take them longer to get pricing back up in the market.”

Adler said that the brewer, which completed its purchase of Foster's late last year, will look to reposition the legacy Foster's brands away from the mainstream, as well try to leverage its international brands, such as Peroni, Grolsch and MGD. “But, they're coming off a low base, so there's a time lag issue,” he said. “I'm sure they can make Peroni work in the market, but it'll take time.”

Adler also warned that the Foster's buy was not developing along the same lines as previous SABMiller purchases. “Their M&A legacy is either to buy out local assets in markets like South America and improve them thanks to their global expertise, or buy a mature market asset and leverage it into other markets,” he said. “This deal now sits somewhere between the two: It's not really a developing market and they've bought a fairly developed asset. 

“It's a very different challenge,” he warned, “and possibly a tougher task than they might have anticipated.”