Wine troubles behind us, says Foster's chief

"There is no doubt that in recent years we have suffered from a quite serious adverse wine cycle," he told analysts during the second half of a two-day strategy briefing in Sydney. "Exchange rates have added to that, and this contributes to a bottom-of-the-cycle valuation for our wine business."

Foster's rejected an indicative offer last month from private equiteers Cerberus Capital of between $2.3 billion and $2.7bn for TWE, saying it undervalued the business. TWE has a book value of $3.1bn in Foster's accounts.

TWE's executive team yesterday laid out their strategy for boosting returns from the business, which has acted as a brake on earnings for much of its 14-year history.TWE Americas managing director Stephen Brauer said the "big opportunity" in the US market was in the $US8-plus ($8.18-plus) segment, accounting for 39 per cent of wine sales by volume, but 57 per cent by value.

Accordingly, the company was concentrating new product innovation above the $US8 price-point, while seeking to migrate customers from cheaper TWE brands on to slightly more expensive products.

TWE draws 49 per cent of earnings before interest and tax from the Americas, primarily the US and Canada, compared with 34 per cent from Australia.

Mr Brauer warned analysts that the new strategy meant Foster's market share would appear to be going backwards in coming months, as measured by market researcher Nielsen.

"We're moving to the luxury category, with a focus on profitable growth . . . there has been some short-term pain as we make that transition," he said.

Meanwhile Europe, Middle East and Asia boss Peter Jackson said TWE would reduce its reliance on Britain, Australia's largest wine export market after the US, by boosting its presence in the continental European market.

In addition, TWE would kick back against the discounting trend that had slashed returns on British wine sales, pledging to pass on the impact of tax and excise increases scheduled for coming months and dumping low-margin sales. No further details were released on the company's plans to demerge TWE from its CUB beer division, a proposal still purportedly under consideration by the board, but widely expected to proceed.