Beer in Bullish Zone: Bets for ASX Stocks and boost through Campaigns by CUB

Summary

• Beer stocks like BEE and GRB have been rallying as consumers stock up on liquor amid coronavirus. However, independent craft beer face challenges.
• Carlton & United Breweries (CUB) distributed free beer to generate cashflows for financially stressed pubs and clubs through its ‘For the Love of your Local’ campaign.
• CUB has increased its target to raise $2 million worth of beers for venues after succeeding in its earlier aim of $1 million.

Beer sector is one of the primary drivers of economic activity and domestic jobs, with about 85% of all the beer sold in the country being made in the nation itself. Australian made beers support vital goods and services including agriculture, materials and packaging, transport and freight and marketing and sales as an economic driver.

Millions of litres of beer are being drained in Australia as several pubs and clubs closed due to coronavirus restrictions with many of them not reopening any time soon. Lion, one of the biggest brewers, revealed that it had dumped 90k kegs of beer in the drain.

Coronavirus pandemic has affected every business, but it is likely to boost beer sales in 2019-20 as consumers stock up on liquor and their alcohol consumption rise as they stay at home. However, independent players are facing more significant challenges than big brewers who get the benefit of bulk beer purchase in the country.

Beer stocks have remained bullish. Let’s have a look at the performance of 2 beer stocks of Australia.

Broo Ltd

Broo Ltd (ASX:BEE) is a manufacturer and brewer of premium Australian beer rallied 7.69% and 7.14% on May 22 and May 26 and recorded the last traded share price of $0.015 on May 27. The stock has risen by 85% since its 19 March 2020 low price at $0.008 following an upward trajectory.

Source: ASX

However, Broo witnessed a decline in trading activity in March due to coronavirus. Still, it has actively managed cashflow, reduced overhead costs and implemented positive steps to mitigate the economic effect of government restrictions to control coronavirus spread.

As per its trading update dated April 30, BEE’s hospitality sector centred businesses Sorrento Brewhouse and Mildura Pub shut down temporarily due to current COVID-19 restrictions. BEE owned and operated iconic Mildura Brewery continues to produce beer under its existing sales arrangements, and the Company remains centred on increasing domestic sales and distribution.

Further, the Company projected a reduced amount of trading cash flow for the June quarter.

Gage Roads Brewing Co Limited

Gage Roads Brewing Co Limited (ASX:GRB) rose 4% closing at $0.052 on May 27 but was down by 1.92% at $0.051 on May 28. The share price has surged 41.6% from a low of $0.036 recorded on 23 March 2020.

As per its update on COVID-19, in March this year, the brewery remains fully operational, and its current operations are at 80% higher than the average output due to sudden surge in demand for the product. The Company, in the beginning of 2020, established 3,500 square metres of the cold storage facility to store its products in better quality until they get delivered to customers. The initiative helps in improving shelf-life of the products and ensures good taste. GRB has also completed its authorising of new highly efficient bottling and canning lines.

The entity mentioned coronavirus situation as uncertain but asserted that it contained capital flexibility, including flexible credit facilities by commonwealth bank, cashflow and stimulus programs by ATO to fight the challenges arising from the pandemic.

Free beer campaign by CUB (Carlton & United Breweries)

The lockdown has destroyed Australia’s $20 billion-plus pub and club industry which is made up of more than 10,000 venues and employs many of the country’s 1 million hospitality workers.

Though many pubs and clubs are experiencing the hardships due to COVID-19 induced lockdown, Carlton & United Breweries (brewing entity) has a strategy to keep the industry from drowning. It is giving about 2,000 barrels of free beer to clubs and pubs to support Australia’s hospitality sector.

In April, Carlton & United Breweries (CUB) and the Australian Hotels Association (AHA) came together for a proposal ‘For the Love of your Local’ to help produce instant cashflows for venues, to assist them in living through the coronavirus lockdown. CUB is handing over a beer to every hotel/club, free of cost taking care of the fact that every $ it reeives makes way towards the chosen pub or club.

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They have created a ‘For the Love of your Local’ website, where Australians can select their participating local venue and then purchase a pint of Great Northern Super Crisp or Carlton Draught post which the cash will instantly go to the location. Carlton & United Breweries then measure up the bought item with a free of cost pint, which means an individual would receive two for one pint when their area reopens.

The brewer succeeded in its first phase by raising $1 million worth of beer for the venues and is now looking to double its fundraising target to $2 million. CUB stated that more than 100,000 litres of donated CUB beer would flow for customers.

CEO Peter Filipovic, CUB stated that the campaign is quite favourable for pubs, clubs and beer fans. Some venues will never get to open their doors again if there is no cash flow, but Australia needs pubs and clubs to keep their place at the heart of many local communities once the crisis is over.’

He added that restrictions would continue to limit trade and some venues will have to wait for reopening until restrictions are further lifted. About 2,000 pubs and clubs have joined by now.

A fleet of customised Carlton Draught and VB trucks are expected to set out on the road during this week period to provide pubs (Victorian and Sydney), selling takeout tap beer in the glass containers.

(NOTE: Currency is reported in Australian Dollar unless stated otherwise)