Woolies signs new deal with WA brewer
What a bottler: Gage Roads' craft beers will help fill Woolworths' liquor stores.
WOOLWORTHS has signed a three-year supply deal with craft beer company Gage Roads Brewing as part of the West Australian brewer's $12 million-plus expansion plans to ramp up its capacity and establish itself as the nation's leading craft contract brewery.
The strengthened relationship will help fill Woolworths' liquor shops with new craft beer labels at a time when sales of traditional beers are slowing and once innovative premium beer brands are also showing signs of maturing.
Under the newly extended deal, Woolworths will increase its minimum supply from Gage Roads to 1 million cartons a year. Gage Roads' portfolio of beers includes Wahoo Premium Ale, Gage, Sleeping Giant and Atomic Pale Ale.
It also makes Woolworths' brands Dry Dock, Clipper Light and Castaway brands under previous contract arrangements. And it joined with Woolworths to develop and launch its Sail & Anchor range.
The continued relationship between Woolworths and Gage Roads is expected to form a key plank in the supermarket giant's broader plans to roll out a number of private label or exclusive beer labels in its stores and liquor outlets, tempting consumers away from traditional brands and to its own range of beer, which commands fatter profit margins.
Woolworths is Gage Roads' biggest shareholder, having bought a controlling 25 per cent stake three years ago in the only pure beer company listed on the Australian Securities Exchange.
Brad Banducci, the director of Woolworths liquor group and responsible for liquor retail brands such as BWS, Dan Murphy's and Cellarmasters, was recently appointed to the Gage Roads board.
In a presentation at the company's annual meeting, Gage Roads managing director John Hoedemaker said the brewer was in a good position to benefit from the decision by Lion to close Perth's Swan Brewery and the booming craft beer segment.
He said Woolworths' product basket of beers was maturing.
''Growth rates of existing products [are] slowing from triple digits during early adoption to circa 10 per cent growth in financial year 2012,'' he said. ''With our increased capacity and lower cost structure, Gage Roads is planning to increase its draught beer presence in WA. With the demise of Swan Brewery, the banner of largest WA brewery passes to Gage Roads.''
Its capital expansion project will see $12.4 million invested to ramp up its brewing capacity to 3 million cartons a year by 2014-15 and reduce operating costs by 50 per cent. It sold 1.2 million cartons in 2011-12.
Gage Roads reported a 25 per cent lift in revenue last financial year to $19.7 million, driving a 309 per cent jump in full-year net profit to $500,730. But the company, which has a market capitalisation of $37.5 million, is sitting on accumulated losses of $10.79 million.