Good Drinks Australia bucks the craft brewery trend to grow its brands and underlying profit

The Perth-based company, which produces the Gage Roads, Matso’s, Atomic, Alby and Hello Sunshine brands, has released unaudited figures outlining its business growth ahead of its official earnings announcement, showing solid gains in beer sale volumes.

The volume lift also includes distribution deals for major international beermakers Miller, Coors and Magners, but Good Drinks' own brands have been a key drive with a 10 per cent lift in volumes to 15 million litres - a result that was aided by 26 per cent and 11 per cent growth respectively in its key markets of Queensland and Western Australia.

The Matso’s and Gage Roads brands continue to outperform, with volumes up 9 per cent for both brands across their markets compared with FY23.

The rise for Good Drinks Australia's own brand portfolio has been supported by its hospitality division, which operates popular venues Gage Roads Freo at Freemantle and Matso’s Sunshine Coast at Eumundi, both of which are tourism drawcards.

While revenue from the company's hospitality division fell to $26.3 million from $29 million in FY23, EBITDA of $4.5 million is up marginally when excluding a $1.6 million gain in FY23 for the sale of Queensland gaming licences.

However, the hospitality result has been impacted by the underperformance of a third venue in the division, Atomic Redfern, which has been written down by $4.5 million to zero in the latest accounts as the company continues to search for a buyer for the inner Sydney venue.

Good Drinks launched Atomic Redfern in 2020. According to Good Drinks CEO John Hoedemaker, the company has fielded inquiries from a number of interested parties since placing the business on the market.

While Hoedemaker says the issues confronting Atomic Redfern could partly be attributed to the Sydney hospitality sector “doing it pretty tough”, he also concedes it was a venture that Good Drinks probably should not have undertaken in the first place.

“The (smaller) scale of the business doesn’t really suit what we are good at; we’ve found we have achieved a much better result out of Gage Roads Freemantle and Matso’s in Eumundi,” Hoedemaker tells Business News Australia. “We have outgrown the (Atomic Redfern) business and are moving on from it.”

After spending $2 million on plant improvements and $7.5 million on development of the Matso’s Sunshine Coast venue during the year, Good Drinks has flagged the opportunity to unlock capital through sale-and-leaseback of property assets, including the Eumundi property.

In its quarterly update released in May, Good Drinks Australia pointed to its “enviable” market position sitting between “smaller ‘single brand’-dependent and often undercapitalised craft brewers, and the much larger ‘legacy brand’-dependent multinationals which are experiencing strong decline”.

The company’s latest unaudited accounts reveal a cash balance of $7.5 million at the end of June, which the company says puts it in a firm position to deliver its growth strategy.

Good Drinks has forecast growth in volume, revenue and market share at similar rates to FY24 in the current year, driven by an acceleration in marketing investment targeting its key demographic.

The company notes that its own brands have managed to make gains with consumers despite being priced at a 10 to 30 per cent premium to competitors in its category.

Hoedemaker says this is a result of  heavy investment in marketing and growing its brands, sometimes to the “detriment of reportable earnings”.

“We have been investing ahead of the curve in ourselves and in marketing; that’s why I think we have grown to become the fourth-largest brewer in Australia and our brands are resonating with consumers,” he says.

“We built a portfolio that has brands across multiple segments of the beer market. Some of them, like Matso’s Ginger Beer and the Gage Road brands, are at a premium to the more classic beers on the market.”

Despite consumers tightening their belts, Hoedemaker is confident that the strategy is sustainable amid cost-of-living pressures.

“Our view is that over time, the real value that we are creating for our shareholders is based on the brands we are creating - and brands are more valuable if we can create a brand that is at a premium to the mainstream or the market leader in that particular category,” he says.

“It’s a fine line. If you price your product too highly it’s to the detriment of volume. But if you price your products reasonably well you can get a premium and decent volume.

“That’s what we do as a business and that’s sustainable if you have invested in your brand’s health over time.”