Gage Roads Succeeded In Obtaining Site For First East Coast Microbrewery And Taproom

March 13, 2019 06:31 PM AEDT | By Team Kalkine Media
 Gage Roads Succeeded In Obtaining Site For First East Coast Microbrewery And Taproom

Gage Roads Brewing Co Limited (ASX:GRB) is a consumer good company with operations in brewing, packaging, marketing and selling craft-brewed beer, etc. The key segments include proprietary brand brewing and contract brewing, and the products range from ales to lagers. The company has products including unfiltered beers and specific products such as Little Dove (a world-style pale ale), Sleeping Giant (India pale ale), Narrow Neck (American-style pale ale) and others that represent flavours from various regions across the globe.

The company today, on 13 March 2019 announced to have secured a site for its first microbrewery and taproom. Located in the inner-city Sydney suburb of Redfern, the site is situated in a local hospitality precinct that is also adjacent to significant transport infrastructure. The venue comprises 578 square meters and will house a small craft brewery as well as a 250-person hospitality operation that will be open to both the public and trade.

The creation of microbreweries and associated taprooms is a well-established, internationally proven concept used by most successful craft brewers to build their brand. The strategy of the company has two primary benefits including significant improvement of awareness of proprietary brands driving increased retail sales on the east coast, and to deliver a standalone financial return.

The strategy also provides several ancillary benefits, including improving consumer and trade awareness in key local markets; providing significant logistical advantages in draught beer distribution in local markets; and the local microbreweries are key to expanding draught sales and brand-in hand activation. The strategy is further expected to accelerate east coast retail sales beyond those considered by the current 5-year strategy. It is directly aligned with an existing strategy to shift the sales mix to proprietary brands. It creates an important hub for Good Drinks’ sales force and promotes product innovation and collaboration with industry. The local brewery community connection fast-tracks the company’s existing “brand-in hand” strategy as well.

The company will invest circa $3 million for the installation of a brewhouse and taproom fit-out of the premises, which will be funded via existing operating cash flows and credit facilities. Subject to the timing of regulatory and licensing approvals, the microbrewery and taproom is expected to be operational within 12 months and will commence generating positive cash flows from that date.

To support the east coast growth strategy, part of the earnings generated by the company will be re-invested to fund the growth of our Good Drinks division in NSW.

On the price-performance front, the stock of Gage Roads Brewing Co Limited is currently trading at $0.102 with a market capitalisation of $105.17 million (AEST 04:00 PM, March 13, 2019). The stock has generated a YTD return of 2.50% and a negative return of 21.15% over the past six months. It had a 52-week high price of $0.145 and a 52-week low price of $0.070, with an average trading volume of ~1.01 million. It is trading at a PE multiple of 36.610x with an EPS of AUD 0.003.


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