A SHIFT from craft brewer to contract beer-maker has led to Gage Roads Brewing posting a maiden profit of $680,000, and has the Palmyra-based operation poised to launch three new contract brews during the next year.
A SHIFT from craft brewer to contract beer-maker has led to Gage Roads Brewing posting a maiden profit of $680,000, and has the Palmyra-based operation poised to launch three new contract brews during the next year.
The maiden profit comes at the same time Gage Roads rebranded its own lager and pilsner beers, and also launched new products Sleeping Giant India Pale Ale and Atomic Pale Ale in October.
The brewery experienced total volume growth of 427 per cent during financial year 2009-2010, with 63 per cent growth in sales of Gage Roads branded beer.
Gage Roads chief executive Nick Hayler said the positive result was due to a change in focus to contract brewing, in particular an agreement to supply products for supermarket giant Woolworths.
Gage Roads brews Dry Dock and Clipper Light beers and Castaway cider for Woolworths, while it has contract brewing arrangements in place with four other breweries, including Matso’s Broome Brewery.
Mr Hayler said there were plans in place to rebrand Gage Roads’ Wahoo beer, and also launch three new products for Woolworths in the coming year.
Woolworths bought a 25 per cent stake in Gage Roads in May last year.
“Changing the business model to more of a contract brewing model had a major impact on our business volumes and our profitability,” Mr Hayler told WA Business News.
“Eighty per cent of our business is based on contract brewing, for Matso’s and Woolworths.
“Originally we had a contract to do 350,000 cartons a year for Woolworths, and their requirement grew to more than a million cases.
“So we went about building a brewery that could deal with that sort of capacity.”
That extra capacity, Mr Hayler said, has allowed Gage Roads to grow its own brands while servicing Woolworths and the other breweries.
The Palmyra brewery now has the capacity to produce between 1.2 million and 1.6 million cartons of beer or cider each year, depending on which products are produced.
The other big change that led to profitability, Mr Hayler said, was the switch to a direct distribution model after cancelling an agreement with national liquor distributor VOK Beverages in May last year.
“The direct distribution model has allowed us to grow our own brands by 63 per cent over the last financial year, in a market that was in decline,” he said.
“Relying on any agent, they’re not going to love your product like you love it, so we now have a national sales manager who drives the sales of our products directly to the customer, whereas before we were relying on agencies like Vok or Hardy’s to do it for us.”
Gage Roads’ next step, Mr Hayler said, was to increase its presence in the tap beer market.
“It’s very competitive, it’s difficult to get into, tap points are really tight, but I think we’re in about 200 outlets now,” he said.
“Our goal is to be in 300 by the end of this year. A lot of what we do with kegs is really only in WA, so our plans are to expand that to the east coast, whether it’s with our kegs or with contract brewing.”
