When a company's biggest selling point is cost cutting and cultural change it's a sure sign that there are plenty of large problems.
Foster's isn't pretending that things are all peachy - indeed it readily admits that the wine business particularly its US wine business has serious problems.
There is no point in moving into a denial when the half-yearly results paint a clear picture of a company whose results are again disappointing and appears to be at a loss to find the solution.
Part of this can be blamed on factors outside the management's control - a wine glut, discounting in most parts of the world and the economic hangover from the global financial crisis.
But then this company has brought plenty of this on itself. The new chief executive, Ian Johnston, can blame the past but there is evidence that in some key areas there has been more recent troubles emerging.
The number and range of excuses used by various Foster's management over the past five years is legendary. It had undertaken so many about-turns in strategy that it would make one's head spin.
Six months into the current transformation strategy it has made some inroads into cutting costs - it has closed vineyards, culled wine brands and separated its beer and wine sales force. The idea is to cut $100 million off the cost base over time.
As long as it cuts in the right places a slim down is a fine idea.
But it doesn't address the fundamental issues. The wine business just doesn't make appropriate returns - even without a supply glut and a global financial crisis.
The major shareholders are openly telling the board to demerge or sell wine but directors want to improve the earnings before even considering it.
In the meantime, the company is bleeding shiraz a rate of 3.3 million cases a year.
But the market had anticipated this would be bad.
What scares investors more is if the newest plan to revive the business is as successful as the previous ones, they will be lumbered with the financial hangover a lot longer.
lknight@smh.com.au
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- brewhouse
- Date and time
- February 16, 2010, 4:51PM
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