Ann: Progress Update Q2 FY19 and H1 FY19, page-21

https://www.brewsnews.com.au/2019/02/04/strong-growth-continues-at-gage-roads/

“STRONG GROWTH CONTINUES AT GAGE ROADS

February 4, 2019 by Ross Lewis Leave a Comment

Gage Roads will turn another beer into a standalone brand as it strives to continue the success of its ‘Return to Craft’ strategy.

Atomic will soon become the fourth beer label in the brewery’s stable, joining the original Gage Roads, Matso’s and Alby in the company portfolio.
The company also has the Hello Sunshine cider banner.
The existing Pale Ale will spearhead the Atomic range with a mid-strength version already on sale at Perth’s Optus Stadium. As a requirement of the company’s supply licence with the 60,000-seat venue, only 3.5% ABV beer can be sold to the general public.

Gage Roads managing director and co-founder John Hoedemaker said his brewing team was currently working on other versions to join the new brand.
“There will be a line extension to Atomic and we’re currently looking at some new beers. It will become its own family of products and we’re exploring different varieties within that Pale Ale sphere,” Hoedemaker told Australian Brews News.
“It will look a bit different to the Single Fin label in the future and have its own presence.

“What we found out is Atomic really speaks to the consumers in Victoria and New South Wales. They are quite big followers in Atomic but they didn’t have a connection to Gage Roads.
“So we thought here’s a great opportunity to create a brand that people in those States really follow. Gage Roads is a coastal lifestyle brand, which is Single Fin, but in those States, Atomic was a bit more urban and gritty.”
The Atomic range will fall under Gage Roads’ recently retitled sales division, Good Drinks, which will soon be based in Sydney to capitalise on the growth of the brewery’s products in the eastern States.

The change in sales marketing was sparked by the $16-million acquisition of Matso’s in June last year. Gage Roads had been brewing Matso’s beer, such as Ginger, Chili, Lychee and Mango, at its Palmyra operation on a contract basis.

“When I started the business 15 years ago with my brother Bill we had Gage Roads brewery, had Gage Roads beer and the entire brand was Gage Roads. Now we have a range of different brands,” Hoedemaker said.

“As we showed in our annual general meeting presentation last year, Good Drinks now has a family on independent brands. They speak different things, they talk to different consumers, they operate at different price points and offer different value. We wanted to create a business that can manage different brands.
“And Matso’s is a significant brand, it is selling about 220,000 cases per annum which puts it in the top-10 (independent) craft beers in the country. But its beers are complementary to the Gage Roads range.”


Gage Roads has also made two key sales appointments that will help the brand continue to expand interstate.

In its quarterly statement to the Australian Stock Exchange on Friday, Gage Roads announced John-Paul Murphy as the new Head of Sales of Good Drinks and Murray Reid as the Sales Manager for the WA, SA and NT markets.
Murphy joins Good Drinks after 14 years at Bacardi Martini Australia while Reid has more than 20 years of experience with CUB, most recently as State Sales Manager for WA.


Also in the ASX report, the company confirmed strong support for Single Fin in the final six months of 2018 helped Gage Roads lift sales of its brands by 64 per cent over the same period the previous year.
In December, off-premise data agency IRI MarketEdge stated Single Fin sales grew faster than any other craft beer brand in Australia. The data also showed Single Fin accounted for 69 per cent of the national annual growth in the summer ale category.

Also according to IRI MarketEdge, eight brands – Yak Ales, Pirate Life, Stone and Wood, Mountain Goat, Cricketers Arms, Balter, Young Henrys and Gage Roads – were behind 89 per cent of the growth in Australian craft beer sales for the most recently audited year – 2017.

Gage Roads has been arguably the most successful team at Perth’s new multi-purpose super stadium but the WA brewery also kicked plenty of goals away from the ground at the back end of last year.

According to the ASX report, “Strong growth across all channels resulted in total Gage Roads brands sales for the (2018-19) half-year being up 58 per cent to 2.9-million litres. Underlying sales, which exclude 550,000 litres of draught sales to Optus Stadium and other marketing events, represent 2.4-million litres, up 38 per cent from the second half of 2017 (1.7-million litres)”.

Gage Roads sold 1-million litres of beer at the venue during the previous calendar year.


Also reported to the ASX was “combined Gage Roads brand sales and contract brewing volumes hitting a total throughput of 5.8-million litres (underlying: 5.3-million litres) and they generated an unaudited EBITDA of $2.1 million for the first half of the 2018-19 year, an improvement of 59 per cent over the same period in 2017-18”.

“Gage Roads’ own brand portion of the total sales mix has grown from 41 per cent in H1 FY18 to 50 per cent in H1 FY19.

“Including Matso’s the owned brand portion of the sales mix now represents 62 per cent (underlying 53 per cent). This shift in sales mix towards the company’s own brands has improved total gross profits from 59 per cent in H1 FY18 to 68 per cent for H1 FY19 (underlying gross profit: 66 per cent).”

The latest results are reflective of the first half of a five-year ‘Return to Craft’ strategy that resulted in Gage Roads divesting the 25 per cent share of the company controlled by Woolworths.
Under the scheme, the company was to also gradually reduce the amount of contract brewing it would do for the retail giant.

Accordingly, sales volumes of Gage Roads’ contract brewing division were down 7 per cent at the end of 2018.
Now the company can fully incorporate Matso’s into its own sales figures and after adding its contract brews, Gage Roads will still target more than 13-million litres of beer production from its Palmyra facility this financial year.

It is comfortably WA’s biggest brewery, filling the void left by Swan Brewery when it left Perth in 2013 to continue its operations in Adelaide. WA is the only State in the country without a macro-brewery presence.
“We have grown to become WA’s brewery – we’re the largest commercial brewery in the State,” Hoedemaker said.

“And we’re very proud of that.””