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Australia's beer market is expected to remain tough in the short-term, according to the head of Foster's Group's beer arm.

The country's beer sector shrank by 1% in volume for the six months to the end of June and the situation is unlikely to improve soon, said the finance director of Carlton & United Breweries (CUB), Stephen Matthews. "In the short-term, we do expect subdued volumes," he told analysts at a two-day Foster's investor event at the end of last week.

However, CUB believes the lower consumer demand is due to unusual circumstances.

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"In the last 18 months, the beer category has benefited from a number of one-off factors including the ready-to-drink [beverages] tax, stimulus payments and interest rate decreases," said CUB's managing director, John Pollaers. "We believe that the beer market is fundamentally strong," he said.

CUB's management has given itself one year to halt a five-year run on the firm's market share. It remains the largest brewer in the country with a 50% share of market volume, but has steadily leaked 5% in share over the last five years.

"Our portfolio is not adequately positioned and aligned to growth categories," said Pollaers. Australian consumers have shifted to lighter styles of beer and CUB, with its flagship Victoria Bitter brand, has struggled to keep up. It is also facing stronger competition from SABMiller and Kirin Holdings. CUB last week announced that it would launch three new beers to help it stabilise market share and build momentum.

Its level of success could influence the amount of interest and potential price tag in a possible buyout deal next year. Foster's Group said it was on-track to demerge its wine arm from CUB in the first half of 2011, a move that is widely expected to lead to takeover bids for the beer business. 

For a webcast of the investor days, click here.


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