Ann: Managing Director's AGM Address to Shareholder, page-14

https://www.brewsnews.com.au/2018/11/30/gage-roads-to-expand-east/

“GAGE ROADS TO EXPAND EAST

November 30, 2018 by Ross Lewis Leave a Comment

WA’s Gage Roads is targeting an extensive eastern states expansion with a brewery and taproom to be in place in a major interstate city within 18 months.

Drinkers will be able to taste several Gage Roads beers from cans by Christmas.

At the brewery’s annual general meeting, managing director John Hoedemaker told investors the company was “currently evaluating a first site” on the east coast and had allocated $3 million in development costs.

Hoedemaker highlighted at the meeting the new brewery and associated taproom could have capacity for up to 2 million litres of beer a year.

Venues in other areas on the eastern seaboard were in the pipeline.

Gage Roads was also looking at moving its sales head office to Melbourne or Sydney. Three months ago, the brewery re-named its sales arm Good Drinks following the acquisition of Matso’s in a $16 million deal in June and the development of Alby products as a separate brand entity.

After several months of planning, Gage Roads has also decided to launch Alby, Alby Crisp, Single Fin and Hello Sunshine cider in cans. The new packaging was specifically aimed at capitalising on festival events, especially those over the coming summer.

A new beer called Very Hoppy Ale was released this month, further expanding the brewery’s stable.

Over the past two years Gage Roads has plotted an aggressive foray into the east-coast market, with sales staff located in Queensland, New South Wales and Victoria.

And the brand has won high-profile deals with the Victorian Cricket Association and the Sydney 7s rugby tournament.

“The east coast is a significant contributor to revenue for the business, representing 54 per cent of national sales by value,” the meeting was told.

“If we can achieve meaningful brands in hand and draught volumes in the order of 0.5 million litres to 1.5 million litres, we expect a significant uplift in retail sales.”

The growth of Gage Roads since it adopted a “Returning to Craft” strategy in 2016 – and bought back Woolworths’ 25 per cent share in the company – has been phenomenal.

The business held a 2 per cent share of the national craft beer retail market two years ago. Now including the Matso’s range, that figure has increased to 7 per cent in 2018 to be fourth on the Australian list behind James Squire (19 per cent), Yak Ales (14 per cent) and Little Creatures (8 per cent).

Gage Roads’ contract as the preferred beer supplier at Perth’s new 60,000-seat Optus Stadium has enabled the brewery to double its draught beer sales in WA to around 1.6 million litres. It has also exposed the brand to around 1.4 million spectators.

The brewery in the Perth suburb of Palmyra is now producing around 13 million litres, including contract brands.

Hoedemaker said the new brewery/taproom in the eastern States was “expected to generate positive operating cash flows upon completion”.

The move interstate follows a similar decision by WA brewery Beerland, producer of the 2018 Australian International Beer Awards champion brew – Wheat. Beerland is looking for interstate sites to expand its brewpub model, which has been successful in its home state via the Northbridge and Whitfords venues.

And Gage Roads’ plan to brew beer interstate is similar to the moves made by Fremantle-based Little Creatures and Colonial (Margaret River), which developed breweries in Victoria to enhance exposure on the east coast.”