Australia: Craft brewer Broo Ltd strikes a deal with Carlton & United Breweries for two of its brands to be made at CUB’s facility in Queensland

One of Australia's smallest brewers, Broo Ltd, struck a deal with the A$16 billion beer giant Carlton & United Breweries for two of its brands to be made at the Yatala brewery in Queensland, boosting access to a market that is providing a glimmer of hope for the tiny company, The Australian Financial Review reported on August 12.

Broo is struggling. Its cash receipts shrunk to just A$420,000 in the June quarter, with new COVID-19 restrictions in its Victorian base meaning its two hospitality venues are shut, and staff are on JobKeeper payments.

Chief executive and major shareholder Kent Grogan said on August 12 the brewing deal with CUB gave the company a ray of hope in tough times.

"It's fantastic for us,'' he said.

"A lot of our best growth is coming from Queensland at the moment,'' he said.

Broo has a sharemarket capitalisation of A$12 million and its share price was wallowing at 1.7¢, before a 36 per cent jump on August 12 to 2.3¢ by noon AEST.

CUB, Australia's biggest beer company with brands including Victoria Bitter, Carlton Draught and Crown Lager, was acquired for A$16 billion by Japanese giant Asahi in a deal which settled in early June. A CUB spokesman said it was ''a commercial arrangement that gives Broo access to a small amount of capacity at one of our breweries''.

Broo champions an Australiana theme with a silhouette of a kangaroo on the label, mainly to attract Chinese consumers.

But the Australiana approach had helped lured an increasing number of Queenslanders to the product which is sold mainly through independent retailers.

"Queensland is a parochial state. Our beers do have a bit of a quirky nature to them''.

The hotter weather and value proposition was also helping in Queensland.

"The drinking environment in Queensland is very consistent all year round,'' Mr Grogan said.

Under the two-year deal, CUB will brew Broo Premium Lager and Australia Draught at CUB's Yatala brewery in south-east Queensland.

Broo's Sorrento Brewhouse and its Mildura pub in Victoria are both shut amid the COVID-19 pandemic. Mr Grogan said the Mildura brewery was still making beer but would shift further towards craft product.

He said Broo anticipated making its first order shortly with CUB for a minimum of 48,000 cases for production in October. It expected to lodge similar orders each quarter.

Broo listed on the stock exchange in October 2016 as a brewing ''underdog'' using its Australian-owned status as a challenger to CUB and Lion, who are both foreign-owned.

It listed via a A$10.5 million capital raising at an issue price of 20¢. Many of its shareholders took up stock in 2011 when Broo was an unlisted public company. They were each handed 10 free shares after buying a carton of Broo beer in a special promotion designed to accelerate sales at the company.

Mr Grogan said the renewed lockdown in Melbourne and restrictions elsewhere in Victoria had cast an extra cloud over the local economy and people were finding things very difficult.

"It's a very challenging time,'' he said.

He said Broo had been through a rough time but it had remained resilient. The company's share price had sunk below 1¢ in early April.

12 August, 2020