Portfolio brands growth at Good Drinks

Gage Roads’ new Fremantle site was a a highlight of GDA’s H1 report

At Gage Roads Brew Co. parent company Good Drinks Australia, portfolio brands are on the up and sales grew in the first half of the year.

Six-month results posted to the ASX this week showed that the company returned an EBITDA of $6 million, which Good Drinks (ASX:GDA) said was a strong result given disrupted COVID trading conditions.

Sales were up on what GDA called a “strong comparative period” last year, and total revenues reached $32.7 million, up 15 per cent.

Perhaps inevitably, brand-in-hand was the only channel that did not grow in double percentage figures, but sales in national chains, independent retailers, and draught grew 15 per cent to 6.9 million litres for the six months.

The group has plans to re-engage its brand-in-hand strategy, and is planning on targeting 1 million brand-in-hand serves in 2022, pouring at Fringe World, For the Love Festivals and Summer Salt.

Despite indicating in recent years that it would be moving away from contract brewing, total contract brewed volume output grew 54 per cent to 3.7 million litres, and as a result, total volumes grew to 10.6 million litres for the first half of the year.

Good Drinks acknowledged this and said that it was planning to “significantly ” reduce its contract brewing in 2023 in line with its strategies.

GDA said that its portfolio is “on track” and delivering results, with its Gage Roads masterbrand up approximately 25 per cent, it said they were attractive brands in high-value growth segments.

The ASX-listed group is on track to produce 20 million litres of its own brand beer by 2025, with targets of 20-25 per cent own-brand growth per annum.

Currently it is forecasting 19 million litres for 2022, with costs of 47c per litre.

Gage Roads Brew Co.’s Freo venue was a highlight of the start of the year, and it opened on time and on budget. Parent company Good Drinks said it received 40,000 visitors during the first 2 weeks.

The company said that despite ongoing challenges of COVID, staffing and its supply chain was unaffected, and it had upsized its inventory to mitigate supply chain and production risk.

Plans for east coast growth are still on the cards, although the ongoing restrictions caused by COVID did impact east coast sales admitted the group, although it said this decline was offset by strong WA and Queensland retail and draught sales.

In a results presentation, Gage Roads founder John Hoedemaker explained that its Atomic branded venue in Redfern is also starting to rebound from the impact of Omicron outbreaks.

As part of its $6 million marketing investment, it also invested $1.5 million in outdoor campaigns for Gage Roads and Matso’s, which has also been redeveloping the brand’s new Eumundi site.

However, while Good Drinks’ results were optimistic and showed strong growth, the company also highlighted ongoing global challenges which it expects to continue into the second half of the year. There were fewer drinking occasions in December which reduced pull through, so it is expecting lower replenishments in January and February.

GDA also suggested that when COVID starts to impact Western Australia, on-premise is expected to be temporarily disrupted – but this could potentially be mitigated by packaged sales off premise.

At the time of publication, GDA’s share price sat at $0.87, and the group had a market capitalisation of $111 million.

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