Coca-Cola Amatil has inherited a beer and spirits business in Fiji and Samoa from Foster's with flat revenue and sliding profitability, but will invest in the niche beverage group to unlock the growth potential around the export of local beer and rum to new markets.
John Murphy, Coca-Cola Amatil's managing director of licensed beverages and recently appointed chairman of Foster's Group Pacific, has written to shareholders in the South Pacific beer and spirits company saying the business outlook for 2013 would largely be determined by continued growth in the Fiji economy as well as further recovery in the global economy.
"A main focus for 2013 and beyond will be to unlock the growth potential of the local and export markets for beer and rum via an increased capital investment program," Mr Murphy said in the company's annual report.
"This will provide the essential plant and equipment upgrades needed to improve our business efficiencies and capability to enhance our ability to compete in export markets."
Following last year's $12.3 billion acquisition of iconic Australian brewer Foster's by SABMiller, Coca-Cola Amatil picked up Foster's assets in the South Pacific, a Fiji brewer that also makes and distributes a range of spirits.
Under the deal Coca-Cola Amatil bought out Foster's 89.6 per cent stake in Foster's Group Pacific for $58 million. The company remains listed on the South Pacific Stock Exchange and has a sprinkling of minority shareholders on its register. It was a good fit for Coca-Cola Amatil which also holds the Coca-Cola bottling franchise in Fiji. The company plans to use the smaller brewer as a base to launch its return to brewing in Australia after it serves out a two-year non-compete clause agreed to with SABMiller.
But in the short term and in need of working capital to ramp up its infrastructure, the Fiji beer business is struggling. The annual report released this week shows sales revenue for the group rose marginally from F$72 million to F$74.56 million while net profit slumped by nearly a third from F$6.9 million to F$4.3 million.
Sales volumes for the 2012 financial year were up 1.5 per cent to 3.352 million nine-litre cases.
Fiji beer sales volumes were up 2.5 per cent to 1.969 million nine-litre cases, but spirits and RTDs showed much stronger growth, up 9.7 per cent to 0.237 million nine-litre cases.
But the bottom line was hurt by a 13.3 per cent lift in cost of sales to F$35.523 million due mainly to price increases in raw materials.
Selling, marketing and distribution costs were up 6.7 per cent and the company was forced to book a one-off charge of F$1.026 million due to bottles and crate fraud in Samoa.
Coca-Cola Amatil plans to back up its proposed acquisition of Foster's beer and spirits business in Fiji with fresh investment and marketing activity to transform Fiji Beer and Bounty Rum into beverage export winners.