Tax pop likely to erode brewers' windfallXchange
March 19, 2009 Page 1 of 2 Single page view
THE Senate's decision to reject the alcopops tax is bad news for brewers Foster's and Lion Nathan.
Both companies had benefited from increasing beer sales since the alcopops tax was introduced last April, and analysts estimate the earnings of each brewer could fall by between 1 and 5 per cent over the next year.
Beer consumption had been relatively flat before the alcopops tax but had since grown by 3 per cent - and the sale of alcopops had shrunk by up to 30 per cent.
Drinkers are expected to reverse the shift to beer, slowing volume growth for Foster's and Lion Nathan.
A Goldman Sachs JBWere analyst, Ian Abbott, believes it is "far from a killer blow" to the industry, but it does introduce an element of uncertainty into the outlook for the brewers.
The beneficiaries of the Senate's decision include Coca-Cola Amatil, which distributes Jim Beam ready-to-drink spirits, and liquor producers like Independent Liquor, Fortune Brands and Diageo.
Retail prices for alcopops are expected to fall by 20 per cent, encouraging consumers to start buying them again.
Labor refused to go along with Senator Steve Fielding's call for legislation that would have phased out alcohol advertising during sporting events, but a Credit Suisse analyst, Larry Gandler, said if that was to occur, it would be positive for Lion and Foster's. "This is likely to create meaningful cost savings without severely damaging revenue," he said.
He estimated Foster's could save about $26 million a year on marketing, and Lion could save about $16 million.
Foster's shares closed 1c lower at $5.27, and Lion Nathan shares closed 37c lower at $7.73.
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lion nathan limited
