Last
week the world of wine changed forever. Whether for better or worse is
yet to be seen. Foster’s finally snared Southcorp and French company
Pernod Ricard, in conjunction with US Fortune Brands, and took over the
UK drinks behemoth Allied Domecq. But impressive though these deals
might sound, they could just be the start of something bigger – a
couple of battles in the war, not the war itself.

Is
Fostercorp now a worthy morsel for the world’s largest drinks company
Diageo? Foster’s CEO Trevor O’Hoy thinks not, saying: “I don’t spend
any of my time thinking about those sorts of things. What I will say is
we have a very large integration exercise in front of us. It’s going to
be a one or two year exercise and in that time it’s a very difficult
period for anyone to be taking over. Also we have leveraged this deal
with 100% debt. Anybody looking at us would have to take those points
into consideration.”

Sure they will, and Diageo can do that
easily enough. Disregarding possible Diageo interest, there’s
speculation that O’Hoy will offload some Fostercorp assets. One twist
could be selling the Rosemount brand back to the Oatley family. Bob
Oatley did say back in January that he intends to reinvest back into
Foster’s. What better way than by getting his beloved Rosemount brand
back into private ownership?

Other parts of the
Foster’s/Oatley deal involved Sandy Oatley becoming “Brand Champion”
for Rosemount. Why? It’s not as if he needs a job.There’s also the
opportunity to lease back 170 acres of prime vineyard and a
distribution agreement if he develops a brand sometime in the future.
Now 76 and among Australia’s ten richest people, it’s unlikely Bob
Oatley needs to plan for his future, so perhaps it’s more about
succession planning.

For more information on the business of wine: thekeyreport.com.au.

Peter Fray

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