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Inside Business -

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(generated from captions) communist policy, under Mao See

tonk's leadership, died as a

direct result of the policies

of the Chinese Communist Party,

no cause to celebrate. Just a

quick note on when is a tax not

a tax, carbon tax, the

fixed-price period at the

beginning of the original Rudd

CPRS was one year. Over the

course of negotiations between

Penny Wong and Mack farlan from

the Liberal party, it was

extended to two years. The

last interaction that the

Liberal party had was to extend the carbon tax period as a

precursor to an ETS. I mention

that by way of passing. That's

the program. Talk of an early

election on 'Q&A' Monday night,

apparently as the Opposition

sees it they're just one high

saturated fat meal away from Government. Thanks for

watching. I find it hard to

believe there won't be some

event over the next two years

that will cause an election.

Have you thought of one?

would you like to share your

intelligence? Are you going to

hire a hit man, Joe? Well, look, history will tell you

that a bielection is almost

inevitable. Sometime during

the election of the term of

parliament. People keep

sending me pizzas, it may be

me. Closed Captions by CSI

Hello there. Welcome to the

programme. Well, in a week

where the Greens brought

foreign investment back into

the spotlight, one of

Australia's best known brands

is under siege. Fosters is

trying to ignore a takeover bid

from the London based SAB

Miller, but it seems likely the

company is in play. Rumours

abound about other international brewers who could

join the bidding. We'll catch

up with the CEO, John Pollaers.

Also, the Greek Government

passed an austerity package to

prevent default. Will it be enough to keep Greece on the

rails and prevent a wider debt

crisis in Europe? We'll ask Morgan Stanley's Gerard Minack.

And in First Person, bagging

the cash - how one company is

defying the retail gloom.

Every year we've had double

digit growth. Every year for

the last 15 years.

For many years Fosters has

Australian share market, been an underachiever on the

despite being the nation's

dominant brewer. But almost as

soon as the company split the

beer and wine divisions, the

world's second biggest brewer,

SAB Miller, came aknocking

wanting to to about a takeover.

I spoke to the CEO, John

Pollaers, who has been running

the business for 18 months,

about how he plans to secure

the company's future. John

Pollaers, one of the reasons

for the demerger of the beer

and wine business was to

encourage a takeover so no

surprise that you got one. But

you must have been disappointed

and the board, that it came in

as a low-ball offer to begin

with. Alan, I think there was no intention at all in

demerging the company to set it

up for a takeover. That's what

everyone said at the time. They

may have said it, but having

been recruited to support the

separation, it really has been

around bringing the company

back to its fundamental, which

is a focus on beer and we

believe that we can create much

greater value in a focussed

beer business than through any

other mechanism. Right. So, let's talk about the takeover

offer. It's been rejected out

of hand and you are not

engaging with them. Is that

correct? That is correct. Our

focus is fundamentally turning

the business around and making

sure that we realise the full

potential of it. What do you

expect SAB Miller to do? Is

there any suggestion they will

come back, make a higher offer?

I mean, they are unlikely to

bid against themselves aren't they? Ultimately that's a

question for SAB Miller. From

our perspective there has

always been noise around this

company. Why wouldn't there be.

It's a strong company, very

strong market position with a

very strong international

reputation. But, as I said, our

focus is let SAB Miller do what

they need to do. Our focus is

on developing the business. So

you definitely weren't setting it up for sale? Absolutely

not. And your focus is entirely

on running the business for the future? Absolutely doing the

right thing by the business and

shareholders and unlocking the

real potential of the business

that for some time has been

distracted and is now focussed

on rehv building its

position. Your shareholders are

pretty keen on an auction. I'm

not sure that's true. I think

at the end of the day they

recognise that our job is to

maximise value for them. The

best way to maximise value is

to have a well-run company

unlocking the growth potential

and is relevant to consumers.

That's where I think their vote

will be. How will you do that

in a declining... Beer

consumption per capita has been

declining since 1970 and is

still declining. What's the

plan? The beer marketing has

been better performing. For 15

to 20 years it's been flat to

marginal growth. We've had a

tough year. Most Australians

are feeling it tough and beer

consumers. But fundamentally we

see the beer categories

continuing to grow. When you

look at it, there's never been

a more exciting time in beer.

We have fast-growing craft and

international and domestic premium, new style regular

beers. It's almost like

innovation has come to the beer

category. One impact of that is

that it is fragmenting lots of

brands so it is turning into

the wine business where there

are lots of different brands

and perhaps that leads to loss

of market share for the big

players. Well, we still have a

strong 350% share of the

Australian market and an

enviable market share in the

subsegments from craft through

to mainstream beer. I'm not

concerned about fragmentation

insofar as we have to keep

relevant to changing consumer

needs and tastes. Sure that

brings complexity in managing a

larger portfolio, that is the nature. That's what you have to

do, have a larger portfolio of

brands? You have to be more

targeted to the individual

opportunities with consumers. I

don't think that means our

portfolio will grow bigger than

it is today, but it means over

time some brands will go stronger and some we will

replace with new brands as we

create them. You've held market

share, is that at the cost of

margin? No, we've seen an

increase on product going

through on promotion, which is

a function of the economic

cycle in Australia. We've taken

a focussed look at how we

continue to benefit from the

trend of premiumisation in

Australia while making sure at

a value level we're well

covered. Don't you have to run

the company for cash rather

than growth? Fundamentally,

growth is kind of fine if you

can achieve it, but really what

it is about is cashflow. I

don't think any well-run

business looks at one line of

the P and L. We have to be

focussed on top-line growth.

Ultimately that's the measure

of whether you are succeeding

in the market place. As you've

seen for many years, it's had a

very focussed cores focus, SAB

Miller. Our focus is on bottom

line and you will find few

companies with the cash

generation we've produced over the years and continue to do.

So you have to be focussed on

all three lines. What is the

free cashflow? I won't disclose

numbers but our cashflow

conversion has been around 100%

for a long time. I think you

have the biggest profit margin

of any brewer in the world. If

not number one we'd be right up

there. In the context of the takeover offer you've received,

are you talking to shareholders

now about what you will now about what you will do for

the future and in particular

are you telling them what you

expect to be doing by way of

dividend? I laid out when I

first arrived here the plan for

turning around the business.

Effectively year one was all

about being very focussed on execution, building the capability in the company and

getting the positioning of the

brands right. We have been

talking to shareholders, again through that period about the

second phase, which is all

about continuing that focus on

execution, making sure we get

cost out, reinvest in the

brands and extend our

leadership position. So there

are no surprises in that. What's the difference between phase one and

two? Phase one was all about

getting the capability right.

We've replaced nearly 70% of

our senior sales and leadership

teams. We have clear around the

kinds of standards and

execution at outlet level,

changed our trading terms to

make them performance based and

the fundamental position of our

brands is right. And you gave

the retailers a punch in the

nose too? We stood up for our

brand. We said if we have a

long history with brands with a

heritage, we have to protect

them and do the right thing. To

your question, phase two has

been clear - get the investment

rates up in the brands, start

to expand the levels of

innovation around them, get the

category strategies right and

get the cost out to fund

that. Obvious John Elliah was

going to Fosterise the world.

Are you thinking of making

overseas expansions within the

beer business? I think our

focus is on our core business,

which is beer. What people

probably don't understand is we

have strong distribution in 45

countries around the world and

an opportunity for good organic

growth. I expect that business

to make a bigger contribution

to the overall performance. But

it will be organic and

focussing on the fundamentals

of execution and the

fundamentals in those

relationships. No

acquisitions. No. Which are

your most important brands?

Corona is the biggest selling international brand in the

market here. Are you going to

try and grow that more than it

has grown in recent

years? We've got 7 of the top

10 brands and three of the fast

est four growing brands. Uf you

having to a long way away from VB. It's a much-loved

brand. The growth has been brand. The growth has been in

the craft and international

brands. Not quite so. Carlton

has grown consistently for 10

years. It has been the fastest

growing regular beer brand and

in volume terms outstrips those

by a long way. International

premium is important. Corona is

a very important brand. We've

been distributing it for 20

years and continue to get great

growth. The craft business, Fat

Yak and Matilda Bay is the

fastest growing brands. I liken

the portfolio to a family. You

have to find enough love to

share between all of the kids

and make sure they are grow

without neglecting any one of

them. For us there is about

seven brands we would really

give that attention to. Thank you for joining us John

Pollaers. Thank you. While the

wrangling in Canberra continues

over how to price carbon, a new

battle is emerging on power

use. Victoria is rolling out

Smart Meter, but it has been plagued by customer complaints

about incorrect readings,

forcing the new State

Government to launch an inquiry. As James Panichi

reports, Australia's biggest

energy users are also worried

they could face a looming bill

shock. Just a few hours east

of Melbourne is this ideaic

setting for Victoria's largest

power plants but there is

trouble in paradise. We've

fauked out $850 for equipment

to monitor exactly what is

going on and put in thousands

of hours of noting down figures

and things and now that we've

got the data it raises a lot of

concerns. But where do you

take it? Jenny Thompson's house

was designed to be energy

efficient and she's aed monthel

citizen of electricity use. But

for years she's been locked in

a struggle with her power

company and it's all because of

this, a Smart Meter. We were

querying like why is a 4.8

kilowatt service drawing 4.8

kilowatts per hour. They

wouldn't provide an answer.

There were questions we had

that they would not provide answers. Eventually Jenny

Thompson came to the view that

her Smart Meter was misreading

her energy consumption.

Approximately $560 per annum

in excess. How much of an

increase are we talking

about? About 60% more than what

we were actually using.

Incidents like this have

turned Victoria's

ground-breaking metre

ground-breaking metre programme into a bureaucratic nightmare for the State Government to

fix. Many observers believe the

rollout's model is partly to

blame. Retailers have to

compete for customers,

distributors, the companies

that move the power into homes

and businesses, operate at monopolies. Those monopolies

are rolling out Victoria's

Smart Meters. It's a real problem with any monopoly

business - they don't care

whether you are a customer or

not. So trying to pursue a

particular complaint with distributors, if they don't

respond quickly, no skin off

their nose. When Jenny

Thompson noticed something was

wrong were her metre she turned

to her distributor. But the

company stood by the readings

and not even the state electricity regulators could

change that. Energy consultant

Jeff Washusen says regulators

are often powerless to

intervene. They are not

effective at all in protecting

consumer rights. They don't get

activity involved. If consumers

don't fight for economic rights

they get the service they

deserve. Metres are part of the

asset base of electricity distributors and managing

metres is nothing new. It is

part of the whole process of

managing assets, which is the

role of electricity

distributors. Australian

distributors say the Victorian

rollout, which places them at

centre stage, remains by far

the most cost effective. A

major study was commissioned in

07-08 deciding what was the

best way to proceed. It

concluded that the maximum

benefits would be delivered by

a distributor-led rollout. They

considered distributors,

retailers, even communications

companies leading the roll-out

but the conclusion was it's

best - the benefits will be

greatest if it is a

distributor-led rollout. They

are not really telling the

whole story here. They are not

the only ones who have the

expertise. In fact, they use

contractors to do this. And

with energy traded in the

national electricity market

worth almost $7 billion a year,

consumers are afraid faulty

metring could have a big

impact. Roman Domanski, who

represents large energy users,

is also concerned about the

metre's price tag. These things

are less sophisticated than a

number of items that you can go

down to your local Harvey

Norman or dick Smith and buy.

Yet the distributors are given

a monopoly over them. So, as

with any monopoly, what usually

happens is the price or the

cost goes up significantly. Victoria's Coalition Government responded to the

public outcry by announcing a

review of the programme it

inherited. We've said we want a

full review which means if the

programme shouldn't continue,

we want to hear that. If the

programme needs to continue

because of the various sunk

costs that have been expended,

then we need to hear that. We

also need to hear how it can be

improved. State and territory governments around Australia

will be closely watching Victoria's next

Victoria's next move. That's because through COAG they have all signed up to a

distributor-led rollout similar

to Victoria's. But the future of Smart Meters in Australia

might have more to do with

smart politics than good

policy. And with consumer

dissatisfaction on the rise,

State Governments might be

reluctant to make further investments. Leaving Smart

Meters out in the cold. When

I attend national meetings I attend national meetings of Energy Ministers from around

the country and the Victorian Smart Meter appears on the agenda there is a collective

rolling of eyes and grimacing and sympathy felt for me as the

minister that is now in charge

of this programme. I think of this programme. I think that the mistakes that have the mistakes that have been made in Victoria is something that the rest of the country

can and should go to school on. It's a monopoly. It doesn't

need be. It's bad. It's costly. People don't need to be paying

those sort of costs in my view and the Victorian Government needs to consider that. We've

been on a steep learning curve

for almost three years to

how to read and understand how to read and understand all the data and interpret put it all together. There is no organisation out there that seems geared up someone through this. Now it's up to Government and companies to either find a way to restore public confidence in the process or face the the right business over to Jayne Edwards. over to Jayne Edwards. Well, the mood buoyant on buoyant on Friday as stocks straight day capping off the market's best week years. Each of the indices gained more than 1%. Investors

celebrated the extended release raising Parliament backed its unpopular austerity package, for analysts are warning Elsewhere the oil price gained 4% over the week, despite 4% over the week, despite a dip manufacturing data. markets, the switch in sentiment is obvious. the week while Asian markets news on local shares, here's Tom Elliott. And a happy financial year to you you Thursday, which was the last enough? For his thoughts I Let's take them one at Even if Greece Even if Greece gets bailed out it? Yes, I think so. In markets to borrow the German currency has narrowed sounds impressive except expecting them to borrow at 13% seeing is really as we thought it was a as we thought it was a week ago, we're just not so when they will go broke. So

there is still enormous problems in Greece and other Europe. What is your for Greece and Europe? Well, Europe faces enormous problems because the usual leavers that

governments pull when they have

a debt problem, which is to run the printing press or deflate the currencies, aren't options. The ECB won't come to

the party on the printing press and of course they are tied at

the hip via the Euro to a lot

of big trading partners.

Assuming that all goes through,

then really we're delaying the

end game to next year for

Greece. There is still question

marks I think about Ireland, in

particular, but market moves

can stop jangling. Markets have

rallied hard in the past couple

of days. That's suggests they like procraftination. That's

right. I mean, this is a market

that in my view is that in my view is completely

unanticipatory. It has a very

short-term horizon and they

will party until it is apparent

there is no more - nothing left

in the punch bowl. The politicians at least have

achieved that, but as we have

agreed, you haven't got to the

heart of the matter, which is

national solvency and the

Greeks look as broke as you can

get. Speaking of bunch bowls,

the feds quantitative easing or

money printing came to an end

on Thursday night, our time. It

didn't seem to trouble the markets, even though there was an expectation it would. What

is going on there? Yes, the

punch bowl, the funny thing

with quantitative easing is

they filled up the punch bowl

but no-one went for a drink.

Almost all the money the Fed

printed, so to speak in this

round it was $600 billion. We

know where almost every cent of

that has ended up - in excess

bank reserves. This is the

equivalent of bank notes

gathering dust in the New York

Fed's bank vaults. Though the

Fed said here is cheap money,

go use it, no-one wanted to use

it. In my view that shouldn't

surprise people. This is

exactly what we saw in Japan

after their bubble

burst. Markets went up on the

back of it, commodities and equities and the Australian

dollar. Everything went up. My

view is Mr Bernanke got lucky,

almost from the day he

preannounced QEII at his famous speech last year, the macro

data got better and my view is

it was the macro data getting

better that did the trick for

equity markets. On commodities

it's quite a different argument

in my view. I think there was a

QE that worked, a QE that

pushed up commodity prices but

it wasn't America's. All it did

was, as I said, put money in

bank vaults. The QE that drove

commodity prices in my view was

the massive expansion in credit

in China. That dwarfed what we

saw in America. Chinese loan

growth from early 2009

increased, increased by 3.6

trillion US. So is the Chinese

QE going to keep going on

what? No, well, they've juiced

it up too much. What we've seen

over the last six months is

policy tightening by the

Chinese authorities. Credit

growth has slowed substantially

and what the Chinese policy

makers are aiming to achieve is

a classic textbook soft

landing. Our view is they will

probably pull it off. That will ultimately be good for

commodities and for Asian

equities, but we just need to

make sure that that is what

happens and that some of the more pessimistic assessments,

which is that China has built a

huge bubble that is about to

pop, are wrong. We think we'll

get the evidence either way on

that big issue in the next

quarter or two. Thanks very

much Gerard. You're welcome.

It's well known Australian

retailers are having a hard

time luring shoppers back to

the cash registers in

substantial numbers. But it's a different story for one

supplier in the retail sector.

That is a story of growth,

optimism and the joy of a

strong Australian dollar.

Bee Dee Bag is a specialist

in carry bags for the

Australian retail market. We

are a barometer of the health

of the retail industry in

Australia. When Bruce Australia. When Bruce Dicker

began his business in regional

NSW, shop branded carry bags

were yet to become

ubiquitous. In 1974 we were

using rolls of brown paper. The

business grew grammaticly.

We're 50% paper, 40% plastic

and 10% the green non-woven

bags. Most of the bags are made

in China where Bee Dee Bag

entered a joint venture with a

local manufacture. It has given us an advantage in the Australian market with selling

because our pricing is

something our competitors have

difficulty getting near. We can

stop production on one item and

get whatever we want pushed

through as quick as we need it

which gives us a delivery advantage. Bee Dee Bag has over

12,000 retail customers now and

is nearing an annual turnover

of $20 million. But it's a

business that stands or falls

according to the success of its

customers, the retailers. The

number of bags consumed by the

Australian market is an

indicator of how healthy it is.

If they are buying more bags,

the businesses are bumbling

along. And Bee Dee Bag order

books reveal a different

perspective on retail. The

Australian market generally is

going well with the exception

of northern Queensland because

of the natural disasters

they've had up there. There has

been a downturn. This year

we've had a 25% increase on

last year, which is

phenomenal. It wasn't the

slowdown in spending that

hobbled the business during the

GFC. It was the major increase

in price because of the drop of

the Australian dollar. We had

to pump in excess of $1 million

to the business to keep it

moving along at the rate that

we wanted it to. The local

dollar's rapid rise has

strengthened their position. I

feel sad for the exporters, but

it is the importer's turn to

have joy. We've been able to maintain prices because of it

and I can't see prices changing

in the foreseeable future. The

company's focus will be on

maintaining its competitive

edge as manufacturing in China

becomes more expensive. China

is being modernised at a great

rate. They are all looking for

the luxuries of the western

world. There have been

increased for labor, only

slightly, not much, but

material, paper, has gone up

15% in the last 12 months. It

is inevitable escalation of

waudges in China that is

happening and it will catch up.

We will see increases in wages

and increases in raw material

to the point where it is no

longer competitive with other

parts of the world and we'll

most probably be looking at

Indonesia or India. Bruce

Dicker remains unfazed by

predictions of tighter purse

strings and the growth in

internet shopping. We've been

around for 37 years. I see the

retail sector continuing on the

way it is. Every year we've had

a double digit growth. Every

year for the last 15 years.

Rebecca Nash reporting. That's

it for the programme. If you

would like to check out any of

our stories and interviews

again, we'll have transcripts

and video and a This Program is Captioned

Live. Hello again. Welcome to

'Offsiders'. Australia will finally host another super

rugby grand final, the first in

seven years, after the

Queensland Reds rolled over the

Auckland Blues in last night's

semifinal. The Reds, near the

bottom of the table for so

long, are suddenly favourite s.

It was a rare hat trick of

tries from Rod Davies that

brought 45,000 people to their

feet. It goes out the back to