THE prospect of further cost savings at the Australian operations of Constellation Wines emerged yesterday after the US beverages giant warned that weaker sales in two of its biggest regional markets would force it to cut 5 per cent of its 9000-strong global workforce.
The drop-off in demand for wine in Europe and Australia over the key Christmas and new year periods has crunched Constellation's earnings just as it expects to take a $US430 million ($610 million) hit in regard to impairment charges on its international businesses in its forthcoming fourth quarter results.
Constellation, which owns the brands Hardys, Houghton, Banrock Station and Moondah Brook, disclosed in a filing to the US market this week that because of the one-off charge the group would make a full-year loss for its 2009 financial year. It will release its figures on April 9.
But the pressures on the final quarter of what has been an already tough year have increased as a consequence of poor sales in Australia and Europe, in particular Britain, which is also a significant export market for Constellation's South Australian-based wine division.
Demand in Britain fell as a result of the weak economy that, in turn, prompted intense competition among retailers and price discounting that Constellation refused to take part in.
The chief executive, Rob Sands, said: "While we have already begun to take actions in the UK to align the cost structure with the realities of the marketplace, we believe it is appropriate to implement additional cost reductions not only [there] but across our global businesses."
He estimated the cuts would lead to another 450 jobs going worldwide, details of which would be spelt out next month.
The decision to cull staff and find further savings has yet to be assessed by the company's Australian management, which is already several months into a cost-cutting plan that would trim a fifth of its workforce.
Three hundred and fifty jobs - including 190 in winemaking and packaging and 130 in growing - disappear either through the sale of three wineries, 23 vineyards and the axing of unwanted low-margin brands.
However, the company is hopeful it will not lose any more staff than it originally planned.
"Following the [latest] announcement, we will continue to look at ways of further reducing our cost structure," a spokeswoman said yesterday "It is not anticipated that the overall reduction in positions will exceed that signalled in August last year."
Nonetheless, the company is finding it tough to cut its cost base as quickly as planned with the worsening economy making it harder to find buyers for the operations it is looking to sell.
It has offloaded the Mount Barker winery in Western Australia to West Cape Howe Wines within the past few weeks.
