Head for the hops gives Kiwi a market foothold

It may not be our favourite brew but Foster's can thank a New Zealander for making it a fair-dinkum drop around the world, writes DITA DE BONI

In the bold, brash and entirely masculine world of big liquor, Ted Kunkel, president and chief executive of Australian-based Foster's Group, is something of a surprise.

Although he sports a hint of the booze baron pelvic swagger, he is a different kettle of fish to his closest rival, Lion Nathan's acerbic chief executive, Gordon Cairns.

Maybe it's just that as the overseer of a $A3 billion ($3.7 billion) alcohol empire, Mr Kunkel has nothing much to explain to anyone except his investors anymore. Not a bad position, one might say, for a former Auckland boy who stubbornly worked his way up from a relatively lowly assistant brewer with the company in 1968.

Mr Kunkel - whose leadership is credited with lifting Foster's from the brink of financial ruin 10 years ago to $A427.8 million in profits in the last financial year - now takes home a healthy $A2.3 million paypacket and has several million more in share options.

He dismisses any surprise that a New Zealander could make it so big in an iconic Australian liquor company.

"I don't think too much about that. I think you do two things in life: you take the jobs that are offered to you and if you do them well someone offers you another job, then you climb up the tree. The second thing is ... you can probably say there were turning points where I was fortunate enough to be the right person, the right time, the right training.

"Luck has a little bit to do with it too ... but like a famous golfer once said, the harder I practise the luckier I get."

When Mr Kunkel became chief executive of Foster's in 1992, the company was technically insolvent. The conglomerate - which was involved in a vast mix of businesses, as was the fashion of the time - was restructured to concentrate on beer, wine and leisure activities. Its market capitalisation has since grown from $A3 billion to $A11 billion.

The former Selwyn College head prefect now steers a company employing 15,000 people in breweries, wineries and hotels in Asia-Pacific, North America and Europe. He even insists the company's Chinese operation is close to making a profit.

The company's namesake brew, Foster's, first brewed in Melbourne by the Foster brothers in 1888, has experienced international growth of more than 60 per cent since 1994 and sells more than 115 million cases a year in markets smitten with things Australian - which does not seem to include New Zealand just yet.

Mr Kunkel describes these Ocker brand values as "quality, clean and green, sun, beaches, good times, and God forbid you take yourself too seriously".

And God forbid you should put anything, including your wife, before your love of beer if the latest Foster's ads are anything to go by. "We try and be sensible and responsible, but we want our ads to be fun," he insists.

To the notion of the beer's ho-hum performance in New Zealand, Mr Kunkel says it is not a question of transtasman rivalry. Foster's "has never been a huge beer in Australia, either".

Its international appeal began back in the 1960s, when a group of people were trying to decide which beer to export, he says. It was perceived that Victoria Bitter would confuse British consumers, so Foster's got the nod.

VB and Crown are nevertheless good sellers in Britain. And like all liquor conglomerates in the world today, Foster's is looking to expand its wine offering to maintain growth.

The purchase of direct-selling wine channels through its wine arm Beringer Blass (such as Cardmember Wines in New Zealand), as well as wineries and vineyards, has assumed great importance.

The company purchased a 50 per cent holding in the Japanese wine club Wine Buzz KK last year with an option to buy the remainder before 2004.

It also bought leading US wine direct marketer Windsor Vineyards for $50 million, and a quarter holding of listed Australian wine retailer, Wine Planet. The company boasts one million wine club customers, including 50,000 in New Zealand.

In New Zealand, Foster's sniffed at Montana briefly before turning its attention to Matua Valley Wines, bought in stages off the Waimauku-based Spence brothers for $11.2 million. The group continues to look for further NZ wine assets.

Foster's interest in Montana sparked the stockmarket stoush between Lion Nathan and Allied Domecq. But there are no regrets about abandoning the purchase.

"We didn't look at Montana for long. Our offer wasn't acceptable to the board and we moved on. At the end of the day you have to get value for your shareholders and you have to have discipline and buy at a level that you can perceive will bring you value."

"We would not have paid" Allied Domecq's offer of $4.80 a share for Montana, he says, laughing at the thought.

While Mr Kunkel will not be drawn on the actions of Australasian rival Lion Nathan in the Montana scrap, he says Gordon Cairns is a great competitor in the Australian market. He then follows his praise with the wry observation that Lion Nathan, which once criticised Foster's for "taking its eye off the ball" when it expanded into wine and hotels, has since followed suit on all counts.

Mr Kunkel is confident Foster's can provide a viable liquor play alternative in the market, despite facing a well stitched-up distribution landscape. "We can bundle our offerings together and approach New Zealand from the point of view of a premium branded beverage company.

"Why wouldn't retailers want that option?"

Certainly investors have warmed to Foster's increasingly varied exposure. The company's share price, which dipped below a critical support level of $A4.03 late last year, has rocketed on the back of the company's $A2.9 billion acquisition of California's Beringer Wine, and currently hovers around $A5.40.

Overall, the golf playing chief executive (the one thing he will confess to enjoying in his spare time) says the key to his role is strategy and, "to an extent, trivia".

"Not really trivia, but anything that will positively position the company in the eyes of the investor community. If we look back to the 80s, we learn that it takes 10 minutes to lose your reputation in the eyes of your investors and can take 10 years to regain your reputation. That's all about being frank, open, honest and taking investors on the journey. Unless you've got the confidence of your investors, it will be an uphill battle."