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Local breweries favour direct distribution

GAGE Roads Breweries has cancelled its distribution agreement with VOK Beverages, marking a significant shift in strategy for the Palmyra-based brewer.

Citing cost advantages, Gage Roads announced plans on Friday to move to a direct distribution model for the sale of its bottled beer and cider products, rather than using VOK's national sales network.

Under the new approach Gage Roads will employ its own sales team to complement existing relationships with national wholesalers Australian Liquor Marketers and Hotel Liquor Wholesalers.

Gage Roads chief executive Nick Hayler said by cancelling the agreement signed last year, the Palmyra brewer could provide its products to a broader customer base at a more competitive price.

"We were pretty happy with our agreement with VOK, but it just adds a cost to your product," Mr Hayler said.

"They were good to us, but at the end of the day if it's costing you more to get to your consumer than if you did it yourself, you're better off doing it yourself.

"We're trying to drive sales and reduce the price of the product."

Mr Hayler said Gage Roads expects to be able to meet the demands of the 1,300 retailers and venues VOK supplied on its behalf.

"We're confident of being able to cover all of this distribution ourselves, if not grow it," he said.

"Our future's still secure, we believe we'll be profitable within 12 months, that's our goal, that hasn't changed, but what did change was the economic climate, which meant consumers were looking for a cheaper beer, or the same beer, but at a better price."

Mr Hayler said he expected the price of Gage Roads beer to drop between $3 and $4 a carton.

Little Creatures Brewery in Fremantle has also bypassed third-party distributors and utilised a direct wholesale approach.

Little Creatures national sales manager Richard Sweet said the direct approach allowed the brewery to retain control of its brand while reaching a maximum number of liquor outlets.

"I think most (retailers) have an account with one or both of the big wholesalers, and a lot of the small wholesalers as well, so unless you've got a pretty wide reaching direct distribution network then I think it's crucial to be in one of the major wholesalers," Mr Sweet said.

Meanwhile, emerging beer maker Matso's Broome Brewery has recently signed an agreement with HLW and is currently working on reaching a similar agreement with ALM.

The deal with HLW alone expands Matso's reach from approximately 40 retailers to over 700.

"At the end of the day if you don't arrange it with HLW and ALM you're missing out on massive distribution," Matso's sales and marketing manager Justin Wiebrecht said.

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Share Price

Closing price for the last 90 trading days
Source: Morningstar

Total Shareholder Return as at 29/06/18

1 year TSR5 year TSR
70thGage Roads Brewing Company164%-9%
492ndMustera Property Group-4%0%
518thAtlas Pearls and Perfumes-8%-10%
677thMCS Services-35%-7%
778thDTI Group-63%0%
722 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

10/10/16
$100k Issued
10/10/16
$372k Issued
04/10/16
$128k Issued
Total value as at the date of the transaction
Source: Morningstar

Revenue

64th↑Gage Roads Brewing Company$28.5m
73rd↓Atlas Pearls and Perfumes$18.2m
74th-MCS Services$18.1m
76th↑Mustera Property Group$17.5m
77th↓DTI Group$17.1m
239 listed industrial companies ranked by revenue.
Source: Morningstar

Remuneration from Gage Roads Brewing Company

248thJohn Hoedemaker$440k
369thAaron Heary$323k
542ndMarcel Brandenburg$230k
Ranked by total remuneration from all listed WA companies

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